The investment bank that has chaired the London meetings setting the world gold price since 1919 is quitting the market.
NM Rothschild will withdraw from all its commodity trading
activities, which also include an oil trading business set up less than
two years ago, as part of a strategic review.
The move brings to an end nearly 200 years of tradition. NM
Rothschild was founded in London in 1810 by Nathan Mayer Rothschild, who
helped finance the Duke of Wellington's army in the Napoleonic wars
through gold trading.
The company hosts and chairs twice-daily meetings which
effectively set the world's gold price. The meetings are held in a plush
chamber in the bank's offices at St Swithin's Lane in the City. The
other four firms involved are Deutsche Bank, HSBC, Canada's Scotia Bank
and Societe Generale.
During the fixes, telephone lines are kept open to trading
rooms where dealers are in touch with customers. Potential price
movements are unlimited and the fix has been known to take up to two
hours, although it is usually over in a matter of minutes.
The chairmanship of the meetings is likely to be rotated
between the four remaining banks in future. Gold industry sources also
predicted that the meetings would be replaced by telephone fixing.
NM Rothschild's withdrawal from the gold market is being seen as one of the first major strategic moves by Baron David de Rothschild.
He set in train the strategic review after taking control of the bank from his cousin, Sir Evelyn de Rothschild. Sir Evelyn has been a champion of Rothschild's gold trading although a spokesman for the bank said he understood that Sir Evelyn supported the decision.
The bank's finance director Andrew Didham, who conducted the review, said commodities now accounted for just 2.2pc of Rothschild's operating income from 8.8pc in 1999.
"There is always a sadness that a bit of history is over, but we decided that the commodities business did not really fit with our other businesses," he said.
While the gold price has surged, mining companies have become less interested in hedging and trading volumes have fallen. Observers also said rival banks tended to have better links with the hedge which now make up a sizeable proportion of the market.
Simon Weeks, chairman of the London Bullion Market Association, said: "It is very sad to lose such a long-established member of the gold market but we have lost participants before, such as Credit Suisse, and the market will continue."
Rothschild has yet to decide whether to sell or close its commodities business, which employs 40 people. The company hired a number of senior traders when it set up its oil business in 2003. The price of gold fell by $7 to $402 an ounce yesterday.
http://www.telegraph.co.uk/finance/markets/2883029/Rothschild-to-pull-out-of-gold-market-after-200-years.html
NM Rothschild's withdrawal from the gold market is being seen as one of the first major strategic moves by Baron David de Rothschild.
He set in train the strategic review after taking control of the bank from his cousin, Sir Evelyn de Rothschild. Sir Evelyn has been a champion of Rothschild's gold trading although a spokesman for the bank said he understood that Sir Evelyn supported the decision.
The bank's finance director Andrew Didham, who conducted the review, said commodities now accounted for just 2.2pc of Rothschild's operating income from 8.8pc in 1999.
"There is always a sadness that a bit of history is over, but we decided that the commodities business did not really fit with our other businesses," he said.
While the gold price has surged, mining companies have become less interested in hedging and trading volumes have fallen. Observers also said rival banks tended to have better links with the hedge which now make up a sizeable proportion of the market.
Simon Weeks, chairman of the London Bullion Market Association, said: "It is very sad to lose such a long-established member of the gold market but we have lost participants before, such as Credit Suisse, and the market will continue."
Rothschild has yet to decide whether to sell or close its commodities business, which employs 40 people. The company hired a number of senior traders when it set up its oil business in 2003. The price of gold fell by $7 to $402 an ounce yesterday.
http://www.telegraph.co.uk/finance/markets/2883029/Rothschild-to-pull-out-of-gold-market-after-200-years.html
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