Getting the Best Price for Gold and the Spot Price

1919 was the year that the buying and selling gold prices in London and the UK began to be determined via what is acknowledged as the London Spot (price) Fix. Essentially this represents the gold price per ounce and includes other precious metals such as silver, platinum and palladium and happens daily at approx. 10:30 and 15:00 GMT through a brief conference call among the five members of the London Gold Pool (Scotia-Mocatta, Barclays Capital, Deutsche Bank, HSBC and Société Générale). The London spot fix price is then fixed to a price at the time Partners when the conference call ends.

The London Gold pool is supported by Partners of the London Bullion Market Association (LBMA) which presents the daily spot fix prices across the precious metals sector. This is communicated in UK Pounds, US Dollars and the European Euro. The price does not remain fixed throughout the morning and throughout the afternoon, however, and will fluctuate straightaway after the spot fix occurs.


How does the Spot Price work?

When you purchase gold via one of the five declared corporations (or via smaller providers who agree their price in accordance with the London Gold Fix), investors will pay the price at the next fix that day. I.e., a purchase is made prior to knowing the actual cost; the London Gold Fix sets the price later. This is a tantalizing balancing act, if the fix is high, investors will go elsewhere. Actually most investors would rather not buy gold in this indistinct way; people and investors who buy gold via the spot market typically have an anxious requirement for it immediately, maybe they are limited by law to have a proportion of their assets in gold. As a result, the big 5 mentioned above who fix the spot price of gold have an incentive to fix it as low as possible (to appeal to more people who want to invest in gold) without losing money. When the fix is very low, then more people are willing to buy gold in the next spot cycle, and then maybe the cost will be fixed slightly higher.

This can be a perplexing subject for the “simple” Gold seller or indeed scrap gold buyer but Spot fixing is essentially how the “big 5” players and smaller providers attract customers who want to invest in Gold and provides a price model from the declared market investors to the person in the street who wishes to sell scrap gold themselves!

Hope this has proved useful and informative.

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