LBMA Gold Price: the London gold fixing
The LBMA Gold Price is the benchmark price of the London gold market and is set twice on every London business day in an electronic auction. It is still commonly called the gold fixing or London Gold Fix. Central banks, refiners, funds and dealers use it to settle contracts and value holdings.
How does the auction work?
The auction takes place on a platform run by ICE Benchmark Administration. At the start of each round, IBA announces a price. Participants then have a fixed window, around 30 seconds, to enter, change or cancel buy and sell orders at that price.
At the end of the round, the system compares supply and demand. If the imbalance exceeds a set threshold, the price is adjusted and a new round begins. If it is within the threshold, the auction ends and the price is set. The remaining imbalance is shared equally among the direct participants.
IBA staff monitor every auction. Trades are centrally cleared, and delivery is spot, meaning two UK business days after the auction day.
Who takes part?
There are direct and indirect participants. Direct participants trade in the auction themselves, while indirect participants pass their orders through a direct participant. According to the LBMA, 15 direct participants currently contribute to the gold price, including Bank of China, Goldman Sachs, HSBC, JPMorgan, Standard Chartered and several trading houses.
All participants must follow a code of conduct. An oversight body at IBA, the Precious Metals Oversight Committee, monitors the definition and methodology of the price. According to the LBMA, the process complies with the IOSCO Principles for Financial Benchmarks.
Is there a London fixing in euros?
In the auction, trading and settlement take place only in US dollars. However, IBA also publishes the price in euros and British pounds. To do so, the dollar price is converted at the exchange rate prevailing at the end of the final round.
The euro and pound values are therefore conversions, not separate auctions. If you are looking for the LBMA Gold Price in euros, you will find it for both the AM and the PM auction. Silver has its own auction once a day at 12:00 London time.
How has the gold fixing developed since 1919?
On 12 September 1919, the Bank of England agreed a daily gold price with the bank NM Rothschild & Sons. Five firms set it: Rothschild as chair, Mocatta & Goldsmid, Pixley & Abell, Samuel Montagu & Co. and Sharps Wilkins. At the first fixing at 11 am, the price was 4 pounds, 18 shillings and 9 pence. In the first days, bids were made by telephone; after that, the firms met daily at Rothschild’s offices.
On 1 April 1968, the price quotation switched from pounds to US dollars, and from then on there were two fixings a day. For decades, a small number of member banks set the price in a non-public process, most recently five market-making banks.
What changed after the 2015 scandal?
The old process came under criticism. In May 2014, the UK Financial Conduct Authority (FCA) fined Barclays around £26 million. One of the bank’s traders had placed orders during the afternoon fixing on 28 June 2012 to push the price below a certain threshold. The FCA also criticised controls and conflicts of interest over the period from 2004 to 2013.
In March 2015, ICE Benchmark Administration took over as independent administrator. The telephone fixing became an electronic, tradeable and auditable auction, and participation was opened up to further banks and trading houses. Since then, the price has officially been called the LBMA Gold Price.
Fixing, spot price, future: what is the difference?
The fixing is a snapshot at two set times. The spot price, by contrast, changes continuously as long as trading takes place anywhere in the world. The price of a COMEX future refers to a later delivery date and is therefore usually slightly higher.
The fixing is useful for settlements because everyone involved uses the same verifiable value. Commercial use of the data requires a licence from IBA. The LBMA now provides historical prices only through its licensed portal.
