Gold fixing
Gold fixing describes the trading process in gold trading on the London Bullion Market that has been taking place since 1919 , which is carried out twice a day with the aim of processing as many transactions as possible at a fixed price . The representatives of the five so-called bullion banks are involved as members of the London Bullion Market Association (LBMA). The determined fixing price serves as a benchmark for all further gold transactions.
history
The price of gold has been determined at the London Bullion Market since the 17th century . With the London Gold Fixing on September 12, 1919, the market structure was created as it still exists today. Founding members were NM Rothschild & Sons , Mocatta & Goldsmid , Samuel Montagu & Co., Pixley & Abell and Sharps & Wilkins. NM Rothschild & Sons assumed the permanent chairmanship. The first gold price was fixed at 4 pounds, 18 shillings and 9 pennies (GBP 4.18s.9d = 4.9375) per troy ounce . The New York gold price was at the same time at 20.67 US dollars per troy ounce.
For this event, the dealers met once a day at 10:30 a.m. local time (11:30 a.m. CET) in the Rothschild banking house on St. Swithin Lane to assess supply and demand. When the two were in balance, the contestants lowered their British flags and the day's gold price could be fixed. This price was representative of the day's total gold trading, although only a small fraction of the daily gold turnover was involved in price setting. The Bank of England was not directly involved in the fixing; for them the Rothschild company operated through purchases and sales.
After the outbreak of the Second World War , the London gold market closed on September 3, 1939. The last fixed price was 8.05 pounds sterling per troy ounce. On March 22, 1954, a gold fixing took place again after 15 years. The opening price was determined to be £ 12.42. That was the equivalent of $ 35.00 per troy ounce.
When the British government decided in November 1967 to devalue the pound sterling, at that time the most important reserve currency after the US dollar, a rush for gold began at the London Bullion Market. On March 17, 1968 the gold market was closed again. After reopening on April 1, 1968, the market was divided into two parts, one price could continue to adapt to the market, the other was fixed. Since then, there has been another daily meeting in London at 3:00 p.m. local time (4:00 p.m. CET) to set the price again when the US stock exchanges are open.
On January 21, 1980, the London fixed price hit a record high of $ 850 per troy ounce in view of the crisis in Iran and the Soviet invasion of Afghanistan . In 1987 the London Bullion Market Association (LBMA) was founded in close consultation with the Bank of England, which was then the regulator for the precious metals market. The primary regulator in the UK has since been the Financial Services Authority (FSA). In April 2004 NM Rothschild & Sons withdrew from gold trading and gold fixing. From May 5, 2004, the gold price was set by telephone. In the course of the financial crisis , on March 14, 2008, a price above the $ 1,000 mark was fixed for the first time at $ 1003.50 per troy ounce. On March 20, 2015, the London Gold Fix was replaced by the LBMA Gold Price. Since then, this has been set twice a day by the direct participants using an electronic platform.
In March 2013, the International Organization of Securities Commissions opened an investigation into the manipulation of pricing. The background to this is the discovery of the LIBOR scandal in 2012, in which the London Interbank Offered Rate, which was determined similar to the gold price , was systematically distorted for years by false reports from the banks involved. There are no concrete suspicions about the gold price, the investigation is intended to strengthen the "confidence of the markets".
Members
Of the founding members of the London Gold Fixing, only NM Rothschild & Sons remained independent. "Mocatta & Goldsmid Ltd." became a subsidiary of Standard Chartered Bank in 1973 and was sold by the latter to Scotiabank in 1997, which renamed the new subsidiary " ScotiaMocatta ". This means that the seat was also transferred to the Bank of Nova Scotia or ScotiaMocatta during the gold fixing. Sharps & Wilkins and Pixley & Abell merged in 1957 to become Sharps Pixley . The latter was sold to Kleinwort Benson in 1966 and to Deutsche Bank in 1993, which became a member of the gold fixing. In January 2014, Deutsche Bank announced that it no longer wanted to be involved in determining the official reference prices for gold and silver. She justified her withdrawal from the exclusive group of five fixing participants with the significant downsizing of her raw materials business. She intends to sell her place in the circle to another member of the London Bullion Market Association. Samuel Montagu & Co. went to Midland Bank in 1967 , which has been part of HSBC since 1992 .
Johnson Matthey Bankers Ltd. (JMB) took over the seat at the Goldfixing from Pixley & Abell in 1957. In 1984, JMB came temporarily into the possession of the Bank of England, which took over the company from the global precious metals group Johnson Matthey PLC in view of the looming losses in the lending business. The central bank sold JMB 1986 Mase Westpac, the gold Commercial Bank of Westpac . In 1993 the seat went to the Republic-Mase Bank (formerly Mase Westpac), a subsidiary of the Republic National Bank of New York (RNB). The latter was taken over by HSBC in December 1999. In May 2000 the seat was sold to Credit Suisse First Boston (CSFB). The CSFB canceled its membership in the Gold Fixing in October 2001. In July 2002, the Société Générale took over the headquarters of the CSFB.
NM Rothschild & Sons left gold fixing in 2004. Since June 7, 2004, the meeting, previously chaired permanently by Rothschild, has been held at Barclays Bank under an annual rotating chairmanship . A representative of the
- ScotiaMocatta (subsidiary of the Bank of Nova Scotia),
- Barclays Bank,
- Deutsche Bank AG London,
- HSBC Bank USA NA London Branch and
- Société Générale,
who were all members of the London Bullion Market Association (LBMA).
From March 20, 2015, the gold fixing was determined between the following 6 members:
- ScotiaMocatta (subsidiary of the Bank of Nova Scotia),
- Barclays Bank,
- HSBC Bank USA NA,
- Société Générale,
- Goldman Sachs International (new) and
- UBS (new)
At the beginning of 2018, the direct participants in the auction are:
- 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 NA London Branch
- Koch Supply and Trading LP, Morgan Stanley
- ScotiaMocatta (subsidiary of the Bank of Nova Scotia)
- The Toronto Dominion Bank
Price determination
The world market price for gold is determined at the London Bullion Market . The LBMA gold price is used by large gold owners such as refineries and mining companies. Most central banks, including the Deutsche Bundesbank , refer to the price during the afternoon gold fixing (PM fix) in order to give their gold reserves a value. The London world market price is also used in the market for gold futures , for example to give a price to swaps and options .
Trading hours at the London Bullion Market are Monday through Friday from 8:50 a.m. to 3:00 p.m. UTC (9:50 a.m. to 4:00 p.m. CET ). The gold fixing is carried out twice a day with the aim of processing as many transactions as possible at a fixed price :
- Morning: Monday to Friday 10:30 a.m. UTC (11:30 a.m. CET)
- Afternoon: Monday to Friday 3:00 p.m. UTC (4:00 p.m. CET).
An opening price is given at the start of the sessions and trading begins on this basis. The price at which a balance between supply and demand is possible is the published fixed price. Price determination usually takes less than ten minutes. In the event of a financial or political crisis, it can take significantly longer. The longest fixing in history was only over after two hours and 15 minutes. It took place on Black Monday , October 19, 1987, when the value of the Dow Jones index on the New York Stock Exchange plummeted 22.6 percent.
Between 1919 and 1968 the price of gold was only determined in sterling. The reason was the British dominance in international financial, economic and trade relations. In 1968, quotations in US dollars were added, which later replaced the pound as the primary currency. This happened because of the increased importance of the US currency in the world economy. Since 1999 the price has also been billed in euros . In an international comparison, the European common currency is the most important reserve currency in the world after the US dollar .
OTC trading
Trading on the London Bullion Market takes place outside the stock exchange (over-the-counter, OTC). Trust-building for banks, mining companies and investors is the high liquidity of the market and the fact that the gold bars are actually physically available. The precious metals are stored in the Greater London area in LBMA-certified warehouses that are secured like fortresses. Only the trading partners and - twice a day - the auction participants have an insight into OTC trading. In order to bring a certain degree of transparency to the market, the LBMA now publishes the trading volumes between the 5 clearing banks with a one-month delay.
Only bars from refineries and mints that meet certain quality requirements are permitted for trading . Bars that are to be considered “good delivery” at the London Bullion Market must have a gold content of at least 350 and at most 430 troy ounces and a fineness of at least 995 ‰. They must also bear a serial number and the stamp of a manufacturer or precious metal tester (assayer) approved on the London gold market. Payment and delivery of the gold traded on the London market take place two working days after the transaction has been concluded. A commission of 0.25 percent is payable for all purchases in the fixing: The sales are not charged by a commission.
Web links
Individual evidence
- ↑ Handelsblatt: Rothschild withdraws from gold trading , April 16, 2004
- ↑ Goldfixing.com: London Gold Market: 1660-2004 ( Memento of the original from January 27, 2012 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. (PDF; 28 kB)
- ↑ LBMA: LBMA Gold Price - Frequently Asked Questions. (PDF) In: FAQ. LBMA, accessed April 30, 2018 .
- ↑ Handelsblatt: Gold price under suspicion , March 14, 2013
- ↑ Tax Free Gold: Mocatta & Goldsmid
- ^ Tax Free Gold: Sharps Pixley
- ↑ http://www.wsj.de/article/SB10001424052702304149404579326283908460484.html?mod=Finanzen
- ^ Tax Free Gold: Samuel Montagu
- ^ Tax Free Gold: Pixley & Abell
- ↑ London Bullion Market Association: Statistics FAQs ( Memento of the original from January 5, 2012 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice.
- ^ LBMA Gold and Silver Price - ICE Benchmark Administration. Accessed April 30, 2018 .
- ↑ Wirtschaftswoche: Gold Fixing - Who sets the gold price every day , from January 28, 2011
- ↑ Gold trading volumes: Clearing Statistics. Accessed January 2, 2019 .
- ↑ London Bullion Market Association: Good Delivery ( Memento of the original from January 5, 2012 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice.
