Precious Metals

Loco London and the troy ounce

The center of the physical precious metals market is not an exchange. It is a bilateral over-the-counter market in London, and the standard delivery point is called loco London: metal held in a vault in London, transferable across the books of the London bullion clearing banks. Prices everywhere else in the world are quoted as premiums or discounts to loco London. The unit is the troy ounce, 31.1035 grams, about 10 percent heavier than the avoirdupois ounce on a kitchen scale. One metric tonne is 32,151 troy ounces. Traders quote in dollars per troy ounce; mine supply and central bank reserves are discussed in tonnes.

Most loco London metal is unallocated: a credit balance on the books of a bullion bank, fungible and cheap to hold, but an unsecured claim on the bank rather than on specific bars. Allocated metal is the opposite: numbered, weighed bars segregated in the client's name, owned outright, with storage fees. The distinction is the first thing every precious metals client must understand. Unallocated is how the market trades; allocated is how the cautious store wealth. The standard wholesale bar is the London Good Delivery bar, roughly 400 troy ounces for gold and roughly 1,000 troy ounces for silver, refined to LBMA-accredited standards.

From the fix to the auction

For almost a century the reference price was the London fix, set twice daily for gold by a small club of banks on a private conference call, a process that began in a Rothschild office in 1919. That era ended in scandal. In May 2014 the UK regulator fined Barclays for manipulating the gold fix against a client's option, and the benchmarks were rebuilt as transparent electronic auctions. The silver fix became the LBMA Silver Price in August 2014, and in March 2015 the gold fix became the LBMA Gold Price, an auction run twice daily at 10:30am and 3:00pm London time on a platform administered by ICE Benchmark Administration. The platinum and palladium fixes became LBMA-branded auctions the same year. Thousands of contracts worldwide, from miner offtake agreements to ETF net asset values, still settle against these prints; only the mechanism changed.

Leasing, forwards, and central banks

Gold behaves like a currency, and its forward market works like an FX forward market. Metal can be lent and borrowed, so it carries an interest rate: the lease rate. Central banks, which collectively hold roughly 36,000 tonnes of gold, historically lent part of it to bullion banks, who lent it on to refiners, jewellers, and hedging miners. Lease rates are normally a fraction of a percent, which means gold forwards almost always price above spot: a contango that is simply dollar interest minus the lease rate, plus storage. When physical metal gets scarce, lease rates spike and the curve flattens or inverts, which is the bullion market's clearest stress signal.

The bigger change is in central bank behavior itself. In the 2000s central banks were coordinated net sellers under the Central Bank Gold Agreements. After Western governments froze roughly half of Russia's foreign exchange reserves in February 2022, reserve managers in emerging markets drew the obvious conclusion about assets held in someone else's banking system. Central banks bought more than 1,000 tonnes of gold in each of 2022, 2023, and 2024, the heaviest official buying since the 1960s, led by China, Poland, Turkey, and India. That bid is the single biggest structural force behind the 2024-2026 price records.

COMEX and the EFP

The futures leg of the market is COMEX in New York, part of CME Group, where the 100-ounce gold contract and 5,000-ounce silver contract trade. London is spot and forwards; New York is futures and options. The two are stitched together by the exchange for physical, or EFP: a privately negotiated swap of a futures position against loco London metal, quoted continuously by bullion desks as a spread. Arbitrage normally keeps the EFP within a few dollars. When it widens, metal physically moves. Between December 2024 and March 2025, fears that US import tariffs might capture bullion blew the gold EFP out to historic extremes and pulled hundreds of tonnes of gold and silver across the Atlantic into COMEX vaults, a reminder that the paper spread is anchored by bars on airplanes.

The platinum group is a different animal

Platinum, palladium, and rhodium are precious by rarity but industrial by demand. Where gold demand is jewellery, investment, and central banks, PGM demand is dominated by autocatalysts: the devices that scrub exhaust from internal combustion engines. That makes PGM prices hostage to car production, emissions rules, and the speed of electrification. Supply is even more concentrated than demand: South Africa's Bushveld Complex produces roughly 70 percent of the world's platinum, and Russia's Nornickel, mining palladium as a by-product of Arctic nickel, supplies roughly 40 percent of the world's palladium. Two countries, two geological accidents, most of the supply.

Platinum and palladium have futures on NYMEX and LPPM auction benchmarks in London, but the minor PGMs do not. Rhodium, iridium, and ruthenium trade on dealer markets: bilateral deals against posted reference prices from Johnson Matthey and other refiners, with no futures contract and brutal illiquidity. Rhodium is the extreme case, a market of roughly 1 million ounces a year that ran from under $600 per ounce in 2016 to roughly $30,000 in March 2021 when tightening Chinese gasoline emissions rules met fixed supply, then gave most of it back by 2023. Iridium is essential to PEM hydrogen electrolyzers; ruthenium to hard disk media and chlorine production. They are tiny markets with enormous price elasticity, and they trade by phone.