Gold fixing
| Company type | Private company |
|---|---|
| Industry | Financial services, Precious metals |
| Founded | 1919-09-12 |
| Headquarters | London , United Kingdom |
Area served | Global |
| Products | Gold price fixing service |
The London Gold Fixing (commonly known as the Gold Fix) refers to the procedure used to determine the price of gold through a specialized conference call. Originally, this process took place at the London premises of Nathan Mayer Rothschild & Sons, conducted by members of The London Gold Market Fixing Ltd.
This benchmark price is established twice on each business day within the London bullion market, except for Christmas Eve and New Year's Eve when only a single morning fixing is performed. It sets the official price for settling transactions among London bullion market participants and functions as a globally recognized standard for pricing most gold-related products and derivatives. The LBMA gold price is determined twice daily at 10:30 AM and 3:00 PM London time, quoted in United States dollars (USD). Indicative prices in sixteen additional currencies—including British pounds, Canadian dollars, Chinese renminbi, and euros—are provided but are used solely for settlement purposes among LBMA members.
Currently, 14 institutions participate in the fixing process, comprising prominent financial entities such as the Bank of China, Industrial and Commercial Bank of China, HSBC Bank USA, JPMorgan Chase, Morgan Stanley, and Standard Chartered, alongside trading firms like Jane Street Global Trading and Koch Supply and Trading.
History
The inaugural London gold fixing took place on 12 September 1919 when five leading bullion dealers and refiners—N.M. Rothschild & Sons, Mocatta & Goldsmid, Pixley & Abell, Samuel Montagu & Co., and Sharps Wilkins—set the price at £4 18/9 (GBP 4.9375) per troy ounce. Initially conducted via telephone, these meetings were later held at Rothschild’s New Court offices.
After the issuance of U.S. Executive Order 6102 in 1933, which mandated citizens to relinquish gold at $20.67 per ounce, the official gold price was fixed at $35 per ounce. Due to wartime restrictions and market closure, the London gold fixing was suspended between 1939 and 1954.
The fixing reached an all-time nominal high of $850 per troy ounce on 21 January 1980, a record that stood until 2008 when it rose to $865.35; nonetheless, when adjusted for inflation, the 1980 peak remains higher in real value.
Originally held at Rothschild’s offices in London, since 5 May 2004 the fixing has been conducted via telephone conferences to accommodate banks moving their operations from central London to locations such as Canary Wharf. Until 1968, only a single daily fixing was held; a second session at 3 p.m. was introduced to coincide with U.S. market openings following the collapse of the London Gold Pool and the end of Bank of England control over gold prices.
In April 2004, N.M. Rothschild & Sons announced its exit from both gold trading and participation in the fixing process. On 7 June 2004, Barclays Capital took over Rothschild’s role, with chairmanship rotating annually thereafter.
On 28 June 2012, Barclays voluntarily disclosed involvement in manipulating the gold fixing to avoid derivative contract payouts. Following this, in January 2014, Deutsche Bank withdrew from the panels responsible for setting gold and silver fixings.
On 23 May 2014, the Financial Conduct Authority imposed a £26 million fine on Barclays for systemic failures in controls, conflicts of interest related to gold fixing over nearly a decade, and manipulation activities during June 2012.
Process
The five banks involved serve as market makers, managing gold transactions both for their own accounts (proprietary trading) and on behalf of clients (brokerage). Sell limit orders are executed only if the price exceeds a predetermined threshold, while buy limit orders are filled only below a specified price.
The lead bank suggests a price close to the prevailing gold spot price, and the participants conduct simulated trades at that level. These simulations encompass both physical gold and contracts backed by marginal reserves ("Paper Gold"), influencing market volume and supply-demand dynamics.
Each institution reviews qualifying limit orders and proprietary transactions at the proposed price, then declares a net gold position (in ounces) they plan to purchase or sell. When the aggregated net position across all banks equals zero, the fixing process concludes with all trades finalized. The chairperson confirms this by announcing, "There are no flags, and we're fixed."
If the net balance is not zero, the chair adjusts the price accordingly: increasing it when buying interest surpasses selling, which tends to reduce buy orders and encourage sales; decreasing it when selling pressure exceeds buying, producing the opposite effect. This cycle repeats until market equilibrium is achieved.
Buyers incur a premium of 20 cents per troy ounce to cover the costs of the fixing procedure, effectively establishing an implicit bid–ask spread. Participants also seek to strategically time their trades to maximize returns.
At any point, the fixing can be suspended—originally indicated by raising a small Union Jack flag, and currently by stating "flag" during telephone communications.
See also
External links
- Current Gold Fixing Price provided by the London Bullion Market Association.
- THE LONDON GOLD MARKET report from 1964