Therefore, in the case of gold, the published price refers to a fine
troy ounce of the metal in a bar weighing between 350 and 430 troy
ounces, which meets all of the required standards (as defined in section
Refiners of gold and silver have to satisfy the LBMA Good Delivery
Rules that their bars meet the stringent requirements set by the
Association, whilst refiners of platinum and palladium have to similarly
satisfy the Rules set by the LPPM. The LBMA and LPPM accreditations are
the internationally accepted standards of product and refinery quality.
Full details of the requirements for joining the Good Delivery Lists of
the precious metals can be found on the LBMA and LPPM websites.
The standard delivery location of gold and silver is London – also
known as Loco London. This is ultimately an account held with a clearing
bank for precious metals and backed by metal held in a vault in London
that forms part of the clearing system. (The role of London Precious
Metals Clearing Limited – LPMCL – is covered in more detail in section
Generally, in the case of gold, metal in a predominantly producing
centre (such as South Africa) will be at a discount to the London price,
while that in a predominantly consuming country (India) will be at a
premium to the London price.
Loco London as a delivery location is the default for gold and
silver, while for platinum and palladium, it is more nuanced and must be
specified as to whether it is Loco London or Loco Zurich that is
required. If not so specified, Loco London is the default location.
Delivery of currency and metal is effected two business days after
the transaction date on the so-called ‘spot date’. Excluding public
holidays, it means that a trade entered into on a Monday will settle on a Wednesday and a trade entered into on a Friday will not settle until the following Tuesday.
However, while there must be two good London business days between
trade date and spot, if a US holiday falls between the trade date and
what would otherwise be the good spot date from the London holiday
schedule, the US holiday is generally ignored. It is worth noting though
that metal will not settle on US holidays.
Sometimes it can be the case that certain institutions will prefer to
have two clear business days in each of London and New York to ensure
that there is sufficient time for both currency and metal to settle.
Therefore, it is worth clarifying with the quoting institution to ensure
that any possibility of confusion in minimised.
Precious metals are, by default, quoted in terms of US dollars per
troy ounce. However, prices can generally be obtained against any freely
Bearing in mind the above conditions, the generic price quoted for a
precious metal by the media almost inevitably will be for a troy ounce
of the metal delivered Loco London, for gold and silver. In the case of
platinum and palladium, whether the delivery location is London or Zurich should be specified, but if no location is noted, then the assumption is likely to be that the metal will be settled Loco London.
The metal will be credited/delivered on the spot date in terms of US
dollars and will also conform to the rules regarding Good Delivery bars.
Based on the Loco London price, dealers can offer material of varying
fineness, bar size or form (for example, grain/sponge) at premiums (or
discounts depending on circumstances) to cover the cost of producing
small, exact weight bars or bars of a fineness above (or below) the
minimum 995 fine (in the case of gold).
This holds true across all four precious metals that can then be
shipped to destinations around the world at prices inclusive of freight
Equally, metal can also be quoted at a discount to the Loco London
price should there be insufficient demand for gold kilobars in India,
for example, or should bars not have been produced by a Good Delivery
List refiner and, hence, need to be ‘upgraded’, and so on.
Loco London or Loco Zurich?
While gold and silver have always been predominately settled over
accounts in London – so called Loco London trading – traditionally,
platinum and palladium have traded Loco Zurich – in other words, over
accounts that were held at one of the then three large Swiss banks
(Credit Suisse, Union Bank of Switzerland and Swiss Bank Corporation).
However, following the merger of Swiss Bank Corporation and Union Bank
of Switzerland (which formed UBS) and the substantial scaling back of
the market presence by Credit Suisse, there has been increasing interest
for the PGMs to trade as a predominately Loco London market.
However, while most PGM market makers do solely quote for Loco London
metal, between themselves, the picture is rather more nuanced for
customer transactions. Thus delivery location should be specified prior
to requesting any prices (for settlement over London or Zurich accounts)
and, indeed, there may be a price difference between the two locations
depending on market conditions. This differential should never get too out of line or be that long-lasting, as metal can be shipped between the two centres fairly simply and rapidly.