By Will Martin
There's a battle brewing in the heart of the gold industry, and some of the world's biggest banks are involved.
The fight centres itself around the way in which gold — one of the most divisive assets in the financial markets — is traded. There are two clear camps:
1. People who want precious metals like gold, silver and precious metals to be traded on a new platform regulated by a central exchange.
2. Those who want gold trading to remain as an activity done directly between buyers and sellers.
Those two camps, according to a brilliant story from Neil Hume and Henry Sanderson at the Financial Times, contain some of the world's foremost financial institutions.
On the side of modernising and creating a new exchange are Goldman Sachs, the most powerful bank in the world when it comes to commodities, and the Industrial and Commercial Bank of China, the giant Chinese lender with more than £2.5 trillion of total assets.
Fighting the other corner are what the FT describes as "two big bullion banks" — JP Morgan and HSBC. This pair is backing an initiative from the London Bullion Market Association to improve transparency in the current system, which has previously been criticised for being too opaque in its operations, according to the FT.
As it stands, the trading on spot gold — gold bought and sold on the day, rather than as a future — is done over the counter, meaning that no exchange is involved. Advocates of OTC trading say the lack of an exchange provides flexibility and ease of transaction, while as previously mentioned, those who prefer exchange trading criticise it for being opaque and subject to less regulation.