Singapore drops plans for gold fix amid London pricing probe

By A. Ananthalakshmi

SINGAPORE (Reuters) - Singapore has dropped plans to set a daily reference price for gold, four sources with direct knowledge of the matter said, as regulators in Europe investigate suspected manipulation of precious metals prices by banks.

The Singapore Bullion Market Association (SBMA), an industry body, has been in discussions for nearly a year on launching a price benchmark in Asian trading hours similar to the twice-daily London fix for spot gold prices, the sources said.

But the European probe has made banks reluctant to participate, they added.

"The banks' compliance (teams) and managements are not very keen at this stage to discuss about fixing and benchmark pricing," said one source, who did not want to be identified because he was not authorized to speak to the media.

"Because of these investigations, everyone wants to play cool on this topic."

Another source said the topic of gold fixing has become too sensitive for banks to be associated with for now.

Singapore is still in talks to introduce some form of pricing mechanism for gold, the sources said, as part of efforts to make it a trading hub for precious metals.

The SBMA declined to comment.

The fixing of the gold price in London is done through a teleconference between five banks, but Deutsche Bank (DBKGn.DE) said last week it would withdraw from gold and silver benchmark price setting, after exiting the bulk of its commodities business.

In mid-December, German banking regulator Bafin demanded documents from Deutsche Bank under an inquiry into suspected manipulation of benchmark gold and silver prices, the Financial Times reported, citing sources.

The other banks involved in fixing the gold price are Bank of Nova Scotia-ScotiaMocatta (BNS.TO), Barclays Bank Plc (BARC.L), HSBC Bank USA (HBA_pf.N) and Societe Generale (SOGN.PA).

All four have declined comment on the Deutsche move.

The first Reuters source said some of the banks that would have potentially done the fixing in Singapore are the same as those participating in the London fix, which is set by matching demand from their customers with supply.

Asian market makers largely follow the London fix, though some have said a fixing during Asian hours would more accurately reflect physical demand in the region.

Asia, led by China and India, is the biggest buyer of physical bullion.

Encouraged by that, Singapore is still trying to figure out how best to introduce a pricing mechanism.

One source said the SBMA was in talks with the Singapore Exchange (SGX) (SGXL.SI) to possibly launch gold futures contracts, though talks were at a very early stage.

The SGX did not reply to request for comment.

Singapore has already exempted investment-grade gold from being taxed and is set to see its first gold refinery this year opened by Swiss refiner Metalor.

(Reporting by A. Ananthalakshmi; Editing by John Stonestreet)