Who Decides How Valuable Gold Is?
In the industry, we see gold spot price as determining the value of this precious metal. This is basically the price at which we have gold traded in one point in time and in a specific location, the one where delivery will take place from. Whenever looking at selling and buying gold, we have a buy price that will be a little higher than this spot price. The selling price is always going to be slightly less. We have a spread in this comparison, which represents broker profit margin and broker costs.
Just as with everything in any market, bullion exchanges are going to be affected by demand and supply but the price of gold is also affected by different other factors like interest rates, the current value of the US dollar, interest rates, tensions that appear at a geo-political scale and even central bank involvements.
In a similar way with commodities and stocks, the worth of gold will be determined on the exchange. The problem is that bullion exchanges will never be created equally. We have 2 critical exchanges that have to be analyzed and that have an effect on gold value: COMEX, located in New York and LBMA, located in London. The 2 financial centers will see most of the gold trading action in the world.
There are bullion exchanges that exist in other major cities from around the world like Sydney, Hong Kong, Tokyo, Dubai, Zurich, Shanghai and Singapore. We are faced with a global reach so the gold spot price will constantly be established in a continuous way even if LBMA and COMEX are closed. Gold is basically traded for 23 hours and a half in every day except weekends, when prices remain the same.
The London Bullion Market Association (LBMA) operates during the GMT 07:30 and 15:00 hours. In the past this was the main industry bullion exchange. However, we had the 1968 crises that ended up affecting gold standard so the importance of LBMA is currently waned. Even so, its importance is really high as we are faced with strict standards in terms of quality and facts that are respected at all times.
The Commodities Exchange Of New York (COMEX) is currently the most important of all the bullion exchanges that exist in the entire world. It does operate on Eastern Time, in the range between 08:30 and 13:30. COMEX is now a part of NYMEX (New York Mercantile Exchange). Because of this, the standard value of gold is being determined through a procedure that is documented with so much information in the Rule Book published by NYMEX. Traded contract prices will determine this to a large extent.
Besides COMEX and LBMA, we also have influences that appear based on the operations of the other bullion exchanges from around the world. However, these are the two that decide most of the differences that appear in gold time from one minute to the next. If you want to predict gold value, analyzing these two will be a necessity.