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Even without Rothschild, the fix is still in

Section: Daily Dispatches

Pricing Gold but No Longer Standing on British Tradition

By Bernard Simon
The New York Times
Thursday, May 6, 2004

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Another piece of the British empire crumbled yesterday
when no one raised or lowered the Union Jack to set
the international price of gold.

Instead of meeting twice a day, as they have for almost
85 years, in the oak-paneled offices of the venerable
merchant banking group N.M. Rothschild amp; Sons in
London's financial district, four precious-metals traders
-- three in London and one in Paris -- fixed the gold price
on a telephone conference call, basing the decision on
their latest readings of supply and demand.

quot;Nothing was that much different apart from the fact that
we didn't walk down to St. Swithins Lane,quot; said Simon
Weeks, director of precious metals and foreign exchange
at ScotiaMocatta, a unit of the Bank of Nova Scotia.
The price was fixed at $392.55 an ounce yesterday
afternoon, up from $391.25 when the traders met for the
last time on Tuesday.

Yesterday, Mr. Weeks became the first non-Rothschild
employee to run the proceedings. The bank, controlled
by the family that supplied gold to the Duke of Wellington
almost two centuries ago to help British forces win at
Waterloo, closed its commodities trading business last

The Rothschild seat on the committee is up for sale.
The bank's grip on the chairmanship had become a sore
point with the other four committee members --
ScotiaMocatta, Deutsche Bank, HSBC USA, and Socit
Gnrale. In the future, the chairmanship will rotate

Philip Klapwijk, chairman of GFMS Ltd., a precious-metals
consultants group in London, said the twice-daily London
price fixings remained quot;very much the benchmarkquot; for
institutions taking physical delivery of gold.

But speculative trading and hedging with futures trading,
Mr. Klapwijk said, had increasingly gravitated to the
Comex division of the New York Mercantile Exchange.

The London Bullion Market Association, which controls
the price-setting process, plans to introduce a live
Web-based commentary on the daily price-setting this

In an effort to broaden London's influence in the
international market, the association is seeking to help
institutions in countries with expanding gold consumption
-- like China, India, and Russia -- to set up efficient

The association has scheduled its annual meeting this
year in Shanghai.

Until yesterday, the Union Jack played a crucial part in
the price-setting process. A participant who wanted to
interrupt proceedings to take a new buy or sell order or
to consult his office would raise a flag on his desk. The
price could not be fixed while a flag was raised.

Though electronic communication has replaced the
face-to-face meeting at the Rothschild offices, the flag
-- albeit not a Union Jack -- has not entirely disappeared
from the proceedings.

From now on, those who want to interrupt the price-fixing
on the phone must say the word quot;flag,quot; followed by their
company's name.

Mr. Weeks wrapped up yesterday morning's meeting --
as he plans to do every day -- with the words: quot;There are
no flags, and we're fixed.quot;


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