How gold is priced: spot, the LBMA benchmark and your quote

Clients new to bullion trading often ask for “the gold price” as if it were a single number printed somewhere each morning. It isn’t. Here is where the price actually comes from, and how it reaches your quote.

The spot price

Spot is the price at which gold changes hands for immediate delivery. It is quoted continuously, in US dollars per troy ounce, across the over-the-counter market centred on London and the futures markets in New York and Shanghai. It moves all day with supply, demand, interest rates, currency movements and everything else that moves a global market. At any given moment there is a bid, an offer, and a last trade, and “the spot price” usually means the midpoint of the bid and offer.

The LBMA Gold Price

Twice a day, at 10:30 and 15:00 London time, the London Bullion Market Association runs an electronic auction that produces a single published price. This is the LBMA Gold Price, the successor to the old London gold fix. It exists so that contracts, funds, central banks and refiners have one agreed reference figure per session, rather than each picking their own moment on a moving screen. Many long-term supply contracts settle against it.

The benchmark is not a different price from spot. It is a snapshot of spot, taken at a fixed time by a fixed process, that everyone can look up afterwards.

From dollars per ounce to dirhams per gram

A UAE quote takes the dollar price per troy ounce, converts it to grams (one troy ounce is 31.1035 grams), and converts the currency to AED. Because the dirham is pegged to the dollar, the currency step introduces almost no movement of its own; the gram price in AED tracks the ounce price in dollars almost exactly.

Adjusting for fineness

Spot is quoted for pure gold. A 995 bar contains 99.5% gold, so its metal value is the spot price multiplied by 0.995. Scrap at 18 karat is 75% gold and is priced on that fraction. This is why the assay comes before the price: until the fineness is confirmed, nobody knows what fraction of the weight is being bought.

How Meridas quotes

We quote against the live spot rate at the moment a trade is agreed, not against a morning fix or an estimate. The parcel is assayed at our Sharjah laboratory first, so the quote applies to a confirmed fineness. Once both sides confirm, the price is fixed and settlement follows immediately, by bank transfer in AED or in metal. The bullion trading page walks through the steps.

Premiums and discounts

The last piece is the difference between the metal value and the price actually paid. Refined bars and grain from a recognised refiner trade close to the metal value. Scrap and unrefined material trade below it, because someone has to melt, assay and refine them before they become bars. That gap is not a hidden charge; it is the cost of turning material of uncertain purity into metal of known purity, and it is exactly what the refining process is for.