Understanding London Gold

London gold
Product features

Many people mistake London Gold as a specific kind of gold. London Gold does not point to a specific type of physical gold, but rather a spot gold trading contract settled in London.

The term "Loco London Gold" refers to the gold settled in London. However, people generally refer to the London Gold trading activities in Hong Kong as "local" London Gold. London Gold trading in Hong Kong can be traced back to the 1970s. Trading rules basically follow the London bullion market.

  • Trading contracts

    London Gold is a spot gold trading contract. The gold specified in the contract has a minimum purity of 99.5%, which is the standard established by the London Bullion Market Association (LBMA). London Gold in Hong Kong is traded in board lots, and one board lot represents 100 ounces. Investors can buy 0.1 board lot or 10 ounces at the least. Unlike the London bullion market, London Gold trading in Hong Kong in general does not involve physical delivery.

  • Pricing

    The London spot gold price is set twice daily in US dollar per ounce by members designated by LBMA. Taking reference of the London spot gold fix, Hong Kong gold dealers will provide bids and ask quotes to clients based on the quotations of other counterparties.

  • Over-the-counter trading

    Unlike stock and futures trading, the London bullion market does not have an exchange, and gold is traded over-the-counter, where the two counterparts to a transaction can bilaterally agree the trading price to complete the transactions. London Gold in Hong Kong is also traded over-the-counter. When gold dealers receive trading orders from clients, they will either put the order on the market for transaction by other dealers, or directly deal with the client. Some people see the latter as betting against the clients.

  • Trading hours

    As London Gold trades take place over-the-counter, Hong Kong investors can trade gold almost 24 hours a day.

14 February 2018