The LBMA has announced that the gold forward offered (GOFO) rates will be scrapped next year, with the final rates to be published on Friday January 30, it said in a release on Thursday.
It had long been rumoured that GOFO would be discontinued, as International Organisation of Securities Commissions (IOSCO) regulation played an increasing central role in the setting of benchmarks, forcing some banks to become frustrated with the red tape that surrounds the process.
The rates provide a benchmark dataset used as the basis for some finance and loan agreements as well as for the settlement of gold interest rate swaps.
The rate is essentially the equivalent of LIBOR for the gold market and is used as a benchmark for dealers, central banks and others to swap gold for US dollars with miners who may need gold to meet contracts or investors for short-selling and other purposes.
The market-making members of the LBMA – the Bank of Nova Scotia-ScotiaMocatta, Barclays Bank Plc, HSBC Bank USA London Branch, Goldman Sachs, JP Morgan Chase Bank and UBS AG – set the GOFO rate.
Societe Generale became the second rate-setting member this year to exit the process following Deutsche Bank in January. Under LBMA rules, the minimum number of members is six.
Every day at 10:30 UK time, these contributors register the rates at which they are prepared to lend or swap gold against US dollars. Quotes are made over one, two, three, six and 12 months.
The highest and lowest quotes for each period are discarded and the remaining rates are averaged.
(Editing by Tom Jennemann)
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