London: The London Bullion Market Association (LBMA) has announced that come March, a new electronic daily gold price will go live in China that will replace the traditional London gold fixing.

The LBMA, for the first time, has three Chinese banks as ordinary members: Industrial and Commercial Bank of China Ltd, China Construction Bank Corp and Bank of China Ltd. Since 1919, there have been no Asian participants directly involved in gold price fixing.

The historic telephone-based system of fixing the daily gold price now involves only four banks: HSBC Holdings Plc, Societe Generale SA, The Bank of Nova Scotia and Barclays Plc.

The new system will modernize the price-determination process in at least two ways. First, gold prices should be determined by market forces of supply and demand, not the view of a few banks. If Chinese banks can take part in the price fixing, it will increase the robustness of the data and better represent the gold market. At the moment, gold prices in China are set through trading on the Shanghai Gold Exchange.