The Gold Fix: reference price with tradition

News Arnulf Hinkel, Financial journalist – 20.04.2018

Twice a day, the operators of large refineries and gold mining companies, most central banks, market participants active in international wholesale, stock exchange trading or over-the-counter commodities trading, but also countless gold retailers turn their attention to London, where the world market price for physical gold is determined Monday to Friday at 11:30 a.m. and 4:00 p.m. (CET). Even though the Gold Fix served only as a price recommendation, it was used as a reference price by the market participants and institutions named above, including the German central bank Bundesbank. Gold Fixing evolved historically, but had been crucial for a significant part of gold bullion trading until 2015.

A benchmark since 1919

The initial Gold Fix was performed on September 12, 1919 in London. Its aim was to boost gold trading after the First World War. On behalf of the Bank of England, Rothschild & Sons, together with four other banks formed the London Bullion Market Association (LBMA), and performed over-the-counter trading of bullions, thus covering most of total bullion trading. Until 2015, it was other banks that performed Gold Fixing: Deutsche Bank, Baryclays Capital, ScotiaMocatta, HSBC, and Société Générale.

Today's reference price: the LBMA gold price

The London Gold Fixing officially came to an end in early 2015, but the tradition has continued in a modified version: gold trading is now carried out on an electronic trading platform, and price determination is no longer advised and determined by the participating banks by telephone, but depends on buy and sell orders of the market participants – quite similar to stock exchange trading. And just as with stock exchanges, trading on the London bullion market is subject to strict regulatory supervision by an independent administrator, the Benchmark Administration IBA, which belongs to the US derivatives exchange ICE.

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