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Who sets the price of gold?

Before asking who sets the price of gold, it is important to understand which price you mean. Prices to buy and sell gold are set in one of three ways:

The Spot Price: Typically, when you buy and sell gold bullion the price is agreed on the gold commodity spot price. This is a theoretical price for a set weight of gold prior to being refined, and fluctuates according to supply, demand, and currency strength. Under a spot price contract, the price is set by the market at the time of purchase.

The LBMA gold price: For larger orders, the LBMA gold price is used. This is an average gold price, and is used to counter the minute-by-minute fluctuations in price. Each price is arrived at by testing and adjusting an initial price, which is close to the spot price, by a number of electronic auctions. It is set by the likes of the LBMA or Comex and is set twice daily, at 11am and 3pm UK time. Learn more about the LBMA gold price.

Futures Contract Price: This option is quite literally future purchasing; a customer and a supplier agree to a set price of gold for a specified weight - all to be delivered at a set time.

Unlike a traditional consumer product, it’s not as simple as a manufacturer and retailer deciding the price of gold. This makes it difficult to know who actually sets the price of gold, so below we've tried to simplify matters...

How is the price of gold set?

The price of gold depends, like many other things, on supply and demand. Gold is a rare metal, hence the high price, and has value for investment, jewellery, collectables, and in modern industry.

Gold prices are set by several banks, an oversight committee, and a panel of internal and external chair members, who calculate the figures based on supply and demand in the gold futures derivative markets and establish averages for both the spot price and the fixed price.

Comex (CME) in the United States, and the London Bullion Market Association (LBMA) in the UK, operate these major derivative markets.

In order to fully understand who sets the gold Spot Price, an investor needs some understanding how Futures Contracts and the derivatives markets operate. Check out our handy in-depth guide on gold futures.

How is the spot price set?

The commodity spot price is set by calculating an average of the estimated future price of gold, based on the traded futures contracts for the nearest month, called the 'front month'. The futures markets are the fastest to react to financial movements, quickly incorporating it into the gold prices.

This might sound odd - why would you set the live price based on future orders? - but the reality is that the advanced investor commitment to gold helps tell those financial executives just how strong the sentiment for or against gold is, and this allows them to adjust the spot price accordingly to ensure demand and keep gold trading.

Who sets the spot price of gold?

The spot price of gold is set electronically from the supply and demand figures in the gold futures derivative markets. Algorithms assess the same market data that the banks, committees and derivative markets use, and this then generates the live gold price; allowing for changes in demand but also any fluctuations in a domestic currency such as the Pound, Dollar, or Yen.

It's worth clarifying that investors will almost never be able to acquire gold at spot. This is due to the costs of mining and refining involved in gold production. Instead, the gold price paid by investors will be the spot price plus these additional charges, as well as handling fees and dealer margins. This is known as a ‘premium’, and choosing coins or bars with low premiums is the best way to invest in gold.

Trading on the international commodities market, at the spot price, is available 23 hours a day from 11pm GMT Sunday through 10pm GMT Friday. Trading is closed from 10pm to 11pm GMT daily. Spot gold trading also follows CME holiday closures. Market hours and holidays are subject to change.

BullionByPost gold prices

BullionByPost is the UK’s favourite place to view the gold spot price via our real-time, fast loading gold price charts. All our gold bar and coin prices are constantly updated in line with the spot price. When buying gold, we will agree a price with you based on the spot price or the LBMA fix, at a highly competitive premium.

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