Gold fix

By THIS IS MONEY
Updated:

 

The Daily Mail City team explain how the gold price is decided on twice a day - via a conference call and not in a wood-pannelled room in the City these days.

A one kilo gold bar

Gold bar: The official price of gold is set twice a day

Bond villain?

No, that was Goldfinger. This fix is the quaint ritual by which the official price for gold is set twice a day. The first fixing took place September 12, 1919 when an ounce of gold was fixed at £4.18s.9d. per fine ounce.

Why fix?

Because it guarantees that large volumes of gold can be bought and sold at one transparent, clear and undisputed price. For the central banks, miners and investors who deal in gold there is no ambiguity when they want to trade.

How does it work?

The five members of the London Gold Fixing used to meet twice daily in a wood-panelled room in the headquarters of the Rothschild's merchant bank in St Swithin's Lane in the City.

Based on the number of orders for gold bars placed by their clients, they would set a price at 11am and 3pm.

And now?

When Rothschild pulled out in 2004, the process switched to a conference call. Current members are Deutsche Bank, HSBC, SocGen, Barclays Capital and the Bank of Nova Scotia.

Any surviving traditions?

Yes. When the price was set around in Rothschild's HQ, members could raise a small Union flag to pause the bidding process. Now members can simply say the word 'flag'.

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