The London Bullion Market Association (LBMA) has said it could start charging member banks more or even dissolve the Gold Forward Offered Rates (GOFO) contract,
GOFO is the rate at which dealers will lend gold against US dollars due to the new regulations in the financial market.
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According to LBMA chairman David Gornall, the GOFO rate will be similar Libor rate at which dealers will lend gold on swap against US dollars.
In July, the International Organisation of Securities Commissions (IOSCO) set out a series of principles on financial standards, following the Libor manipulation scandal.
Gornall added that that the new principles require the body to look at how data is collected, how it’s recorded, who is administrating it.
"We could either charge member banks more money or if the market decides that they don’t need to spend more money on regulatory affairs (because) as they already pay someone to do that, then the GOFO might not exist," added Gornall.
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By GlobalDataHowever, Gornall said that the LMBA still has a role to play in the way gold is priced as it can carry on with the good delivery rules that specify the physical standards of the bullion bars used in the wholesale London gold market.
Gornall said that the alternative for the LBMA would be to carry on with the good delivery list, the responsible gold guidance on ethical gold production, refining and assaying, the annual conference, publishing the dedicated quarterly journal the alchemist but not the regulatory side.
The halt in the gold price upward trajectory could have an effect on the decision that LBMA member banks have on the GOFO services, Gornall concluded.
