London dominates the physical gold market with just six banks “fixing” the price. The gold banks give a great insight into how banks never die; they meld into larger institutions, but the old name still remain.
Mocatta & Goldsmid was founded in 1677 making it twenty year older than the Bank of England itself. Today it exists as Scotia-Mocatta and part of the Canadian group; Bank of Nova Scotia.
Barclays Capital is the most recent member of this group of six and replaced N M Rothschild & Sons. Rothschild had been dominant in bullion for over 200 years, allegedly since it supplied gold to England and France during the Napoleonic wars. Their exit from the “fix”, just as the yellow metal awoke raises many questions as to why. Least of all, because until their withdrawal, the six banks fixing the price met twice per day at the Rothschild offices. Today, the fix occurs twice per day, but by telephone.
Sharps Pixley was founded by a merger between Sharps Wilkins with Pixley & Abell, in 1957, Both banks can trace their origins back to the late 1700’s and today are part of Deutsche Bank. HSBC acquired control of Midland Bank, one of Britain’s “Big Four” in 1992. Midland was owner of Samuel Montagu & Co, which dates back to 1853.
Société Générale, the French bank is the final member, having acquired Johnson Matthey Bankers. Dating back to 1817 Johnson Matthey collapsed in 1985 and such was its importance it was purchased by the Bank of England for a token sum of £1.
London Good Delivery bar (LGD) are the standard size of ingots traded between the banks “Over The Counter” (OTC). Between three and four hundred ounces each bar, around twelve kilograms, with a minimum purity of .990 each. Current prices of $1,400 per ounce make each LGD ingot worth around $560,000. Estimates are that around two thousand tonnes of physical gold are traded daily. This is equivalent to an entire years worth of fresh mine production. Little is actually delivered; most is simply picked up and moved across the vaults below the Bank of England.
