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who_sets_the_price_of_silver_gold

Who Sets The Price Of Precious Metals Such As Gold or Silver

by Jerry White

What are the London gold and silver fixings? Who exactly are the fixers? And if the gold bullion market is centered in London, how can it trade 24 hours a day? Who sets the prices of gold, silver, platinum and palladium?

Supply & Demand

Precious metals trade freely on and off exchanges. The market prices of all precious metals are determined by supply and demand as reflected in bids and offers and thousands of daily transactions. The London gold and silver bullion markets and Comex exchange futures market in New York are the most liquid precious metals trading forums. They are kept closely in line with each other through dealer arbitrage. Prices of all other forms of gold and silver are based on the prices in these markets.

The London fixings

The London gold fixing or gold fix is the procedure by which the price of gold is determined twice each business day on the London market by the five members of The London Gold Market Fixing Ltd, on the premises of N M Rothschild & Sons. The current five participants in the fixing, who must be members of the London Bullion Market Association, are:

  1. Scotia-Mocatta — successor to Mocatta & Goldsmid and part of Bank of Nova Scotia
  2. Barclays Capital — Replaced N M Rothschild & Sons when they abdicated
  3. Deutsche Bank — Owner of Sharps Pixley, itself the merger of Sharps Wilkins with Pixley & Abell
  4. HSBC — Owner of Samuel Montagu & Co.
  5. Société Générale

The five participating banks are market makers. A market maker aims to make money by buying gold at a lower price than the price at which they sell it, or selling the gold at a higher price than they buy it back.

Gold is fixed twice daily starting at 10:30am and 3pm London time by the five members of the London Gold Market Fixing, who act as brokers for their customers. Silver is fixed daily at noon by the three members of the London Silver Market Fixing.

Platinum and palladium are fixed daily at 9:45am and 2pm by the four fixing members of the London Platinum & Palladium Market.

Dealer prices

Bullion dealers and banks, whether in London, New York, Zurich, Hong Kong, Singapore, Sydney, Dubai or anywhere else in the world trade throughout the day for spot gold and silver loco London (that is, for delivery on the books of a London dealer), and their realtime bid and asked prices for spot gold, silver, platinum and palladium are published on various sites on the web, including goldprice.org and thebulliondesk.com. Coin dealers generally base their prices for bullion coins and small bars on the bullion dealers’ loco London delivery spot price and will add a premium to it representing the mint fabrication cost and the dealer’s shipping cost from the mint, overhead and profit. The typical premium for one-ounce gold bullion coins is 5-7%, higher (around 15%) for fractional coins.

Comex contracts

The Comex division of NYMEX (part of the CME Group) trades gold futures and options contracts of 100 ounces minimum 995 fine during the New York day and electronically on Globex, plus mini-futures contracts of 1 kilo (32.15 ounces); and silver futures and options contracts of 5,000 ounces minimum 999 fine, plus mini-futures contracts of 1,000 ounces.

who_sets_the_price_of_silver_gold.txt · Last modified: 2019/03/26 08:14 (external edit)