London Gold Fixing / LBMA Gold Price.

Reading Time: 8 minutes

The London Gold Fixing, also known as Gold Fix, is the process of determining the price of gold through a dedicated conference line. In the past, this activity occurred at the London premises of Nathan Mayer Rothschild & Sons and was facilitated by the members of The London Gold Market Fixing Ltd. The primary purpose of the Gold Fixing is to establish a price for settling contracts within the London bullion market. However, this price also serves as an unofficial benchmark for the pricing of gold products and derivatives worldwide. The LBMA gold price is determined twice each business day, at 10:30 AM and 3:00 PM, London time, in United States dollars (USD). Prices in other currencies, such as British pounds, Canadian dollars, Chinese renminbi, and euros, are indicative and primarily intended for settlement between LBMA members.

Key Takeaways:

  1. The London Gold Fixing, or Gold Fix, is a process for determining the price of gold, conducted through a dedicated conference line.
  2. It was historically held in the London offices of N M Rothschild & Sons but transitioned to a dedicated telephone conferencing system in 2004.
  3. The Gold Fix sets the price for settling contracts within the London bullion market and serves as an informal benchmark for gold pricing worldwide.
  4. The fixing process involves five market-making banks that propose prices and adjust them to achieve a balance between buy and sell orders.
  5. The Gold Fix’s historical significance includes its suspension during wartime, notable price records, and instances of manipulation and regulatory actions.

Summary: The London Gold Fixing, also known as Gold Fix, is a process that determines the price of gold through a dedicated conference line. It plays a crucial role in setting prices for contracts within the London bullion market and is widely recognized as a benchmark for gold pricing globally. The process involves five market-making banks proposing and adjusting prices to achieve equilibrium between buy and sell orders. Historically, the Gold Fixing has seen significant events, including wartime suspensions, price records, and instances of manipulation, leading to regulatory actions. The process’s transparency and influence extend to various sectors, making it a vital part of the gold industry and investment landscape.

Currently, 14 participants are involved in the Gold Fixing process. These participants include the Bank of China, the Bank of Communications, Coins ‘N Things, the Industrial and Commercial Bank of China, INTL FCStone, Jane Street Global Trading, HSBC Bank USA, JPMorgan Chase, Koch Supply and Trading, Marex Financial, Morgan Stanley, Standard Chartered, the Bank of Nova Scotia, and the Toronto-Dominion Bank.

the LBMA Price Fix

London Price Fix : Bullion dealers commonly use the LBMA prices, known as the ‘London fixed price,’ or the live ‘spot price‘ when trading precious metals. It’s essential to recognize that the fixed price may deviate from the live spot price. The advantage of using the fixed price as a reference lies in providing transaction certainty and streamlining exchange processes. This eliminates the need for negotiations over the ever-changing spot price, resulting in potential cost reductions for investors.

Why Choose the LBMA Price Fix?

Setting fixed precious metal prices is an established practice in the bullion industry, benefiting various stakeholders, including bullion banks, wholesalers, and businesses.

Using the fixed price as a reference simplifies the exchange process, as it eliminates the need for constant negotiations over the fluctuating spot price. Without this system, the ongoing haggling over price fluctuations and order placement uncertainties would likely lead to increased costs for precious metals and higher premiums.

The fixed price system allows for lower premiums, ultimately resulting in more affordable precious metal prices for consumers.

London Precious Metals Fix Timings All times are based on London time.

  • Gold 10:30 am and 3:00 pm
  • Silver 12:00 noon
  • Platinum 9:45 am and 2:00 pm
  • Palladium 9:45 am and 2:00 pm

Keep in mind that during daylight savings time in the United Kingdom, when it’s one hour ahead of Greenwich Mean Time (GMT/UTC), the fix timings do not change. For over half the year, gold fix timings are actually 9:30 am and 2:00 pm GMT/UTC. The LBMA explicitly states that the timings are in ‘London time,’ ensuring consistency when the UK time shifts in March and October.

Understanding the LBMA Gold Fix

In a single transaction, a ‘spot price’ or ‘over-the-counter’ (OTC) price is established as the trading price, which may include a premium. However, in more complex, multi-trade scenarios involving multiple buyers and sellers, determining a single price becomes challenging.

To address this, a benchmark price is introduced, known as the LBMA Price Fix. It’s determined through an auction process conducted by members of the London Gold Pool, resulting in an average of traded prices.

The Process

Members of the Gold Pool receive various gold orders from clients or on their own behalf. The chairperson initiates the process by proposing a price near the spot price. Other participants then assess their positions based on simulated trades at that price. If the quantity of gold sold matches the quantity bought, the price is fixed.

Imbalances can occur, such as when simulated trades reveal that the amount of gold proposed for purchase is less than what’s offered for sale. In such cases, the price must be adjusted.

The process continues until the correct price is determined.

After the Fix

Once the price is fixed and released (at 10:30 am and 3:00 pm London Time), traders use it as a benchmark for buying and selling clients’ orders. These prices may vary in relation to the spot price, but the fix serves as the reference point until the next cycle.

Spot Prices for Precious Metals

It’s essential to understand that the fix price represents the price at the precise moment an agreement is reached. It quickly fluctuates, and within seconds, trades occur at different prices. The LBMA members utilize this to establish a market price for that specific moment, allowing them to manage sales, purchase requirements, orders, and commissions effectively.

While we frequently use the London gold fixing as a basis for transactions with professionals, most private investors prefer a current ‘spot’ price for gold. Dealing with an unknown price might seem unconventional, but for most precious metal professionals, any variances usually even out over time, saving time that would otherwise be spent haggling over different market perspectives.

Three Currencies

While many believe the gold price is fixed only in US dollars, prices are available in sixteen other currencies, including the pound sterling and the euro. However, these are indicative prices for settlement purposes only. The challenge of quoting prices in various currencies persists, but it’s crucial to clarify the currency in which the price is quoted to avoid confusion.

History of the Gold Fixing.

The history of the Gold Fixing dates back to September 12, 1919, when five prominent gold bullion traders and refiners – N.M. Rothschild & Sons, Mocatta & Goldsmid, Pixley & Abell, Samuel Montagu & Co., and Sharps Wilkins – conducted the first London gold fixing. The gold price was set at £4 18/9 (GBP 4.9375) per troy ounce, with the New York gold price at US$19.39. The early fixings were conducted by telephone until the members started meeting at the Rothschild offices in New Court, St Swithin’s Lane.

Notable events in the history of Gold Fixing include U.S. President Franklin D. Roosevelt’s Executive Order 6102 in 1933, which required U.S. citizens to turn in their gold for $20.67 per ounce, and the subsequent price setting at $35.00 per ounce. Wartime emergencies and government controls led to the suspension of the Gold Fixing between 1939 and 1954. On January 21, 1980, the Gold Fixing reached $850, a record not surpassed until January 3, 2008, when a new high of $865.35 per troy ounce was set during the morning fixing. Adjusted for inflation, the 1980 record still holds in real terms.

The Gold Fixing was traditionally held at the London offices of N M Rothschild & Sons but transitioned to a dedicated telephone conferencing system on May 5, 2004. This change was necessary as some banks relocated their London operations to areas like Canary Wharf. Before 1968, the price was fixed once a day, and a second fixing was introduced at 3 p.m. to align with the opening of the U.S. markets. This shift was due to the loss of control over the price of gold by the Bank of England, which resulted from the collapse of the London Gold Pool.

In April 2004, N.M. Rothschild & Sons announced its withdrawal from gold trading and the Gold Fixing. Barclays Capital subsequently took its place on June 7, 2004, and the chairmanship of the meeting, formerly held by Rothschilds, now rotates annually.

An incident on June 28, 2012, saw an employee of Barclays manipulate the gold fixing process to avoid a payout related to a derivative product sold to a client. The employee and Barclays self-reported the incident. In January 2014, Deutsche Bank withdrew from the panels setting the gold and silver fixings.

2014 Changes

In 2014, substantial changes were made to the London Gold Fixes in response to concerns about potential manipulation due to banking scandals. The fixing process is now managed by the London Gold Fixing Company, and ICE Benchmark Administration (IBA) became the official administrator of the new pricing mechanism in March 2015.

On May 23, 2014, the Financial Conduct Authority fined Barclays £26 million for systems and controls failures, conflicts of interest in relation to the gold fixing over the nine years to 2013, and manipulation of the gold price on June 28, 2012.

The Gold Fixing process involves five participating banks acting as market makers.

They handle gold orders for their own accounts, their clients, or a combination of both. Client orders are typically limit orders, which means they will only execute if the price is at or below a predetermined level for sell orders or at or above a preset level for buy orders. The lead participant initiates the fixing process by proposing a price near the current gold spot price. The participants then simulate the results of trading at that price, considering both physical gold and gold trading contracts, often referred to as “Paper Gold,” which can inflate market volumes and affect supply and demand dynamics differently from physical gold.

Each bank assesses its limit orders and the potential trading activity from its proprietary trading desk at the proposed price, expressing their intent as the net amount (in ounces) of gold they wish to buy or sell. If the overall net amount is zero, all transactions proceed, and the fix is complete. If not, the chair must adjust the proposed price. If there are more proposed buy orders than sell orders, the price is raised, leading to fewer successful buy orders and more successful sell orders. Conversely, if there are more proposed sell orders, the price is lowered, resulting in more successful buy orders and fewer successful sell orders. This process continues until an equilibrium is reached.

During this process, participants can pause the proceedings at their discretion. Originally, this was done by raising a small Union Jack on their desk, but under the telephone fixing system, participants can register a pause by saying the word “flag.”

The Gold Fixing concludes with buyers paying a 20 cent per troy ounce premium to fund the fix process, resulting in an implicit bid-ask spread. Like other forms of market making, participants attempt to predict market direction and time their transactions to maximize profits.

The Gold Fixing is utilized by various entities, including banks, central banks, refineries, mining companies, and retail stores dealing in gold products and jewelry. It also plays a significant role in valuing gold reserves and is used in derivatives markets for pricing various gold-related positions, such as gold futures, swaps, and options.

Individual investors can also participate in Gold Fixing through platforms like BullionVault, enabling them to buy gold and silver at the prices determined during the London Fixing. This process involves opening an account, depositing the desired investment amount, and placing an order. The final price is unknown until after the Fixing, and it is published in various sources, including newspapers, the LBMA website, and others.

The London Gold Fixing is a historical and essential process that sets the price of gold twice daily, serving as a benchmark for the global gold market and influencing various aspects of the gold industry. Participants, including major banks, engage in a meticulous process to establish a common transaction price for a significant volume of buy and sell orders, with the final price impacting a wide range of gold-related activities and investments.

Time line London Gold Market: 1660-2024

Gold price: £4.05 per t.oz fine.

The East India Company secured exclusive trading rights to the east. In next 45 years they shipped almost 500,000 t.oz/15.5 m.t from London to India. The guinea, named after Guinea on Africa’s 1663 ‘gold coast’, was first struck.

Moses Mocatta set up in London, founding the firm that later became Mocatta & Goldsmid, the oldest members of the market.
Nine generations of the family worked in the bullion market. Mocatta first sent gold to India via the East India Company in 1676.

Bank of England founded.

The Great Recoinage in England shifted the
balance of coins in circulation from silver to
gold, by over-valuing gold, thus paving the
way to an informal gold standard.

Gold price: £4.35 per t.oz fine.

Note of the january month

Gold rush in Brazil led to opening of mint in
Rio de Janeiro making ‘moedas de ouro’,
most of which came to London over next sixty
years for reminting into guineas.

Sir Isaac Newton, as Master of the Mint, set
the historic gold price of £4.25 per troy ounce
fine (£3.89 per standard ounce of 916 fine in
which guinea was minted). The price
effectively lasted two hundred years, placing
Britain on an unofficial gold standard.

Mocatta appointed official broker in gold and
silver to the Bank of England.

The Bank opened its own Bullion Warehouse,
which became the crossroads for precious
metal for over a century.

Bank of England’s gold stock stood at
900,000 t.oz/28 m.t – the first central bank
gold reserve.

Bank of England’s gold stock stood at
900,000 t.oz/28 m.t – the first central bank
gold reserve.

Brazil’s gold output peaked at 550,000
t.oz/17 m.t. Most of this came to London via
Lisbon.

Major recoinage of guineas involving 5 million
t.oz/155.5 m.t. Mocatta bought 550,000
t.oz/17.1 m.t for the Bank’s account in 1774
alone – three-quarters of world output. The
rest came from old coin.

Abraham Mocatta took Asher Goldsmid as
his partner.

Lowndes London Directory recorded: Mocatta & Goldsmid (Brokers), Grigsby’s Coffee House in 1783.

Bank of England’s Warehouse changed its
name to The Bullion Office.

Bank of England opened an account for
Louis d’Or coins brought by French refugees
escaping the Revolution.

Bank of England’s gold reserve, drained by
costs of the Napoleonic wars, was down to
235,000 t.oz (£1 million) against note issue
liabilities of £15.5 million. Cash payment in
gold against bank notes was suspended on
20 February, and did not resume for twentyfour years.

Nathan Mayer Rothschild opened his banking
house in London and became closely
involved in secret shipments of gold and
silver to the Duke of Wellington’s army in
Europe against Napoleon. Mocatta &
Goldsmid rounded up the gold, often bidding
over the market price.

The House of Commons Select Committee
on the High Price of Bullion, which had risen
from the normal £3.89 for 916 gold to £4.50.
The evidence provided a unique insight into
the London market, as Aaron Asher
Goldsmid, Nathan Mayer Rothschild
(incognito as a ‘continental merchant’) and
gold refiner William Merle explained the
trade. The Committee concluded the Bank of
England had been printing too many notes as
they were no longer redeemable in gold.
Sharp & Kirkup, auctioneers since 1796,

started brokerage in gold and silver, but
refused Bank of England accreditation.

The gold price jumped to £5.35 for standard
gold after Napoleon escaped from Elba, but
after his defeat at Waterloo fell back under
£4.00.

The Coinage Act made the gold standard
official, with the guinea replaced by the
sovereign, worth £1.00, weighing 0.25
t.oz/7.77 g at 916 fine. The first sovereigns
were issued in 1817.

Full resumption of cash payments in gold
against notes by the Bank of England. Bank of England’s Bullion Office opened to 1840 ‘any sworn broker’, because of the increase in gold from Russia entering the Port of London, thus ending Mocatta’s exclusive arrangement.

1848 California gold rush brought a new dimension to the gold market, with tripling of mine output by 1850.

Australian gold discoveries in New SouthWalesand Victoria pushed world output to 6.5 million t.oz/203 m.t by 1855. Most Australian gold came to London, transforming the market.

Stewart Pixley set up as a bullion broker, the
first of four generations in the market, with William Haggard as partner. The firm later became Pixley & Abell.

Samuel Montagu founded his bullion and
exchange business (today part of HSBC).

London market comprised: Brokers: Mocatta
& Goldsmid, Sharps & Wilkins, Pixley &
Haggard (shortly Abell), Samuel Montagu &
Co. Approved refiners: Johnson & Matthey,
Browne & Wingrove, Rothschild’s Royal Mint
Refinery, H. L. Raphael’s Refinery (1856).

‘Good delivery’ bars were of 200 t.oz, and the Bank required a triple assay of each bar.After 1871, 400 t.oz bars were also accepted. Germany went on the gold standard; most other European nations followed suit.

House of Commons Select Committee on
Depreciation of Silver took expert advice from
Mocatta, Pixley and Sharps on gold output
coin fabrication and central bank stocks.

Royal Commission on Gold & Silver investigated changed relationship between the metals. Samuel Montagu sat on the Commission, Stewart Pixley and Sir Hector Hay of Mocatta gave statistical briefings. The Commission came out in favour of the gold standard, as opposed to bimetallism.

Gold discoveries in the Witwatersrand in
South Africa. Output reached 3.8 million
t.oz/118.2 m.t by 1898. It came to London for
refining and sale.

Gold rush in Western Australia after
discoveries at Kalgoorlie.

US presidential election had bimetallism as
the key issue, supported by William Jennings
Bryan. He was defeated and the US went on
the gold standard in 1900.

Peak years of gold rush to the Yukon in
Canada, yielding 3.7 million t.oz/115 m.t.

Gold price: £4.25 t.oz fine/US $20.67. At outbreak of World War I governments 1914 limited gold flows and called in much domestic coin, especially in Britain and France. The gold standard was never
officially suspended, although in practical terms it was.

The Bank of England, determined to restore
London as the main gold market, reached an
agreement with the seven South African
mining houses to ship their gold to London for
refining, after which it would be sold through
N. M. Rothschild ‘at the best price obtainable,
giving the London market and the Bullion
Brokers a chance to bid’. Thus, on 12 September 1919, the first gold fixing took place; the price was fixed at £4.94 (US $20.67) per t.oz fine – a change from the previous price for standard 916 gold. The bids were made by telephone for the first few
days and it was then decided to hold a formal
meeting at Rothschild’s offices in New Court,
St Swithins Lane.

The Rand Refinery was opened in South
Africa, but the gold continued to be sold
through London.

Britain went onto a gold bullion standard at the old fixed rate of £4.25 t.oz fine, but with minimum purchase of 400 ounces.

Britain and many other nations came off the
gold standard, with the onset of the
depression. Sterling was devalued creating
price between £5.50 and £6.34.

The US came off the gold standard.
President Roosevelt stopped the convertibility of dollars into gold and ordered US citizens to hand in coin.

On 31 January Roosevelt set a new fixed price of $35 per t.oz. The US bought all gold offered at that price.

London gold market closed on 3 September
on outbreak of World War II. Final fix £8.05.

Bretton Woods Agreement established new international framework of fixed exchange rates with gold exchanged for currencies among central banks at $35.

US gold reserves peaked at 707 million t.oz/21,990 m.t; equal to 75% of world
stocks.

London Gold Fixing resumed; opening price £12.42. Aim was to keep price equivalent to
$35.

Gold Pool of US and main European central
banks set up to defend $35 price, by selling
at fixing to contain it.

Private buying exceeded mine supply,
making Gold Pool net sellers.

Collapse of Gold Pool and defence of $35 price, after devaluation of sterling and pressure on dollar over Vietnam setbacks sent speculators into gold. The pool lost almost 64 million t.oz/2,000 m.t. London market closed for two weeks; when it
reopened the fix was in dollars, not sterling, and an afternoon fix was added for New York’s benefit. Gold price floated freely, but central banks still exchanged at $35.

Federal Reserve in New York closed its ‘gold
window’ at which central banks had still been
able to trade dollars for gold at $35, ending
the gold exchange standard.

Hong Kong gold market liberalised. London
market members soon opened trading rooms.

American citizens again permitted to own gold after 42 years. Comex 1 kilo contract launched. US Treasury began five years of gold sales.

IMF began four-year series of gold auctions.

Record London fixing at $850 on 21 January ended an inflationary decade of oil price shocks, the freezing of Iran’s assets and the Soviet invasion of Afghanistan, which sent investors into gold. Average price for the year was $614.63.

The London Bullion Market Association founded to represent the interests of the members of the wholesale bullion market.

The longest fixing, 2 hours 26 minutes, took
place on 23 March, when a Middle East bank
came into the fix offering at least 450,000 t.oz/14 m.t. The price dropped over $20 during the fix.

The Euro was launched, with the European
Central Bank holding 15% of its reserves in
gold. The Bank of England announced the
sale of half of the UK’s gold stock. The
Washington Agreement on Gold (The Central
Bank Gold Agreement) set a five-year term of
limited gold sales by central banks to stabilise
the market.

N. M. Rothschild & Sons gave up their seat at the fixing, which was taken by Barclays. Bank of Nova Scotia (Scotia Mocatta) became the new chair, with the fixing itself becoming a telephone process.

Ithe LBMA organized its inaugural Assay and Refining Conference, marking the beginning of a series of conferences. These gatherings brought together technical personnel from various organizations with a vested interest in matters related to the assaying, refining, and casting of precious metals. The primary objective was to offer participants valuable insights into the functioning of the LBMA’s Good Delivery system.

The price of gold surged past the $1,000 threshold, achieving a historic record of $1,023.50 on March 17th.

Once more, the price of gold hit a fresh milestone, surging to a new all-time high of $1,426 per ounce on December 7th. During the same year, the Wall Street Reform and Consumer Protection Act, also known as the Dodd-Frank Act, was enacted in July, with Section 1502 focusing on the issue of “conflict minerals” originating from the Democratic Republic of the Congo (DRC).

Once more, the price of gold soared to an unprecedented peak, hitting an all-time high of $1,896.50 on September 5th.

On June 28, 2012, an employee at Barclays manipulated the gold fixing process to prevent a derivative product from triggering a payout to a client. Both the employee and Barclays voluntarily reported the incident.

In January 2014, Deutsche Bank withdrew from the panels responsible for setting the gold and silver fixings.
On May 23, 2014, the Financial Conduct Authority fined Barclays £26 million for systems and controls failures, conflicts of interest regarding gold fixing over the nine years to 2013, and manipulation of the gold price on June 28, 2012.

Silver became the first precious-metal fixing to transition to an electronic auction following Deutsche Bank AG’s withdrawal from the old phone system. Regulatory scrutiny of benchmark-setting increased in the wake of Libor rate manipulation. Platinum, palladium (PPLT), and gold fixings were also replaced by new electronic auctions.

The London Metal Exchange (LME), World Gold Council, and a group of banks announced plans to introduce centrally-cleared gold and silver futures in the first half of the following year. The LBMA selected technology firm Boat Services Ltd. to develop a trade reporting service to enhance transparency in the over-the-counter market. The LBMA also launched the Global Precious Metals Code.

The Global Precious Metals Code aimed to establish a robust, fair, effective, and transparent market, where all participants could transact based on best practice guidelines.
In the same year, the LBMA disclosed, for the first time, the amount of gold and silver held in the London vaults.
The LBMA initiated its first Annual Review, which looked back at key initiatives and developments over the previous twelve months.
Additionally, the LBMA announced its intention to publish precious metals trade reporting data through LBMA-i.

The LBMA was now capable of revealing the size of the LBMA membership’s share of the Loco London and Loco Zurich over-the-counter market, including daily average turnover for gold and silver.



  • The London OTC market, historically dominant in the gold trade, now accounts for approximately 70% of global notional trading volume. It sets the LBMA Gold Price, trading ‘Good Delivery’ bars stored in secure vaults, making it a key global benchmark. Known as the ‘terminal market,’ London’s strategic time zone and financial hub status contribute to its importance, despite a recent decline in relative market share. The introduction of LMEprecious by the World Gold Council aims to address these challenges and modernize the market.
  • In the US, the COMEX derivatives exchange, operated by CME Group, plays a vital role in gold price discovery. It focuses on the ‘active month’ contract, closely linked to the spot price. Though few contracts result in physical delivery, the COMEX remains connected to physical markets through an active Exchange for Physical (EFP) market. Notably, an increasing share of COMEX trading occurs during Asian market hours, reflecting its success in tapping into Asian market growth.
  • The Chinese gold market, primarily represented by the Shanghai Gold Exchange (SGE) and the Shanghai Futures Market (SHFE), has rapidly grown in importance. SGE, established in 2002, introduced the Shanghai Gold Price benchmark to assert China’s role as a price-setter, promote RMB internationalization, and encourage global participation. Active futures trading on SHFE complements SGE’s spot and deferred contracts, even though the two exchanges are not directly linked.
Spread the love

Leave a Reply

Your email address will not be published. Required fields are marked *


Posted

in

by

© 2024. Made with Twentig.