The London Bullion Market Association or LBMA
The London Bullion Market Association or LBMA – a summary
LBMA: History and function
The London Bullion Market is one of the most important trading places in the world for precious metals in bullion formats. In former times, most gold was traded in Amsterdam in the Netherlands. However, from 1684 onwards, international gold and silver trading increasingly shifted to London. The price of silver has been fixed daily on the London Bullion Market since 1897, while the price of gold has been set twice a day since 1919. The London Bullion Market Association (LBMA) was then founded in 1987, and has acted as the regulatory authority for the physical precious metals market since that time.
Previously, this task had been performed by the Bank of England, but increasing demand required a more specialist solution. In the London Bullion Market of today, more than 600 tons of gold and 3,000 tons of fine silver are traded in the course of a single day. Minimum transaction volumes apply to this procedure: 1,000 ounces for fine gold, and 50,000 ounces for silver. Over-the-counter precious metal trading (OTC) takes place, mainly involving business transactions between manufacturers and producers, international banks and wholesalers, and institutional investors.
The LBMA has a membership of more than 145 companies from over 30 nations. The basic requirement for admission to the LBMA is active participation in the London bullion market. In addition, members must have been active in the market for at least 5 years, and must have been producing bars for at least three years. Market transactions are processed via what is known as “clearing”. Several big banks share responsibility for this function and operate together as London Precious Metals Clearing Limited (LPMCL). As of November 2022, the committee comprised the following members:
- HSBC Bank
- ICBC Standard Bank
- JP Morgan Chase Bank
- UBS Group AG
LBMA annual gold price survey
Once a year, the London Bullion Market Association surveys market analysts about the expected trading range and the average price for traded precious metals in the coming year. The analyst whose forecast comes closest to the actual price receives a gold bar as a reward. Through its regular seminars and activities hosted as part of the annual conference, the LBMA ensures a regular exchange of knowledge and development of expertise among market participants.
Good Delivery Standard Bars
The electronic trading platform AURUM facilitates independent gold transactions carried out between members, or with their clients. While these participants transact business at their own risk, the rules stipulate that all traded gold and silver bars must meet certain quality requirements. These so-called ‘good delivery bars’ are standard LBMA bars guaranteed to be of the correct weight and fineness.
Each of these LBMA-accredited gold bars has a fineness of 995 ‰ and weighs around 400 troy ounces. This weight corresponds to around 12.44 kilograms, with a permitted fluctuation range of between 350 and 430 troy ounces. For silver bars, the stipulated fineness must be at least 999 ‰.
In addition, the name of the manufacturer, fineness and bar number, as well as the year and month of production, must be stamped on every Good Delivery Standard bar. Each bar can always be uniquely identified by its number which the manufacturer must then enter in a directory.
Bars with Good Delivery status are recognised and traded globally.
Conditions for LBMA accreditation
Mints worldwide only receive LBMA certification if they can demonstrate the Good Delivery Standard for their bullion bars. For companies, the LBMA seal of approval thus provides essential evidence of the consistent high quality of their precious metal bars.
The following five LBMA-accredited producers are on the Good Delivery List for Switzerland:
- Argor-Heraeus SA
- Metalor Technologies SA
- Pamp SA
- PX Precinox SA
- Valcambi SA
The Gold Fix
Gold fixing is carried out twice a day on the London Bullion Market. The aim of this practical arrangement is to be able to process as many transactions as possible at one fixed price. Fixing takes place from Monday to Friday at 10:30 a.m. UTC (11:30 a.m. CET) in the morning and again at 3:00 p.m. UTC (4:00 p.m. CET) in the afternoon. Meetings are held at Barclays Bank with the chair rotated annually.
This arrangement also brings together representatives from the following banks, all members of the London Bullion Market Association: Bank of Nova Scotia ScotiaMocatta, Barclays Bank, Deutsche Bank London, HSBC Bank USA, NA London Branch and the French Société Générale.
Because of increasing criticism about the lack of transparency, a new auction platform was launched on 20 March, 2015. Since that date, those involved have determined the price of gold electronically under the supervision of the ICE Benchmark Administration (IBA).
Read here to discover more about what you need to consider when importing gold into Switzerland.
Silver fixing discontinued in 2014
For more than 100 years, between 1897 and 2014, there was also a London- based procedure for fixing the price of silver. This silver fixing took place once a day, chaired by the Bank of Nova Scotia-ScotiaMocatta, together with Deutsche Bank and HSBC USA. Once the price had been fixed, transactions were processed by clearing companies. However, silver fixing was discontinued from 14 August, 2014.
- The London Bullion Market is one of the most important global trading venues for precious metals in bullion formats.
- The London Bullion Market Association (LBMA) was formed in 1987 to regulate the operation of the physical bullion market.
- LBMA membership includes more than 145 companies from over 30 nations.
- Good delivery bars are standard LBMA bars with a guaranteed weight and fineness.
- To gain LBMA accreditation for their bullion bars, mints must meet a set of stringent criteria.
- Gold fixing is carried out twice a day on the London Bullion Market.