Centenary of the LBMA Gold Price
12 September 2019 marked the centenary of the first London gold price auction, now known as the LBMA Gold Price.
Today, the LBMA Gold Price continues to be set in London and remains the international benchmark price for the gold market. Over the years, it has evolved and modernised. One of the most significant changes came on 1 April 1968 when the price changed from UK Sterling to US Dollars and moved to twice a day, to reflect the growth in the US market.
On 20 March 2015, LBMA announced that ICE Benchmark Administration (IBA) were appointed as new independent administrators of the gold price auction process. IBA have also established an external oversight committee to assist them in ensuring the effective governance of what is a transparent, trusted and tradable process.
The auction provides the opportunity to buy or sell precious metals via a transparent electronic platform. Everyone can see the same, publically available information, at the same time. This provides a level playing field to all participants. The administrator monitors the benchmark settings before, during and after the process to ensure its integrity.
Since 2015 the number of direct price participants has increased from 5 to 16, and now includes three Chinese banks. The number and global reach continues to grow.
Become a Participant
The auction is designed to be transparent and allow as many participants as possible across a range of industries. Contact IBA for more information on becoming a participant: firstname.lastname@example.org or +44 20 7429 7100.
A Brief History: A Story of Hope and Courage
As we look forward to the next 100 years of the Gold Price, it is important to reflect on the first. The impact of World War I on the London gold market was as resounding as on any other market at that time. Great Britain had seen a rush of gold into London during the preceding two and a half centuries, necessitating the organisation of a formal market to standardise the sale and storage of gold bullion. The Great War’s devastating effect on the world economy created a need for stability and certainty again in the trade of gold through London.
On 12 September 1919, the Bank of England made arrangements with NM Rothschild & Sons for the formation of a free gold market and the establishment of a daily gold price.
The first price auction took place at 11am when the price of gold was settled at £4 18 s 9d by the five founding members: NM Rothschild & Sons (chair), Mocatta & Goldsmid, Pixley & Abell, Samuel Montagu & Co. and Sharps Wilkins. The bids were made by telephone for the first few days, but it was then decided to hold a formal meeting each day at New Court, the London offices of NM Rothschild & Sons*.
Following more recent periods of global economic and political uncertainty, there has been a growing need to establish increased transparency and regulation within the financial sector. Under the guardianship of LBMA the market responded proactively. It accepted that the old ways of doing things, where an exclusive membership of five trading houses agreeing the daily price, would no longer be valid. LBMA established the new LBMA Gold Price to replace the long-established London Gold Price in 2015.
The gold price has survived turbulent times during the course of the last 100 years. Through its continued recognition as a globally established benchmark, we celebrate the courage of the gold market in its ability to seek out hope, and to adapt. LBMA looks forward with anticipation to the ways in which the market will continue to evolve and grow in the future.
It took 89 years for the gold price to break through the $1,000 barrier, reaching a new all-time high of $1,023.50 on 17 March 2008.
The price of gold was set by Sir Isaac Newton, as Master of the Mint, at £4.75 per troy ounce fine in 1717. The price remained unchanged for 200 years until the first London gold price auction in 1919.
In 1925 Winston Churchill, the UK Chancellor, announced that the UK will return to a modified gold standard. The desire for stable exchange rates led to this reinstatement.
On 31 January 1934 President Roosevelt sets the price of gold at $35 an ounce, which remains until 1968. Fort Knox was built to store the huge influx of gold purchased by the US Assay office.
Gold Price Centenary Film
Commissioned to mark the centenary of the first London gold price in 1919, which was set at New Court, St Swithin's Lane, the London offices of N.M Rothschild & Co.
Read the below Alchemist articles related to the history of the Gold Price Data:
- The Formerly Missing Gold Price Data: 1919 - 1925
- What Happened in the London Gold Market during the Gold Standard:
1925 - 1931
- Gold Investing/Hoarding the free 1930s London Market: 1931 - 1939
Articles by Fergal O’Connor