Internationally, bullion is traded on a 24-hour basis, mainly through London, in Over-the-Counter (OTC) transactions in spot, forwards and options.

The governance of this market is maintained through the London Bullion Market Association’s (LBMA) publication of the Good Delivery List. This is the list of accredited refiners, whose standards of production and assaying meet the requirements set out in the LBMA’s Rules. Only bullion conforming to these standards is acceptable in settlement against transactions conducted between participants in the bullion market.

The world’s trade in bullion is London-based with a global reach of activity and participants. The roots of the London Bullion Market can be traced to the partnership between Moses Mocatta and the East India Company, who started shipping gold together towards the end of the 17th century.


OTC Bullion Market

The pie diagram below illustrates the five main elements which together comprise the London Over the Counter (OTC) Bullion Market. Bars traded in London are done so in an OTC market which means all transactions are conducted between two parties on a principal-to-principal basis. This maintains confidentiality but also ensures that all risks, including those of credit, exist only between the two counterparts.

The term Loco London refers to gold and silver bullion that is physically held in London. Only LBMA Good Delivery bars are acceptable for trading in the London market. The Loco London concept has evolved within the market. In the second half of the 19th century, gold from Californian, South African and Australian mines was sent to be refined and sold in London. With this business as a base, and in tandem with the increasing acceptance of the London Good Delivery List, clients from all over the world opened bullion accounts with individual London bullion dealing houses. It soon become evident that these Loco London accounts, which were used to settle transactions between bullion dealer and client, also could be used to settle transactions with other parties, by transfers of bullion in London. Today all third party transfers, on behalf of London market clients, are effected through the London bullion clearing system. Each segment of the market is described below.

  • CLEARING SYSTEM
    All bullion transactions between the clearing members of the LBMA are settled and cleared by The London Precious Metals Clearing Limited.
  • VAULTING SERVICES
    Seven members of the LBMA, together with the Bank of England, physically hold the gold and silver bullion traded in London. Amongst the ‘custodian services’ they provide, is acting as gatekeepers to the Market; ensuring the bullion delivered meets the standards set by the LBMA.
  • GOOD DELIVERY
    The LBMA maintains the Good Delivery Lists for gold and silver bars. Only bars produced by refiners on the Lists can be traded in the London market. Both the refiners' practices and the bars they produce have to measure up to the most stringent standards of quality.
  • PRICING AND STATISTICS
    LBMA Market Makers set continuous two-way bid and offer prices for bullion products. The LBMA Gold Price is set twice daily and is operated and administered by IBA. The LBMA Silver price auction is operated by CME and administered by Thomson Reuters. The LBMA Platinum and Palladium Prices are operated and adminstered by the London Metal Exchange (LME). These benchmark prices are used around the world as a basis for a variety of transactions.
  • ALLOCATED AND UNALLOCATED ACCOUNTS
    Most traded and settled bullion in London is on an unallocated account basis. This is an account where the customer does not own specific bars, but has a general entitlement to an amount of metal. This is similar to the way that a bank account operates. Allocated accounts means that the customer has entitlement to specific bars.

Other Useful Documentation

For a more comprehensive overview of the Market, the LBMA is in the process of extensively revising the "Guide to the London Precious Metals Market", and this will become available on line later in 2017.