Can someone explain why the price of gold has to be set by a select few who belong to the LBM. Why can't it be traded like coffee, corn, oil or any other commodity? It must be very profitable to buy and sell gold knowing what the price will the next day.
The LBM price setting of precious metals is intended to be used for transactions by members within the LBM. If you represent Barclays and buying bullion gold from HSBC , both members of the the 5 member fixing board, the bid/ask price will be fairly tight. So others outside of the LBM started using the fixing price as a general estimate of gold pricing. As I remember, it is only done twice a day, so actual market prices may drift away from the last fixing price, especially away from Europe. So yes, the London fix price is set by the 5 members, but it is determined by market forces. If gold drops badly in asia, the syndicate can't bring it up by fixing the price high in the morning, or the members of the bullion exchange would be buying at a higher than market price and losing money, and the world market bid.ask price would determine the actual price of gold. In the old days before internet, not everyone had daily price estimates themselves, so they "borrowed" the LBM prices. It is profitable because of the "vigor" "juice" " exchange costs" difference between the bid/ask. No they aren't manipulating the world gold prices, they are working within them. IMO. Jim
I appreciate the explanation, just trying to educate myself and make my own conclusions in regards to market manipulation.
I read that and thanks. I did eventually find the information I was looking for in regards to who the members are and how the system works. According to the below article, they have little impact on the price of gold although it did catch my attention when I saw that a major bank from here in Canada, who is most likely the second biggest bullion dealer here other than the Royal Canadian Mint, being a member. http://buying-gold.goldprice.org/2007/04/london-gold-prices.html
