London Bullion Market is an over-the-counter wholesale market intended for gold and silver trading
Trading is carried out between members of the London Bullion Market Association (LBMA), the majority of whose members are banks or major gold bar dealers and refiners, and supervised by the Bank of England.
|Contract Size||100 Troy Ounces|
|Fixed Exchanged Rate||USD 1.00 = Rp. 10,000-|
|Minimum Tick||10 cents|
|Value Per 10 Cents||Rp. 100,000|
Internationally, gold is traded through over-the-counter transcations with a limited number of trades on the New York Mercantile Exchange (NYMEX) and Tokyo Commodity Exchange (TOCOM). Forward contracts are known as gold futures contracts, and gold spot is traded to be settled two working days after the trading date when both New York and London markets are open for business. Unlike the commodity market, the forward market for gold is driven by spot prices and interest rate differences, similar to that of foreign exchange market, and is not based on the dynamics of supply and demand. Like currencies, gold is borrowed and lent by the central bank. Gold loans are more attractive due to the lower interest rate than that of the US, except in special situations where the market tends to be in contango, in which the forward price of gold is higher than the spot price. Historically, this has made gold trading an attractive market option.
So far, London is the largest global center for over-the-counter transactions, followed by New York, Zurich, and Tokyo. However, trading has grown in recent years with Comex in New York and Tocom in Tokyo generating the most activity. Gold is also traded in the form of securities, such as funds traded in London, New York, Johannesburg, and Australia. Although the physical market for gold and silver is distributed globally, clearing most of the over-the-counter wholesale trade is done through London. The average daily clearing volume of gold and silver at the LBMA back in November 2008 was 18.3 million ounces (worth $13.9 billion) and 107.6 million ounces (worth $1.1 billion). This means that the clearing amount for 4.4 days at LBMA is the same as the annual gold mine production and 6.2 days for annual silver production.