12. Bank of England

The Bank was founded in 1694. In 1697, the first gold rush brought metal from Brazil into London, partly transported on ships owned by the East India Company, which had been granted a Royal Charter from Queen Elizabeth I on 31 December 1600. This inflow of gold led to demand for a purpose-built London vault, which the Bank of England duly set up. Its ‘bullion warehouse’ served the whole of the European market and was further stocked by the influx of gold into London from the subsequent gold rushes in California, Australia and South Africa. For a significant portion of that time, the majority of imports of gold and silver into Britain were sent for delivery to the Bank of England’s Bullion Office.

The refineries that were set up to process this gold were located close to the Bank of England (which owned the St Luke’s refinery). This played a key role in it being a custodian, regulator and facilitator of lending and selling of gold by other banks.

In 1750, the Bank set up the London Good Delivery List, which formally recognised those refineries which produced gold bars of a certain standard and could therefore be allowed to enter the London market. Today, this list is regarded as the only globally accepted accreditation for the bullion market, ensuring that the wholesale bullion bars traded in the market meet the standards and quality required by Good Delivery.

Only after the great expansion of the bullion business following the Californian and Australian gold rushes in the 1850s was the Bullion Office bypassed by brokers in the London market, weighing and storing gold independently. The Bank also had responsibility throughout the period that Britain was on the gold standard of buying gold and sending it to the Mint for coinage – the Bank was bound to redeem the notes that it issued in gold coin. When the gold standard was suspended in 1914, the Bank continued to take much gold, including all South African production, for Britain’s reserves.

After the establishment of the daily ‘Gold Fixing’ in London in 1919, the Bank soon became the agent for the South African Reserve Bank for marketing its gold at the fix – a task it continued until March 1968. After this, its pivotal role diminished with the establishment of the free market.

By the 1980s, the development of the market was such that the Bank of England recognised that the custody, maintenance and regulation of the Good Delivery List required an independent body. This was the catalyst for the founding of the London Bullion Market Association in 1987.