Gold Prices Explained: Spot, LBMA Benchmark and Coin Values
The gold price quoted on financial websites is not the price of a coin, a bar or any single transaction. It is a reference figure for large quantities of gold traded between professionals. Understanding where that number comes from, and how it relates to what you pay for a coin, is the first step to judging any quote. This guide explains the main benchmarks, the units used, and the arithmetic that links them to coins.
What “spot” means
The spot price is the price for gold delivered now, as opposed to a future date. In practice it is a continuously updated figure derived from trading in the over-the-counter London market and from futures exchanges, mainly COMEX in New York. Because these markets operate across time zones, the spot price moves almost around the clock on weekdays.
Spot is normally quoted in US dollars per troy ounce. Websites also show it in euros, pounds or other currencies, and per gram or per kilogram. The figure you see is usually a mid-price, halfway between what buyers bid and what sellers ask.
The LBMA Gold Price
For contracts and valuations that need a single, auditable number, the market uses a benchmark. The LBMA Gold Price is set twice each London business day, in the morning and the afternoon, through an electronic auction in which participating banks submit buy and sell orders until supply and demand balance. It is administered by ICE Benchmark Administration.
The LBMA Gold Price replaced the London gold fix in March 2015. The old fix, which dated back to 1919, was set by a small group of banks through a private telephone process. Its replacement by an electronic, regulated auction followed concerns about transparency across financial benchmarks generally.
Central banks, refiners, mining companies and some dealers use the LBMA Gold Price for settlements and valuations. Day to day, though, coin dealers usually price off the live spot feed.
COMEX futures
COMEX, part of the CME Group, lists the most actively traded gold futures contract. A standard contract covers 100 troy ounces. Futures prices for nearby delivery months stay close to spot, with the gap reflecting interest rates and storage costs. Heavy trading in these contracts means COMEX has a strong influence on price discovery, particularly during New York hours.
Troy ounces, grams and bid/ask
Precious metals are weighed in troy ounces, not the ordinary (avoirdupois) ounce used for food. One troy ounce equals 31.1035 grams, about 10% heavier than a standard ounce of 28.35 g. A kilogram contains about 32.15 troy ounces.
| Unit | Grams | Troy ounces |
|---|---|---|
| 1 troy ounce | 31.1035 | 1 |
| 1 gram | 1 | 0.03215 |
| 1 kilogram | 1,000 | 32.15 |
| 1 tola | 11.66 | 0.375 |
Every market has two prices: the bid, at which someone will buy from you, and the ask, at which someone will sell to you. The difference is the spread. On the wholesale market it is tiny; on physical coins it is much wider.
From spot to a coin’s metal value
To find the metal value of a coin, multiply its fine gold content by the spot price in the same unit.
- A 1 oz bullion coin such as the Krugerrand contains exactly 1 troy oz of fine gold, so its metal value equals the spot price per ounce.
- A British sovereign contains 0.2354 troy oz, so its metal value is 0.2354 times spot.
- A French 20 francs contains 5.806 g of fine gold; multiply that by the gram price, or by 0.1867 times the ounce price.
Always use the fine weight, not the gross weight. A 22-carat coin weighs more than its gold content because part of the alloy is copper or silver.
Why coin prices differ from spot
Coins sell above their metal value for several reasons. Mints charge a premium over the metal to cover fabrication. Distributors and dealers add their own costs: insurance, storage, shipping and margin. Smaller coins cost more per gram to make and handle. When demand surges, premiums rise because supply of finished coins cannot keep up, even if spot itself does not move.
When selling, the opposite applies: dealers usually buy back at or slightly below spot for common coins, and further below for less familiar ones. Historic coins with collector appeal can command more than their gold value.
Historical landmarks
- Before 1934: the US official price was $20.67 per ounce.
- 1934–1971: the official price was fixed at $35 per ounce under the Bretton Woods framework.
- August 1971: the United States ended convertibility of dollars into gold for foreign governments, and prices soon floated freely.
- January 1980: gold reached about $850 per ounce, a peak not surpassed in nominal terms for decades.
- March 2015: the LBMA Gold Price replaced the London gold fix.
For a parallel explanation of the white metal, see the guide to silver prices, and for practical buying steps, how to buy gold coins.
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