While
gold is traded in markets throughout the world, the market is
essentially homogenous since the gold price is always in dollars and the
gold traded is "loco London" (gold deliverable in London and meeting
London trading standards). The London PM fix is normally considered the
main reference price for the day and is the price most often used in
contracts. The price of gold is quoted in USD per troy ounce.
A
tradition of the London Gold Fixing was that participants could raise a
small Union Flag on their desk to pause proceedings. Under the
telephone fixing system, participants can register a pause by saying the
word "flag", and the chair ends the meeting with the phrase "There are
no flags, and we're fixed".
Since
May 2004 it has been conducted by telephone. The chairman begins with a
'trying' price. The five fixing members' representatives relay the
price to their dealing rooms. And these are in contact with other
dealers. The market members then declare how much gold they are prepared
to buy or sell at that price. The dealers, who are in contact with
their clients, may change their order or add to it or cancel it at any
time; the position declared by the dealers is the net position
outstanding among all their clients. (If one is buying two tonnes and
another is selling one tonne, then he declares himself a buyer of one
tonne.) If more gold is required than is offered, then the price will be
adjusted upwards (and vice versa) until equilibrium is reached. At this
point the gold price is fixed. On very rare occasions the price will be
fixed when there is disequilibrium, at the discretion of the chairman
of the fix.
Influence
on gold price: The day price of gold is driven by supply and demand.
Because most of the gold ever mined still exists and is potentially able
to come on to the market for the right price, unlike most other
commodities, the hoarding and disposal plays a much bigger role in
affecting the price. At the end of 2006, it was estimated that all the
gold ever mined totaled 158,000 tons. Given the huge quantity of stored
gold, compared to the annual production, the price of gold is mainly
affected by changes in sentiment, rather than changes in annual
production. In times of national crisis, people fear that their assets
may be seized and that the currency may become worthless. They see gold
as a solid asset which will always buy food or transportation. Thus in
times of great uncertainty, particularly when war is feared, the demand
for gold rises.
When
dollars were fully convertible into gold, both were regarded as money.
However, most people preferred to carry around paper banknotes rather
than the somewhat heavier and less divisible gold coins. If people
feared their bank would fail, a bank run might have been the result.
This is what happened in the USA during the Great Depression of the
1930s, leading President Roosevelt to impose a national emergency and to
outlaw the ownership of gold by US citizens.
If
the return on bonds, equities and real estate is not adequately
compensating for risk and inflation then the demand for gold and other
alternative investments such as commodities increases. An example of
this is the period of Stagflation that occurred during the 1970s and
which led to an economic bubble forming in precious metals.
Gold
is the most popular precious metal in which people invest. It is a
safe- haven against any economic, political, social or currency-based
crises, such as: investment market declines, currency failure,
inflation, war and social unrest.
Gold
is unlike a bond. Gold pays no interest. But, Gold cannot become
worthless like a bond can. The values of both rise and fall in free
market trading.
Gold
is also not a stock.Gold has no employees, no unions, pays no health
insurance, has no overpaid CEO, no need to borrow money from a bank, and
is recession-proof. Gold simply sits there in your vault quietly doing
its job. You can see why for the average stock broker or financial
adviser, Gold remains a total mystery.
Sadly
for their clients, stock brokers seldom recommend investing in Gold or
Silver. Despite the remarkable year-over-year gains they continue to
ignore the gains being generated during the current bull market.
Stocks
and Bonds prosper in strong economic times and bear higher risks in bad
times. By contrast, Gold ignores recessions and does well when these
and other traditional investments fail.
The
first fixing took place on September 12, 1919 amongst the five
principal gold bullion traders and refiners of the day. The price of
gold then was four pounds 18 shillings and ninepence per troy ounce. Due
to government controls and war emergencies, the London Gold Fixing was
suspended between 1939 and 1954. price of gold are fixed in United
States dollars (USD), Pound sterling (GBP) and European Euros (EUR).
Historically,
the Fixing took place twice daily at the City offices of N M Rothschild
& Sons in St Swithin's Lane, but since May 5 2004 it takes place by
telephone. In April 2004, N M Rothschild & Sons announced that it
planned to withdraw from gold trading and from the London Gold Fixing.
Barclays Bank took its place from 7 June 2004, and the chairmanship of
the meeting, formerly held permanently by Rothschilds, now rotates
annually. On January 21 1980 the Gold Fixing reached the price of $850, a
figure which was not overtaken until January 3 2008. This is when a new
record of $865.35 per troy ounce was set in the morning Fixing.
However, with inflation, the 1980 high would be equal to a price of
$2398.21 in 2007 dollars. So, the 1980 record still holds in real terms.
While
gold is traded in markets throughout the world, the market is
essentially homogenous since the gold price is always in dollars and the
gold traded is "loco London" (gold deliverable in London and meeting
London trading standards). The London PM fix is normally considered the
main reference price for the day and is the price most often used in
contracts. The price of gold is quoted in USD per troy ounce.
Since
May 2004 it has been conducted by telephone. The chairman begins with a
'trying' price. The five fixing members' representatives relay the
price to their dealing rooms. And these are in contact with other
dealers. The market members then declare how much gold they are prepared
to buy or sell at that price. The dealers, who are in contact with
their clients, may change their order or add to it or cancel it at any
time; the position declared by the dealers is the net position
outstanding among all their clients. (If one is buying two tonnes and
another is selling one tonne, then he declares himself a buyer of one
tonne.) If more gold is required than is offered, then the price will be
adjusted upwards (and vice versa) until equilibrium is reached. At this
point the gold price is fixed. On very rare occasions the price will be
fixed when there is disequilibrium, at the discretion of the chairman
of the fix.
A
tradition of the London Gold Fixing was that participants could raise a
small Union Flag on their desk to pause proceedings. Under the
telephone fixing system, participants can register a pause by saying the
word "flag", and the chair ends the meeting with the phrase "There are
no flags, and we're fixed".
Throughout
history gold has often been used as money and, instead of quoting the
gold price, all other commodities were measured in gold. After World War
II a gold standard was established following the 1946 Bretton Woods
conference, fixing the gold price at $35 per troy ounce.
At
this point in our nation's history, investors face an uncertain future.
Liberal spending this year has multiplied the budget deficits far
beyond what we declared was "out-of-control Bush Republican spending."
Maximum
Profits Investing in Gold In uncertain times, like we find ourselves in
today, precious metals will act more like a currency- preserving wealth
and resisting deflation forces. There have always been unique periods
in American history in which Gold and Silver suddenly act if they were
the most scarce commodity on the planet!
During
those decades, the investment demand for precious metals exceeds the
supply, prices are bid up, and the profits can be dramatic. Let's take
for example the last bull market for precious metals in the 1970s. the
price of Gold multiplied by 24 times while Silver multiplied over 30
times. With gains on that scale, Gold and Silver are hard to resist as
pure profit plays.
Gold
Survives & Prospers in Bad Times In fact, in recent years, the
price of Gold and Silver have more than quadrupled. Impressive indeed!
Yet, those gains are far from the 24-30 times of the past leaving us
with the opinion that there are still substantial gains still ahead in
this bull market.
By
contrast, Stocks, Bonds, and Real Estate all depend on the U.S. and
World economy to be strong and growing. Right now, it's not. The U.S. is
barely struggling out of a severe two year recession, the mortgage
crisis still continues, the Government still owns huge chunks of the
nation's banks, runs the entire mortgage industry, manages the world's
largest insurer, and barely saved General Motors.
The
Gold Fixing, or the London Gold Fixing or Gold Fix, is the procedure by
which the price of gold is set on the London market by the five members
of the London Gold Pool. 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 throughout the world's
markets.
The gold price fix takes place twice daily at 10.30am and 3pm, London time.
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