Market Tools

Currency unit

For gold the general market convention is to quote in US $ per ounce. Quotations in other currencies are available upon negotiation. In addition to a US Dollar price, the LBMA Gold Price is settled in US dollars. £ and € prices are also available but these are indicative prices for settlement only.

For silver the general market convention is to quote in US cents per ounce. As for gold quotations in other currencies, these are available upon negotiation. In addition to a price in US cents, £ and € prices are also available but these are indicative prices for settlement only.

---

Fine Gold Content

This represents the actual quantity of gold in a bar. For example a good delivery bar may have a gross weight (which includes small quantities of impurities) of 403.775 ounces. If it were of a fineness of say 996.4 fine, the fine gold content or net weight of gold would be 403.775 x 0.9964 = 402.321 fine ounces.

---

Forwards

This may take the form of a simple purchase or sale of metal for settlement beyond spot, an outright forward, or for forward swap transactions. Forward swaps are a simultaneous purchase and sale where one leg of the transaction is generally for spot value and the other forward, conducted at an agreed differential to the spot leg of the deal. They are in effect collateralised loans of metal. This leads to the terms "borrowing on the swap", in the case where the spot is purchased and the forward sold, or "lending on the swap" where the spot is sold and the forward purchased, in order to differentiate from leasing metal.

---

Leases

Gold and silver may be placed on deposit, borrowed or lent, like currency with interest calculated on the basis of troy ounces of gold or silver. It is uncollateralised lending. In order to differentiate and to avoid confusion with forward swaps, this activity is termed “leasing”. Firms therefore “lend on the lease” or “borrow on the lease”.

---

Loco London Spot Price

This is the basis for virtually all transactions in gold and silver in London. It is a quotation made by dealers based on US dollars per fine ounce for gold and US dollars per ounce for silver. Settlement and delivery for both metals is two business days in London after the day of the deal.

Dealers can therefore offer material of varying fineness, bar size or form - for example, grain - at premiums to cover the costs of producing smaller, exact weight bars, or bars of a fineness above the minimum 995 fine.

---

Marketable Amounts

The standard dealing amounts between market makers in the spot market are 5,000 fine ounces in gold and 100,000 ounces in silver. The usual minimum size of transaction is 2,000 troy ounces for gold and 50,000 troy ounces for silver while dealers are willing to offer competitive prices for much larger volumes for clients.

In the forward market, subject to credit limits, London's market makers quote for at least 50,000 fine ounces for gold swaps versus US dollars, and for at least one million ounces of silver.

---

Other Bullion Bars

In addition to Good Delivery bars, a variety of smaller exact weight bars are available to wholesale clients. The fine gold content of exact weight bars determines their price as clients only pay for the fine gold content (and not for the small amount of impurities which may be present). A kilo bar, for example, weighs one kilogram, which is 32.1507465 ounces. If the fineness of the bar was 995.6 then the fine gold content would be 32.009 ounces. Silver kilo bars are purchased and sold as one kilo of 999 fine silver.

---

Bar Weights and Their Agreed Fine Gold Content in Troy Ounces:

Gross weight	995.0 assay	999.0 assay	999.9 assays
1 kilo	31.990	32.119	32.148
½ kilo	15.995	16.059	16.074
¼ kilo	7.997	8.030	8.037
200 grams	6.398	6.424	6.430
100 grams	3.199	3.212	3.215
50 grams	1.599	1.606	1.607
20 grams	0.640	0.642	0.643
10 grams	0.320	0.321	0.321
5 grams	0.160	0.161	0.161
100 ounces	99.500	99.900	99.990
50 ounces	49.750	49.950	49.995
25 ounces	24.875	24.975	24.998
10 ounces	9.950	9.990	9.999
5 ounces	4.975	4.995	5.000
1 ounce	0.995	0.999	1.000
10 tolas	3.731	3.746	3.750
5 taels	5.987	6.011	6.017

---

Quoting Conventions

Prices are expressed in US dollars per fine troy ounce for gold and US cents per troy ounce for silver. Prices against other currencies or in units of weight other than troy ounces are generally available on request.

---

Settlement and Delivery

The basis for settlement of the loco London quotation is delivery of a standard London Good Delivery bar at the London vault nominated by the dealer who made the sale.

While currency settlement or payment for a transaction will generally be in US dollars over a dollar account in New York, delivery of metal against transactions in gold and silver are in practice made in a number of ways. These include physical delivery at the vault of the dealer or elsewhere, by credit to an "allocated account" or through the London clearing process to the "unallocated account" of any third party.

In addition to delivery at its own vault, a dealer may, by agreement, arrange delivery of physical metal to any destination around the world. Many dealers maintain consignment stocks of physical bullion around the world to facilitate efficient and speedy delivery in active bullion centres.

---

Spot and Forward Value Dates

Settlement and delivery for spot transactions is two good business days after the day of the deal (a good business day is defined as one in which banks are open in London for delivery of the gold or silver and in New York for settlement of dollars).

The value dates for standard forward quotations are at calendar monthly intervals from spot. Should that day be a non-business day, the value will be for the nearest good business day except at month ends when the value date will be kept in the month which reflects the number of months being quoted for.

---

Trading Unit

For gold, this is one fine troy ounce, and for silver, one troy ounce. In the case of gold, the unit represents pure gold irrespective of the purity of a particular bar, whereas for silver it represents one ounce of material of which a minimum of 999 parts in every 1,000 will be silver. Fineness is a measure of the proportion of gold or silver in a bullion bar and is expressed in terms of the fine metal content in parts per 1,000, and as such it defines the purity of a gold or silver bar. Assaying is the process by which fineness is determined.

---

Troy Ounce

The traditional unit of weight used for precious metals. The term derives from the French town of Troyes, where this unit was first used in the Middle Ages. One troy ounce is equal to 1.0971428 ounces avoirdupois. In the bullion market, all references to ounces mean troy ounces. One kilogram is equal to 32.1507465 fine troy ounces. A typical gold bar weighs approximately 400 fine troy ounces, so it would weigh approximately 12.44 kg, ie 400/32.1507465.

---

Unit for Delivery of Loco London Gold

This is the London Good Delivery gold bar. To meet the required standard it must satisfy certain criteria. It must have a minimum fineness of 995.0 and a gold content of between 350 and 430 fine ounces with the bar weight expressed in multiples of 0.025 of an ounce - the smallest weight used in the market. Bars are generally close to 400 ounces or approximately 12.5 kilograms.

---

Unit for Delivery of Loco London Silver

This is the London Good Delivery silver bar. To meet the required standard it must satisfy certain criteria. It must have a minimum fineness of 999 and a recommended weight between 750 and 1,100 ounces, although bars between 500 and 1,250 ounces will be accepted. Bars generally weigh around 1,000 ounces. Both gold and silver bars must conform to the specifications for Good Delivery set by the LBMA. Further information available in the Good Delivery section.