Gold fixing: Difference between revisions
Sesu Prime (talk | contribs) m Reverted edits by 196.202.39.70 to last revision by MiracleMat (HG) |
Add source |
||
| Line 1: | Line 1: | ||
The '''Gold Fixing''' (also known as the '''London Gold Fixing''' or '''Gold Fix''') is the procedure by which the price of [[gold]] is set on the [[London]] market by the five members of the London |
The '''Gold Fixing''' (also known as the '''London Gold Fixing''' or '''Gold Fix''') is the procedure by which the price of [[gold]] is set on the [[London]] market by the five members of the London Gold Pool. It is designed to fix a price for settling contracts between members of the [[London bullion market]], 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 takes place twice daily at 10.30am and 3pm, London time. |
||
==History== |
|||
The first fixing took place on [[12 September]] [[1919]] amongst the five principal gold bullion traders and refiners of the day: [[N M Rothschild & Sons]], [[Mocatta & Goldsmid]], [[Pixley & Abell]], [[Samuel Montagu & Co.]] and [[Sharps Wilkins]]. The gold price then was four pounds 18 shillings and ninepence (GBP 4.9375) per [[troy weight|troy ounce]]. |
The first fixing took place on [[12 September]] [[1919]] amongst the five principal gold bullion traders and refiners of the day: [[N M Rothschild & Sons]], [[Mocatta & Goldsmid]], [[Pixley & Abell]], [[Samuel Montagu & Co.]] and [[Sharps Wilkins]]. The gold price then was four pounds 18 shillings and ninepence (GBP 4.9375) per [[troy weight|troy ounce]]. |
||
| Line 10: | Line 12: | ||
The Fixing historically took place twice daily at the [[City of London|City]] offices of N M Rothschild & Sons in St Swithin's Lane, but since [[5 May]] [[2004]] it takes place by telephone. In April 2004 N M Rothschild & Sons announced that it planned to withdraw from gold trading and from the London Gold Fixing. [[Barclays Bank]] took its place from [[7 June]] [[2004]], and the chairmanship of the meeting, formerly held permanently by Rothschilds, now rotates annually. |
The Fixing historically took place twice daily at the [[City of London|City]] offices of N M Rothschild & Sons in St Swithin's Lane, but since [[5 May]] [[2004]] it takes place by telephone. In April 2004 N M Rothschild & Sons announced that it planned to withdraw from gold trading and from the London Gold Fixing. [[Barclays Bank]] took its place from [[7 June]] [[2004]], and the chairmanship of the meeting, formerly held permanently by Rothschilds, now rotates annually. |
||
==Process== |
|||
While gold is traded in markets throughout the world, the market is essentially homogenous since the price is always in dollars and the gold traded is “loco London” (gold deliverable in London and meeting London trading standards). The London PM fix is normally considered the main reference price for the day and is the price most often used in contracts. The price of gold is quoted in US $ per troy ounce.<ref>Forrest Capie, Terence C. Mills & Geoffrey Wood: ''Gold as a hedge against the US Dollar'', [[World Gold Council]], London, Research Study No 30, September 2004, [http://www.gold.org/assets/file/rs_archive/rs_30.pdf p.11]</ref> |
|||
Since May 2004 it has been conducted telephonically. The chairman begins the fix with a ‘trying’ price. The five fixing members’ representatives relay the price to their dealing rooms; these are in contact with other dealers. The market members then declare how much gold they are prepared to buy or sell at that price. The dealers, who are in contact with their clients, may change their order or add to it or cancel it at any time; the position declared by the dealers is the net position outstanding among all their clients. (If one is buying two tonnes and another is selling one tonne, then he declares himself a buyer of one tonne.) If more gold is required than is offered, then the price will be adjusted upwards (and vice versa) until equilibrium is reached. At this point the price is fixed. On very rare occasions the price will be fixed when there is disequilibrium, at the discretion of the chairman of the fix.<ref>Forrest Capie, Terence C. Mills & Geoffrey Wood: ''Gold as a hedge against the US Dollar'', [[World Gold Council]], London, Research Study No 30, September 2004, [http://www.gold.org/assets/file/rs_archive/rs_30.pdf p.11]</ref> |
|||
A tradition of the London Gold Fixing was that participants could raise a small [[Union Flag]] 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". |
A tradition of the London Gold Fixing was that participants could raise a small [[Union Flag]] 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". |
||
Revision as of 16:26, 3 August 2009
The Gold Fixing (also known as the London Gold Fixing or Gold Fix) is the procedure by which the price of gold is set on the London market by the five members of the London Gold Pool. It is designed to fix a price for settling contracts between members of the London bullion market, 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 takes place twice daily at 10.30am and 3pm, London time.
History
The first fixing took place on 12 September 1919 amongst the five principal gold bullion traders and refiners of the day: N M Rothschild & Sons, Mocatta & Goldsmid, Pixley & Abell, Samuel Montagu & Co. and Sharps Wilkins. The gold price then was four pounds 18 shillings and ninepence (GBP 4.9375) per troy ounce.
Due to wartime emergencies and government controls, the London Gold Fixing was suspended between 1939 and 1954.
Gold prices are fixed in United States dollars (USD), Pound sterling (GBP) and European euros (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 was set in the a.m. Fixing.[1] However, when indexed for inflation, the 1980 high would equate to a price of $2398.21 in 2007 dollars, thus the 1980 record still holds in real terms.
The Fixing historically took place twice daily at the City offices of N M Rothschild & Sons in St Swithin's Lane, but since 5 May 2004 it takes place by telephone. In April 2004 N M Rothschild & Sons announced that it planned to withdraw from gold trading and from the London Gold Fixing. Barclays Bank took its place from 7 June 2004, and the chairmanship of the meeting, formerly held permanently by Rothschilds, now rotates annually.
Process
While gold is traded in markets throughout the world, the market is essentially homogenous since the price is always in dollars and the gold traded is “loco London” (gold deliverable in London and meeting London trading standards). The London PM fix is normally considered the main reference price for the day and is the price most often used in contracts. The price of gold is quoted in US $ per troy ounce.[2]
Since May 2004 it has been conducted telephonically. The chairman begins the fix with a ‘trying’ price. The five fixing members’ representatives relay the price to their dealing rooms; these are in contact with other dealers. The market members then declare how much gold they are prepared to buy or sell at that price. The dealers, who are in contact with their clients, may change their order or add to it or cancel it at any time; the position declared by the dealers is the net position outstanding among all their clients. (If one is buying two tonnes and another is selling one tonne, then he declares himself a buyer of one tonne.) If more gold is required than is offered, then the price will be adjusted upwards (and vice versa) until equilibrium is reached. At this point the price is fixed. On very rare occasions the price will be fixed when there is disequilibrium, at the discretion of the chairman of the fix.[3]
A tradition of the London Gold Fixing was that participants could raise a small Union Flag 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 — successor to Mocatta & Goldsmid and part of Bank of Nova Scotia
- Barclays Capital — Replaced N M Rothschild & Sons when they abdicated
- Deutsche Bank — Owner of Sharps Pixley, itself the merger of Sharps Wilkins with Pixley & Abell
- HSBC — Owner of Samuel Montagu & Co.
- Société Générale — Replaced Johnson Matthey and CSFB as fifth seat
See also
References
- ^ LBMA statistics
- ^ Forrest Capie, Terence C. Mills & Geoffrey Wood: Gold as a hedge against the US Dollar, World Gold Council, London, Research Study No 30, September 2004, p.11
- ^ Forrest Capie, Terence C. Mills & Geoffrey Wood: Gold as a hedge against the US Dollar, World Gold Council, London, Research Study No 30, September 2004, p.11