Gold trading in London is a significant aspect of the global gold market, with the London Bullion Market Association (LBMA) playing a crucial role. Here's an overview of how gold is traded in London:
Trading Platforms
- *London OTC Market*: The London OTC market is the largest global center for over-the-counter gold trading, accounting for approximately 70% of global notional trading volume. Trading occurs between members of the LBMA, overseen by the Bank of England.
- *London Stock Exchange*: The London Stock Exchange lists gold-related securities, such as gold mining company shares and gold exchange-traded funds (ETFs).
Trading characteristics
- *Spot Price*: The spot price is set twice daily by the LBMA, with prices quoted in US dollars per troy ounce.
- *Trading Unit*: The standard trading unit is 1 fine troy ounce (pure gold).
- *Products Traded*: Spot, forwards, and options are traded on the London OTC market.
- *Delivery Unit*: London Good Delivery gold bars, weighing between 350-430 fine ounces, are the standard delivery unit.
Market Participants
- *Investment Banks*: Also known as bullion banks, they play a crucial role in the London gold market.
- *Brokers*: Facilitate trading between buyers and sellers.
- *Commodity Trading Companies*: Companies that trade gold as part of their commodity portfolio.
- *Central Banks*: Some central banks participate in the London gold market to manage their gold reserves.
- *Gold Refiners and Mining Companies*: Companies that refine and mine gold.
Notable Gold Trading Hubs
- *New York*: The COMEX derivatives exchange is a significant venue for gold trading.
- *Shanghai*: The Shanghai Gold Exchange (SGE) is a major physical gold trading hub.
- *Other Hubs*: Dubai, India, Japan, Singapore, and Hong Kong are also important gold trading centers.
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