London Fix
Historical Context
The London Fix is a daily benchmark price for gold, silver, platinum, and palladium, determined by an auction process twice a day in London to settle contracts between members of the London bullion market.
For nearly a century (1919–2015), the "London Gold Fix" was a ritual. Five major bullion banks (Barclays, HSBC, ScotiaMocatta, Société Générale, Deutsche Bank) would get on a conference call twice a day. The chairman would announce an opening price. Each bank would declare if they were a net buyer or seller based on their clients' orders. If buyers exceeded sellers, the price was raised. If sellers exceeded buyers, it was lowered. This continued until supply and demand balanced, and the price was "Fixed". **Why it worked:** It allowed the market to absorb massive orders (e.g., a central bank selling 10 tonnes) at a single price without causing wild volatility in the spot market.
Key Takeaways
- Occurs twice daily: 10:30 AM (AM Fix) and 3:00 PM (PM Fix) London time.
- Historically determined by 5 banks via telephone, leading to scandals and manipulation.
- Replaced in 2015 by the "LBMA Gold Price" and "LBMA Silver Price", electronic auctions managed by ICE Benchmark Administration.
- Serves as the global reference price for industrial contracts, miners selling output, and ETFs (like GLD).
- Provides a single clearing price for massive volume that would otherwise disrupt the spot market.
The Fixing Scandal and Reform
In the 2010s, regulators discovered that traders at the participating banks were sharing client order information during the call to front-run the fix. This allowed them to profit at the expense of their clients. * **The Result:** Massive fines were levied. Deutsche Bank left the fixing panel. The old telephone system was deemed opaque and obsolete. * **The Solution:** In 2015, the process was modernized. The "London Fix" was officially replaced by the **LBMA Gold Price**, an electronic auction platform administered by an independent third party (ICE Benchmark Administration) to ensure transparency and compliance with new benchmark regulations (IOSCO).
Significance for ETFs and Industry
The PM Fix (3:00 PM London) is the most important number in the gold market. * **ETFs:** Funds like GLD use the PM Fix to calculate their Net Asset Value (NAV) every day. * **Miners:** A gold miner might have a contract to sell 1,000 oz per week to a refiner at "Average PM Fix + $1.00". * **Jewelers:** Industrial users hedge their inventory risk based on the Fix price.
AM vs. PM Fix
Two daily benchmarks.
| Feature | AM Fix (10:30 London) | PM Fix (3:00 London) |
|---|---|---|
| Time (EST) | 5:30 AM | 10:00 AM |
| Market Focus | European Open / Asian Close | US Market Open |
| Significance | Less Liquid | Global Benchmark |
| Volatility | Lower | Higher (US Economic Data Release) |
FAQs
No. The Spot price fluctuates every millisecond. The Fix is a snapshot taken at a specific moment. However, the Fix is derived from the underlying spot market, so they are usually very close.
Retail investors generally cannot. You buy at the spot price + a premium. Only large institutional participants in the auction can transact directly at the Fix price.
The London Silver Fix was actually the first to collapse after Deutsche Bank withdrew, leaving only two banks. It was replaced by the LBMA Silver Price (administered by CME Group and Thomson Reuters) a year before gold followed suit.
The Bottom Line
The London Fix (now the LBMA Gold Price) is the daily "settlement price" for the physical gold world. It provides a transparent, auditable benchmark that allows the industry to move billions of dollars of metal every day without chaos.
Related Terms
More in Commodities
At a Glance
Key Takeaways
- Occurs twice daily: 10:30 AM (AM Fix) and 3:00 PM (PM Fix) London time.
- Historically determined by 5 banks via telephone, leading to scandals and manipulation.
- Replaced in 2015 by the "LBMA Gold Price" and "LBMA Silver Price", electronic auctions managed by ICE Benchmark Administration.
- Serves as the global reference price for industrial contracts, miners selling output, and ETFs (like GLD).