Beijing: The Bank of China has been accepted as one of the group of London Bullion Market Association (LBMA) banks which sets the London Gold Price. ICE Benchmark Administration has announced that Bank of China will be joining the group of banks from June 22. This provides a benchmark price that is widely used across the globe by participants such as producers, consumers, investors and central banks.

The new LBMA Gold Price was set up to replace the almost century old London Gold Fix, which had been accused of manipulating the gold price in the interests of the participating banks.

The initial four participants – Barclays, HSBC, Bank of Nova Scotia and Societe Generale were participants in the old London Gold Fix and were subsequently joined by Goldman Sachs and UBS, and then by JP Morgan Chase.

The inclusion of the Bank of China is seen as a step in moving the ‘centre of gravity’ of gold price setting to the East. The Bank of China’s direct participation in the gold auction would reinforce the connection between the Chinese domestic market and overseas markets, making the international gold price better reflect the supply and demand in China, and help to promote the internationalization of the Chinese gold market.

More Chinese banks are expected to join to make the hopes of the Bank of China come true and thus represent the start of the shift in pricing power to Shanghai.

While no initial changes may be seen in the gold price as a direct result of The Bank of China joining the price setters, a stronger Chinese influence may be witnessed over time, given that the greatest demand is in the east, although the price setting takes place in the West.