Gold Fixing
Encyclopedia
The London gold fixing or gold fix is the procedure by which the price of gold
Gold
Gold is a chemical element with the symbol Au and an atomic number of 79. Gold is a dense, soft, shiny, malleable and ductile metal. Pure gold has a bright yellow color and luster traditionally considered attractive, which it maintains without oxidizing in air or water. Chemically, gold is a...

 is determined twice each business day on the London
London
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...

 market by the five members of The London Gold Market Fixing Ltd, on the premises of N M Rothschild & Sons. It is designed to fix a price for settling contracts between members of the London bullion market
London bullion market
The London bullion market is a wholesale over-the-counter market for the trading of gold and silver. Trading is conducted amongst members of the London Bullion Market Association , loosely overseen by the Bank of England...

, but informally the gold fixing provides a recognized rate that is used as a benchmark for pricing the majority of gold products and derivatives throughout the world's markets. The gold fix is conducted in United States dollar
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....

s (US$), Pound sterling
Pound sterling
The pound sterling , commonly called the pound, is the official currency of the United Kingdom, its Crown Dependencies and the British Overseas Territories of South Georgia and the South Sandwich Islands, British Antarctic Territory and Tristan da Cunha. It is subdivided into 100 pence...

 (GBP), and the euro
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...

 (€) daily at 10.30am and 3pm, London time, via a dedicated telephone conference facility.

History

On 12 September 1919 at 11:00am the five principal gold bullion traders and refiners of the day performed the first gold fixing. The original members were N M Rothschild & Sons
N M Rothschild & Sons
N M Rothschild & Sons is a private investment banking company, belonging to the Rothschild family...

, Mocatta & Goldsmid, Pixley & Abell, Samuel Montagu & Co. and Sharps Wilkins. The gold price was determined to be four pounds 18 shillings and ninepence (GBP 4.18s.9d = 4.9375) per fine ounce
Troy weight
Troy weight is a system of units of mass customarily used for precious metals, gemstones, and black powder.There are 12 troy ounces per troy pound, rather than the 16 ounces per pound found in the more common avoirdupois system. The troy ounce is 480 grains, compared with the avoirdupois ounce,...

 (troy ounce). The New York gold price was US$20.67. The first few fixings were conducted by telephone until the members started meeting at the Rothschild offices in New Court, St Swithin's Lane.

Due to wartime emergencies and government controls, the London gold fixing was suspended between 1939 and 1954, when the London gold market was closed.

Gold prices are fixed in United States dollar
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....

s (USD), Pound sterling
Pound sterling
The pound sterling , commonly called the pound, is the official currency of the United Kingdom, its Crown Dependencies and the British Overseas Territories of South Georgia and the South Sandwich Islands, British Antarctic Territory and Tristan da Cunha. It is subdivided into 100 pence...

 (GBP) and European euro
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...

s (EUR).

On 21 January 1980 the gold fixing reached the price of $850, a figure not overtaken until 3 January 2008 when a new record of $865.35 per troy ounce
Troy weight
Troy weight is a system of units of mass customarily used for precious metals, gemstones, and black powder.There are 12 troy ounces per troy pound, rather than the 16 ounces per pound found in the more common avoirdupois system. The troy ounce is 480 grains, compared with the avoirdupois ounce,...

 was set in the a.m. fixing. However, when indexed for inflation, the 1980 high corresponds to a price of $2,305.18 in 2011 dollars, thus the 1980 record still holds in real terms.

The fixing historically took place at the London
City of London
The City of London is a small area within Greater London, England. It is the historic core of London around which the modern conurbation grew and has held city status since time immemorial. The City’s boundaries have remained almost unchanged since the Middle Ages, and it is now only a tiny part of...

 offices of N M Rothschild & Sons in St Swithin's Lane, but since 5 May 2004 it takes place by a dedicated telephone conferencing system. Until 1968, the price was fixed only once a day, when a second fixing was introduced at 3 p.m. to coincide with the opening of the US markets, as the price of gold was no longer under control of the Bank of England, a result of the collapse of the London Gold Pool
London Gold Pool
The London Gold Pool was the pooling of gold reserves by a group of eight central banks in the United States and seven European countries that agreed on 1 November 1961 to cooperate in maintaining the Bretton Woods System of fixed-rate convertible currencies and defending a gold price of US$35 per...

. In April 2004 N M Rothschild & Sons announced that it planned to withdraw from gold trading and from the London gold fixing. Barclays Capital
Barclays Capital
Barclays Capital is a global British investment bank. It is the investment banking division of Barclays plc which has a balance sheet of over £1.2 trillion . Barclays Capital provides financing and risk management services to large companies, institutions and government clients. It is a primary...

 took its place on 7 June 2004 and the chairmanship of the meeting, formerly held permanently by Rothschilds, now rotates annually.

Process

A tradition of the London gold fixing was that participants could raise a small Union Flag
Union Flag
The Union Flag, also known as the Union Jack, is the flag of the United Kingdom. It retains an official or semi-official status in some Commonwealth Realms; for example, it is known as the Royal Union Flag in Canada. It is also used as an official flag in some of the smaller British overseas...

 on their desk to pause proceedings. Under the telephone fixing system, participants can register a pause by saying the word "flag", and the chair ends the meeting with the phrase "There are no flags, and we're fixed".

The current five participants in the fixing, who must be members of the London Bullion Market Association, are:
  • Scotia-Mocatta
    Scotia-Mocatta
    Scotia-Mocatta is the global bullion banking division of Scotiabank .- Business :Scotia-Mocatta is one of the ten market-making members of the London Bullion Market Association. Additionally it is one of 5 banks to participate in the London gold fixing...

     — successor to Mocatta & Goldsmid and part of Bank of Nova Scotia
    Scotiabank
    The Bank of Nova Scotia , commonly known as Scotiabank , is the third largest bank in Canada by deposits and market capitalization. It serves some 18.6 million customers in more than 50 countries around the world and offers a broad range of products and services including personal, commercial,...

  • Barclays Capital
    Barclays Capital
    Barclays Capital is a global British investment bank. It is the investment banking division of Barclays plc which has a balance sheet of over £1.2 trillion . Barclays Capital provides financing and risk management services to large companies, institutions and government clients. It is a primary...

     — Replaced N M Rothschild & Sons when they abdicated
  • Deutsche Bank
    Deutsche Bank
    Deutsche Bank AG is a global financial service company with its headquarters in Frankfurt, Germany. It employs more than 100,000 people in over 70 countries, and has a large presence in Europe, the Americas, Asia Pacific and the emerging markets...

     — Owner of Sharps Pixley
    Sharps Pixley
    Sharps Pixley was formed through the merger of two of London's leading gold dealers, Sharps Wilkins and Pixley & Abell. It was acquired by Kleinwort Benson in 1966 largely at the behest of the Bank of England who needed a stable parent for a firm that played an important part in the fixing of the...

    , itself the merger of Sharps Wilkins with Pixley & Abell
  • HSBC
    HSBC
    HSBC Holdings plc is a global banking and financial services company headquartered in Canary Wharf, London, United Kingdom. it is the world's second-largest banking and financial services group and second-largest public company according to a composite measure by Forbes magazine...

     — Owner of Samuel Montagu
    Samuel Montagu, 1st Baron Swaythling
    Samuel Montagu, 1st Baron Swaythling was a British banker who founded the bank of Samuel Montagu & Co.. He was a philanthropist and Liberal politician who sat in the House of Commons from 1885 to 1900, and was later raised to the peerage.Montagu was born in Liverpool as Montagu Samuel, the second...

     & Co.
  • Société Générale
    Société Générale
    Société Générale S.A. is a large European Bank and a major Financial Services company that has a substantial global presence. Its registered office is on Boulevard Haussmann in the 9th arrondissement of Paris, while its head office is in the Tours Société Générale in the business district of La...

     — Replaced Johnson Matthey
    Johnson Matthey
    Johnson Matthey plc is multinational chemicals and precious metals company headquartered in London, United Kingdom.It is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.-History:...

     and CSFB
    Credit Suisse First Boston
    Credit Suisse First Boston was the former name of the banking firm Credit Suisse.-History:In 1978, Credit Suisse and First Boston Corporation formed a London-based 50-50 investment banking joint venture called the Financière Crédit Suisse-First Boston...

    as fifth seat

External links

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