The “London Fix” is administered by the London Bullion Market Association (LBMA). It is the mechanism used to establish global benchmark prices for precious metals — most notably gold, but also silver, platinum and palladium.
The London Fix Price represents an agreed fair-value price for a precious metal based on current buying and selling interest at various price levels as reported by LBMA member banks. For gold, the benchmark is set twice daily.
Today the Fix is less central than it once was, because real-time spot prices for all metals are available online, updated continuously. Those live spot prices reflect the current fair-market value at any given second.
A novice investor does not need to track the London Fix closely. Purchasing through a reputable dealer will generally ensure metal is bought at a fair price near the prevailing spot level. Firms that sell physical bullion typically price products with reference to spot plus a modest premium.
In the LBMA’s words: “Internationally, bullion is traded on a 24-hour basis, mainly through London, in Over-the-Counter (OTC) transactions in spot, forwards and options. The gold price is set twice daily (at 10:30 and 15:00 London BST) in US dollars. The silver price is set daily at 12:00 (London BST time) in US dollars. The platinum and palladium prices are set twice daily at 09:45 and 14:00 (London BST) in US dollars per .9995 fine ounces.”
The reason gold prices are set in London rather than other financial centers like New York or Hong Kong stems from London’s long history as a global center for gold trading.
Photo: Christoph Reiter
London’s role began in the 17th century as significant quantities of South American gold arrived in the city. That early influx prompted the construction of dedicated vaults and bullion warehouses, and the Bank of England emerged as a primary custodian and facilitator for gold trade across Europe. Subsequent supplies from the United States, Australia and South Africa reinforced London’s position. Nearby refineries and the Bank of England’s functions as custodian and regulator solidified the market’s infrastructure. As the LBMA notes, London’s location at the center of international time zones has also helped it serve as a natural hub for bullion activity.
By 1850, five private firms — N M Rothschild & Sons, Mocatta & Goldsmid, Pixley & Abell, Samuel Montagu & Co. and Sharps Wilkins — cooperated to oversee London’s gold market. They established “good delivery” standards to guarantee the quality and purity of traded bullion, and maintained a list of approved melters and assayers. In the 20th century, Sharps Wilkins was replaced on that list by Johnson Matthey.
Yes, the London Fix Price is set in London. No, not by the Queen. Photo: CityAM
The first formal gold price fix was arranged by these firms at Rothschild’s offices in 1919.
That informal arrangement continued for many decades until the LBMA was formed in 1987. By the 1980s the Bank of England recognized that custody, oversight and regulation of the Good Delivery List required an independent industry body. Another force accelerating change was the growth in private gold ownership after the United States lifted its ban on private gold ownership in 1975, which helped increase global interest in the bullion market and the importance of the Fix.
As market participation broadened, the need for greater inclusivity and formal governance became apparent. By April 1988, 13 accredited “Market Maker” members were collectively responsible for creating the daily Gold Fix. That number of Market Makers remains constant, though specific members have changed over time.
The Market Makers as of 2019 included:
- Bank of China
- Bank of Communications
- Goldman Sachs International
- HSBC Bank USA NA
- Industrial and Commercial Bank of China (ICBC)
- INTL FCStone
- Jane Street Global Trading LLC
- JP Morgan Chase Bank N.A. London Branch
- Koch Supply and Trading LP
- Morgan Stanley
- Standard Chartered Bank
- The Bank of Nova Scotia (ScotiaMocatta)
- The Toronto Dominion Bank
Originally, the Fix was agreed through a conference call among Market Makers. Each member would declare the prices at which they were willing to buy or sell gold on a given day, and a consensus price was reached. While this method functioned adequately for decades, it attracted criticism for perceived opacity and the potential for manipulation.
In response, the process was reformed in 2015. The LBMA appointed ICE Benchmark Administration (IBA) to operate the gold benchmark using an anonymized electronic auction system. IBA’s auction is independently administered, tradeable, electronic and physically settled, conducted in US dollars, and publishes aggregated and anonymous bids and offers in real time.
ICE (Intercontinental Exchange) began in 2000 with the goal of creating transparent electronic markets; in 2015 it assumed operation of the LBMA Gold Price benchmark.
How It Works
Image: WSJ
Under the current procedure, a chairperson sets a starting price and proposed price levels for successive auction rounds, guided by prevailing market conditions and activity within the auction. Participants submit anonymized buy and sell orders by volume (number of ounces). The process is conducted in US dollars, although participants can request settlement in other currencies.
If the net volume of bids and offers at the end of a round falls within a pre-determined tolerance — commonly an imbalance threshold such as 10,000 ounces — the auction concludes and the price is published. Netting of orders is performed automatically, combining house and client orders and allocating any share of the imbalance to participants in an equitable way. Orders are then matched, producing trades with immediate confirmations.
To promote fairness, any imbalance is shared equally among direct participants regardless of whether they entered orders in that round, preserving continuity and certainty for participants. After the auction concludes, IBA publishes the benchmark price and a Transparency Report detailing each round’s USD price, aggregated bid and offer volumes, the number of participants and the timing of rounds.
The modern London Fix serves as an authoritative reference point, set twice daily. However, the live spot price — which fluctuates continuously — is the price that ultimately determines what buyers and sellers pay in the immediate market.