Gold’s Global Trading Market
Despite the size of the gold market, how it is traded is often poorly understood. The gold market is inherently global and gold is traded continuously throughout all time zones. Gold’s disparate trading centres around the world are linked as market participants drive convergence of local gold prices through arbitrage activity. However, there are still important distinctions across geographies such as trade restrictions, taxes on gold and differing bar standards such that a single integrated gold trading market does not exist.
The gold market comprises a broad range of participants that includes physical players such as producers, refiners, fabricators and end-users. Financial intermediaries, such as banks, provide an important function in offering financing, providing trading liquidity and offering broader services (e.g. selling of gold bars of consignment). Other important players in the wholesale gold market include official institutions and different types of investor.
Wholesale gold trading performs an important function in facilitating price discovery and bringing together buyers and sellers. Market participants either seek to trade physical gold, gain exposure to the gold price or transfer price risk (e.g. by hedging production of gold). Ensuring that this activity takes place transparently and fairly is paramount, so that market participants have confidence in the integrity of their respective gold market. The World Gold Council intervenes to ensure all trading markets for gold, and the infrastructure that supports them, comply with principles of best-practice, such as the UK Fair & Effective Markets Review, which outlines a broad set of principles covering standards, transparency, market access and conduct.