How Big Is the London Bullion Market?
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How Big Is the London Bullion Market?

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How Big Is the London Bullion Market?

There is no disputing that London is truly the world's single-largest gold hub.

This important sector of the U.K. economy is administered by an industry organization called the London Bullion Market Association (LBMA).

Despite its central role in the global gold trade, London's gold market is still not especially well-understood.

Interpreting the Numbers

Source: truney.com

Currently, the LBMA only publishes its clearing data. This includes all trades that reach settlement in London; however, it doesn't provide a wider accounting of all trading activity that goes on in London's vaunted "Inner City."

There's a fairly obvious reason behind this discrepancy in the numbers: the London bullion market is somewhat opaque. In other words, it's difficult to get an accurate picture from the outside looking in.

Although a huge amount of physical gold does change hands ever day in London's gold district, the sheer volume of paper transactions is staggering. On an annual basis, the amount of gold exchanged (on paper) in the United Kingdom's largest city is in excess of all the gold that has ever been mined in human history!

Let that sink in. It's clearly divorced from the reality of the physical gold trade.

Pulling Back the Veil

The opacity of how London bullion market isn't a new development. For over a century, a small group of big banks designated as market makers would essentially collude to set the day's gold price during the famous London fix.

The fixing process has undergone some long-overdue reforms in recent years. Now, the true size and scope of London's gold trade will also become more transparent.

Beginning in just a few weeks, the LBMA will start publishing more comprehensive data from all of the market's participants, according to Reuters. This covers much more trading activity than just the clearing data.

This means that, for the first time ever, investors and analysts will have access to a more accurate understanding of this crucial component of the international gold trade.



The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.

About the Author

Everett Millman

Everett Millman

Analyst, Commodities and Finance
Managing Editor

Everett has been the head content writer and market analyst at Gainesville Coins since 2013. He has a background in History and is deeply interested in how gold and silver have historically fit into the financial system.

In addition to blogging, Everett's work has been featured in CoinWeek, Advisor Perspectives, Wealth Management, Activist Post, and has been referenced by the Washington Post.

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