Gold has captivated humankind for thousands of years. The precious metal’s alluring color and luster, combined with its rarity, durability, and malleability have made it highly valued for use in currency, jewelry, and investments. While the price of gold fluctuates daily based on supply and demand, there is a process known as “gold fixing” that establishes benchmark prices for the commodity. This comprehensive guide will explain everything you need to know about gold fixing.

What is Gold Fixing?

Gold fixing refers to the practice of determining a daily benchmark price for gold. It establishes a rate that is widely accepted globally for pricing the precious metal and is used extensively in financial markets for transactions involving gold, gold derivatives, and exchange-traded funds (ETFs) backed by gold.

There are two primary gold fixings that take place each weekday – the London gold fixing administered by ICE Benchmark Administration and the Shanghai Gold Exchange PM fix in China. The London fix dates back nearly a century and has historically set the global price, while the Shanghai fix – launched in 2015 – aims to eventually rival it.

How the London Gold Fixing Works

The London gold fix process involves a small group of market making members that operate via conference call. There are currently four companies that participate – Goldman Sachs, HSBC, Societe Generale and ICBC Standard Bank. The call is hosted twice daily at 10:30 AM and 3 PM London time.

During the call, the participating banks share details on the buy and sell orders they have received from clients as well as their own trading positions. Based on this information, the chairperson proposes an opening price, which is then adjusted up or down based on the feedback from the member banks until a consensus is reached. This mutually agreed price is declared as the gold fix for that session.

The London fix aims to arrive at a price that adequately balances buy and sell interest in the market. It represents the equilibrium point where supply meets demand. Once the fix is set, it quickly propagates throughout the gold market and serves as the spot price for gold transactions around the world.

Evolution of the Fixing Process

The London gold fixing process traces its origins back to September 1919 when the first fix was conducted between NM Rothschild & Sons, Mocatta & Goldsmid, Samuel Montagu & Co., and Pixley & Abell. The fix provided a consistent benchmark price at a time when global gold trading was rapidly expanding.

Initially, the participating institutions would meet face-to-face at merchant bank NM Rothschild’s office in London. This later evolved into conversation over a telephone line. In 2004, the London Bullion Market Association (LBMA) took over administration and expanded membership to include more top global banks.

With the advent of electronic trading, the LBMA launched an auction-based electronic platform called LBMA Gold Price in 2015. However, this drew criticism for being too volatile and skewed by algorithmic high-frequency trading. As a result, the back shifted back to a purely telephone-based process but under a new administrator – ICE Benchmark Administration.

Today, technological advancements and concerns over manipulation have led to calls for further modernizing and regulating the fixing process. However, the decades-old phone system persists due to its familiarity and transparency for the market.

Significance of the Gold Price Fixing

The gold fixes – especially the London fix – serve some very important functions:

  • Global pricing benchmark – The fixes provide a universal reference price for gold that can be relied upon for valuations and transactions.
  • Contract settlements – Futures contracts, options, swaps and other gold derivative instruments often rely on the fix as a settlement price.
  • ETF valuations – Gold-backed exchange-traded funds track the benchmark prices to determine the net asset value (NAV) of their shares.
  • Central bank operations – Central banks frequently execute gold transactions at the prevailing fix to facilitate reserves management.
  • Retail buy/sell rates – Jewelry retailers, pawn shops, cash-for-gold outlets refer to fixing rates for their purchase and sale prices.
  • Mining company policy – Gold mining firms may sell production at the fix or use it to hedge output.
  • Accounting purposes – For balance sheet reporting, gold is often marked-to-market based on the fix.

In essence, the global gold fixing provides a vital reference point for all manner of transactions and valuations involving the precious metal. It represents the authoritative market valuation at any given time.

How the Shanghai Gold Fix Works

With China’s burgeoning demand for physical gold, the Shanghai Gold Exchange launched its own yuan-denominated benchmark price fix in April 2015. The process is overseen by the SGE and involves a panel of 18 participating members, including major Chinese banks and international firms.

Fixing sessions take place each trading day at 10:15 AM and 2:15 PM Shanghai time, shortly after morning and afternoon trading closes on the exchange. The SGE collects buy and sell orders from the panel banks who relay their customers’ interests. After consolidating this data, the SGE proposes an opening price which the panel adjusts until a consensus price is agreed upon.

The Shanghai fix complements the LBMA Gold Price fix and provides a reference point more attuned with Asian trading. The fix also allows onshore Chinese traders to hedge their positions in renminbi without exchange rate risk. With the Shanghai market growing, its fix aims to eventually stand on par with London’s longstanding benchmark.

The gold fixing process has faced turmoil in recent years due to various developments:

  • Transition in London from in-person to electronic and back to phone fixing due to volatility concerns.
  • Withdrawal of Deutsche Bank from London fixing in 2014 due to heavy regulatory scrutiny of alleged manipulation.
  • Lawsuits alleging collusion and unfair pricing around the London fix periods.
  • Increasing competition between London and Shanghai fixes.
  • Calls for more market participants beyond handful of private banks.
  • Desire to move to exchanged-based platforms for greater transparency.

This has put the gold fixing process in flux. While the decades-old phone methodology remains, there are pressures for modernization. More diversity among fix members, exchange-based solutions, and regulatory oversight have all been proposed to improve fairness and transparency for users of the global gold benchmark. However, any changes will likely occur gradually to avoid disrupting the established status quo.

Gold Fix Manipulation Concerns

Due to the huge value of transactions pegged to the gold fixings, there is intense interest and scrutiny surrounding the benchmark-setting process. However, critics have alleged that the lack of oversight and limited participating members leaves the fix open to potential manipulation for profits.

Some of the concerns include:

  • Ability of member banks to share confidential client order flow information and improperly use it to their advantage.
  • Limited number of fix members means resulting price can be improperly skewed.
  • Potential communication of misleading supply/demand data to influence price.
  • Frontrunning which involves exploiting non-public fix information to trade personal book ahead of price moves.
  • Spoofing – entering fake orders to artificially alter apparent supply/demand so fix moves favorably.
  • Trading on proprietary knowledge of imminent client fix-linked transactions.

Several lawsuits have accused the member banks of undertaking such manipulative practices around the daily fixings to reap trading profits, while compromising the integrity of a vital benchmark. This has led to calls for greater oversight and reforms around gold fixing.

Gold Fixing Regulations and Oversight

Due to the widespread importance of the gold price fixing and concerns over potential manipulation, regulatory scrutiny has increased. Some measures include:

  • Shift in administration of London fix from LBMA to independent ICE Benchmark Administration.
  • Instituting a conflict of interest matrix and internal oversight for member banks.
  • Audio recordings of fixing calls to enhance transparency.
  • Detailed price snapshots published at fixing time to limit latency arbitrage.
  • Prohibiting fix members profiting from knowledge of clients’ orders.
  • Regulatory monitoring by FCA in UK and CFTC in the US around the fixing auctions.

While reform advocates want more oversight and diversity of fixing panel members, regulators have tread carefully so far to avoid disrupting the longstanding processes. However, change is necessary to uphold credibility amidst growing criticism over opacity and fairness around this vital benchmark.

Impact of Gold Fixing on Prices and Market Behavior

The gold fixes, especially the LBMA Gold Price benchmark, significantly impact market activity and prices. Here are some key observations:

  • Large buy and sell orders often accumulate right before the fix, then execute at the published price once determined.
  • Prices tend to be more volatile around the fixing auctions as markets react to expected benchmarks.
  • The published fix tends to act as a magnet for prices, with market trades adjusting to converge on the reference point.
  • Gold derivatives see surging trading volume around the fix as contracts approach settlement.
  • Price spreads on gold widen before/during fixes due to uncertainty then tighten immediately after.
  • Because the fix is so influential, even a slight unexpected deviation can produce outsized volatility.
  • Momentum and order flow established right after the fix tends to carry through into the next trading session.

While the gold fix aims to simply capture snapshot market equilibrium, in practice it significantly shapes short-term price action, sentiment, flows and behavior – especially in the auction periods.

Major Gold Fix Dates and Milestones

For a practice dating back a century, the gold fixing process has gone through many evolutions:

  • September 1919 – First gold fixing takes place in London at NM Rothschild & Sons offices.
  • 2004 – London Bullion Market Association takes over administration of London fix, expands number of member banks.
  • 2014 – Deutsche Bank withdraws from fix participation amid manipulation scrutiny.
  • 2015 – LBMA transitions fix to electronic platform, later reverts back to phone-based system.
  • April 2015 – Shanghai Gold Exchange launches competing yuan-based gold fix auctions.
  • 2015-2016 – Lawsuits allege manipulation by fix member banks to rig prices.
  • 2017 – ICE Benchmark Administration appointed as administrator for LBMA Gold Price auctions.
  • 2020 – Global pandemic causes unprecedented turmoil in gold markets amid volatility.

The long run of the London gold fixing was marked by gradual change punctuated by occasional sharp shifts, especially leading up to and during the 2010s as technology and markets evolved. It remains deeply ingrained in bullion markets today.

Moving to an Electronics-Based Fixing System

To enhance transparency and accessibility, there are calls for modernizing gold fixing through technology. This could involve:

  • An online portal for accepting fixing orders from a broader array of international participants.
  • Live publication of aggregated bid/ask volumes to improve price discovery.
  • Basing the fix on electronic matching of submitted orders into an order book instead of bilateral negotiation.
  • Allowing orders during a pre-fix period so the auction price aggregates earlier trading interest.
  • Utilizing a volume weighted average price (VWAP) algorithm to determine the fix against orders placed.
  • A period of structured trading around the fixes to normalize excess volatility.

However, any move to automate the auction process will require careful calibration to retain the essential functions of the gold fixing. Technology promises efficiency but could also introduce new risks that erode confidence in this vital benchmark.

The Future of Gold Price Fixing

The gold fixing system stands at a crossroads. While the decades-old phone-based auctions persist, there is impetus for modernization from technology and changing market dynamics like:

  • Rising transaction volumes straining the bilateral negotiation model.
  • Desire for greater transparency, oversight and price discovery.
  • Growth of algorithmic and high-frequency trading in gold instruments.
  • Expansion of gold derivatives markets relying on the fix for settlement.
  • Competition from Shanghai trying to elevate its fix to international benchmark status.

However, it is unclear whether transitioning to an automated platform would improve efficiency or damage the widely accepted status of the London fix. Any changes will likely be incremental based on broad consensus to avoid severely disrupting the trusted global benchmark. But external pressures may necessitate a comprehensive overhaul of gold fixing in the coming years.


From its origins a century ago, the practice of gold fixing has become deeply woven into the fabric of global bullion markets. The longstanding ritual of the London gold auction provides a universally accepted benchmark that facilitates countless transactions and processes. However, concerns over transparency and potential manipulation have spurred scrutiny around gold fixing in recent years.

While pressure mounts for modernizing the process, technology alone will not resolve concerns without introducing greater oversight and diversity of member banks. As gold markets evolve, the fixing system needs to balance efficiency with retaining the trust it has accrued over decades as the authoritative reference price. Getting this transition right is crucial for upholding financial stability across gold-linked markets worldwide.

For traders navigating these complex transitions, understanding the nuances around gold fixing will be vital. This comprehensive guide provides extensive insights into the history, workings, impact and future trajectory of the global gold price auctions.