Welcome to the Investors Trading Academy talking
glossary of financial terms and events. Our word of the day is “Gold Fix”
The gold fix rate is used as a benchmark for pricing the majority of global gold products
and derivatives. The London Gold Fix involves gold dealers from London’s five biggest bullion
banks establishing a common transaction price for a large pool of purchase and sale orders.
They do this twice each business day – first at 10:30am and then again at 3pm.
The participating bullion banks will be acting both on their own behalf and for those customers
of theirs who have issued limit orders for them to trade at the London Gold Fix price.
No-one knows what the Gold Fix will be before it is declared.
The Gold Fix establishes the price at which the gross amount of gold on buy orders matches
the gross amount of gold on sell orders – across all the participating banks.
The Gold Fix Chairman will start the fixing process by declaring a price – usually very
near the ongoing spot market gold price. Assuming this price the participant banks
aggregate all the limit orders they have received – both buys and sells – and declare to the
Chairman the net quantity of gold they would buy, or sell, at the proposed price.
Normally it’s a 10 or 15-minute process, but it can take up to half an hour. The longest
fixing actually took place back on 19th October 1987 – Black Monday. The London Gold Fix took
two hours and 15 minutes to reach agreement that day. That was the day when the US stock
market dropped 23% of its value.