London Gold Fixing
The price of gold is fixed twice daily in London by the five members of the London gold pool, all members of the London Bullion Market Association. The fixes start at 10.30 a.m., and 3.00 p.m. London time. The length of time taken to reach an agreed fixing price can vary. Nowadays it is often reached in minutes, but we have known in take several hours on at least one occasion. There are a number of common misconceptions about the London gold fix.
Many people, including most of the media, are under the impression that the gold price is fixed in US dollars. It is actually fixed in pounds sterling (GBP), and Euros also, although the Euro pricing is fairly new.
Media - Take Note
Whenever you see a gold fix price quoted, it will almost always be in dollars. This applies even in the UK. Most people in the UK who need to know a gold price, need it because they have bought or sold some gold at some predetermined price dependent on that particular fixing price. Naturally because they are in the UK, they wish to know the price in sterling. It is quite frustrating for many of these people to see a price quoted in a newspaper, of more commonly on Ceefax or Teletext, which is quoted in dollars. We have actually been telling the BBC's Ceefax department about this for years, and suggesting that they give the quotes in sterling and dollars , but they originally said there was insufficient space on the screen, which was incorrect, they would think about it (they appear to still be thinking). We have given up trying to advise them.
Not A Fixed Price
The other common error is for people to think the gold fix price is a fixed price, as in today's price or this morning's price, and that all gold transactions for the whole morning, afternoon or day, are carried out at the fixing price. This is not true. The fix price is the price at the exact instant in time at which it is agreed. Within seconds it will be trading at different prices. Amateurs, and also many who should know better, may then wonder what is the point, and why it is called a fixing price. The simple answer is that the five members use it to establish a market price which is fixed only for that precise moment, at which they can balance their sales and purchase requirements, including orders and commissions from clients. We ourselves often use the London gold fixing as a basis for our transactions with other professionals. We are also happy to do this with private individuals, but we find most people are happier for us to quote them a current "spot" price for gold. When we deal on the basis of a London fix, it will always be a future fix, often the next one, but not necessarily. We will agree to buy, or sell as the case may be, a fixed amount of gold in the form of bars, Krugerrands, sovereigns, or other gold bullion formats, at either a percentage or a fixed amount relative to the fix. Neither party knows what the actual striking price will be, but this is usually not a problem. It is also possible to place a conditional order, for example to buy 500 ounces at the next fix, subject to a limit, so that if the fix is above a certain level the transaction will not be concluded. The concept of dealing at an unknown price may seem strange to some, but for most gold professionals, any plusses and minuses usually average out over a period period of time. It saves much time which would be wasted in haggling about two different views of the market.
The London Gold Market closed in 1939, and re-opened on 22nd March 1954.
London gold fix prices can, or could, be found on the site of the LBMA, the London Bullion Market Association.
During 2014, big changes were made to the London Gold Fixes. largely as a side effect of a number of banking scandala, such as LIBOR rigging. The L.B.M.A. conducted surveys amongst its members and other market participants. There was concern that the long standing arrangements could be open to manipulation. To allay fears and suspicions, changes were made. The fixing is now done by London Gold Fixing Company, and from March 2015, ICE Benchmark Administration (IBA) will necome the official administrator of the new pricing mechanism.
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