HOW ARE SPOT PRICES DETERMINED?
The simple answer is that the markets determine the prices through the interaction of pure supply and demand. In the case of the specific case of gold, the major market is the London Bullion Market Association (L.B.M.A.). Most of the members are major international banks or bullion dealers and refiners. Five members of the L.B.M.A. meet twice daily to “fix” the gold price in a process known as the London Gold Fixing. This is an alternate mechanism of price discovery which is designed to allow gold traders to trade at a fair market price. It is designed to fix a price for settling contracts between members of the London bullion market, but informally the Gold Fixing provides a recognized rate that is used as a benchmark for pricing the majority of gold products and derivatives throughout the world’s markets. The Gold Fixing is conducted by telephone, at 10:30 GMT and 15:00 GMT. Clients place orders with the dealing rooms of fixing members, who sum up all orders before communicating thei
