Loco London

Loco London is a concept that is perhaps the most important aspect of the London bullion market as it represents the basis for international trading and settlement in gold and silver. Most global over-the-counter gold and silver trading is cleared through the London bullion market clearing system, with deals between parties throughout the world settled and cleared in London.

This concept has evolved over time. In the second half of the nineteenth century, London developed as the centre through which gold from the mines of California, South Africa and Australia was refined and then sold.

With this business as a base, and supported by the increasing acceptance of the London Good Delivery List, London bullion dealing houses established global client relationships. These clients opened bullion accounts with individual London trading houses. It soon become evident that these “loco London” accounts, while used to settle transactions between bullion dealer and client, could also be used to settle transactions with other parties by transfers of bullion in London. Today, all such third party transfers on behalf of clients of the London market are effected through the London bullion clearing system.

A credit balance on a loco London account with an LBMA member represents a holding of gold or silver in the same way that a credit balance in the relevant currency represents a holding of dollars on account with a New York bank or yen with a Tokyo bank.