London’s gold market has a long history, which can be traced back more than 300 years. In 1804, London replaced Amsterdam, the Netherlands, as the center of the world’s gold trading. In 1919, the London gold market was officially established, and gold pricing was conducted twice a day in the morning and afternoon. The gold market price of the day is set by the five major gold banks, which has been influencing transactions in New York and Hong Kong. The main supplier of gold in the market is South Africa. Before 1982, London gold market mainly engaged in spot trading of gold. In April 1982, London futures gold market opened. At present, London is still the largest gold market in the world.
One of the characteristics of London’s gold market is that the trading system is relatively special, because there is no real trading place in London, and its trading is done through the invisible way — the sales contact network of major gold merchants. The trading members are composed of the five most authoritative gold merchants and some companies or stores recognized as qualified to purchase gold from the five gold merchants, and then are composed of various processing manufacturers, small and medium-sized stores and companies. When trading, the gold merchant shall quote the purchase price and the sale price according to their respective buying and selling prices.
Another feature of trading in the London gold market is its flexibility. The purity and weight of gold can be selected. If the customer requests to sell in a distant area, the gold merchant will also quote the freight, premium, etc., or the futures price as required by the customer. The most popular way to buy and sell London gold is that customers can buy gold spot without cash delivery, and only pay interest according to the agreed interest rate when it is due, but at this time, customers cannot obtain physical gold. This way of buying and selling gold, only in the accounts of the number game, until the customer has the opposite operation to close the position.
There are also some shortcomings in the special trading system of London gold market. First of all: since the prices quoted by various gold merchants are all real prices, sometimes the market gold prices are chaotic, even the gold merchants do not know which price is reasonable, so they have to stop quoting, and the trading of London gold will stop; second, the customers in London market are absolutely confidential, so there is no effective statistics of gold trading positions.