The main market for gold bullion is London, where the metal is traded between members of the London Bullion Market Association (LBMA). The gold fixing price (LBMA Gold Price) is set twice daily, at 10:30 and 15:00 GMT, at auctions administered by ICE Benchmark Administration (IBA). The Gold Price is extremely important as it provides a benchmark for the majority of transactions involving gold across the globe. Approximately 500 tonnes of gold are traded daily on the London market, that is, about a fifth of annual worldwide production. The physical market for gold is used above all by luxury goods producers, who take up about half of the volume, although a substantial amount is also purchased by central banks.
Most of the transactions in the financial gold market take place on COMEX, a division of the New York Mercantile Exchange (NYMEX), where gold futures are traded. Futures allow speculators to take long or short positions in gold without the costs of physically holding the metal. Their popularity has increased steadily in recent years, making the market more liquid and improving the information content of prices.
Financial gold has also become more popular with the growth in the market for gold Exchange Traded Funds (ETF), debt securities back by gold assets owned by the issuer. Like the price of futures, that of ETFs depends on movements in the underlying. ETFs offer easy access to the gold market without the costs of owing physical gold, such as for storage and insurance. Demand for physical gold by ETF issuers peaked in 2011-12 to meet the rush of demand for investment purposes triggered by fears for the future of the international financial system.
