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All articlesHow Gold Prices Are Set: From the Global Spot Price to the Shop Counter
Where the gold price comes from, what the LBMA auction is, why the price at your local shop is different, and how to work out today's fair price per gram for any karat.
There is no single authority that sets the price of gold. There is a global reference price that trades continuously, a twice-daily benchmark used for contracts, and then a local price at your shop that is neither of those.
Understanding the chain between them is what lets you tell a fair price from a bad one.
The spot price
The spot price is what gold trades at right now for immediate delivery, quoted in US dollars per troy ounce (31.1035 grams — not the 28.35g ounce used for groceries).
It emerges from continuous trading across London's over-the-counter market, futures exchanges and dealers worldwide. Nobody sets it; it is where trades are clearing.
Most trading volume settles in London, which is why the London market's activity dominates the reference price the rest of the world uses.
The LBMA benchmark
Twice each London business day — morning and afternoon — an electronic auction establishes the LBMA Gold Price. Participants submit buy and sell volumes at successive proposed prices until supply and demand balance, and the resulting number becomes the published benchmark.
It exists because contracts need a single defensible figure: refiners, miners, central banks and funds settle against it. It is a reference, not a cap or a floor, and the spot price continues moving around it all day.
This is the source of the phrase "the gold fix." It is now a transparent, regulated electronic auction — but the name survives, and it still confuses people into thinking someone is setting the price by decree.
What moves the spot price
| Force | Direction |
|---|---|
| Real interest rates rising | Down — gold pays nothing, so alternatives paying interest compete |
| A weaker US dollar | Up — gold is priced in dollars, so a cheaper dollar raises the number |
| Central bank buying | Up — a large and persistent source of demand |
| Crisis and uncertainty | Up, usually and temporarily |
| ETF inflows and outflows | Both — funds buying or selling metal moves real volume |
| Jewellery demand | Up, seasonally — Indian wedding season and festivals are large |
Real interest rates matter more than nominal ones. Gold competes with interest-bearing assets, so what counts is the return after inflation. That is why gold can rise while rates rise, if inflation is rising faster.
From spot to your local shop
The spot price is for 400-ounce bars traded between institutions in London. What you buy is not that, and every step adds cost:
- Refining and fabrication — turning a large bar into coins, small bars or jewellery.
- Wholesale distribution — moving, insuring and financing inventory.
- The dealer's premium — their margin, plus the cost of holding stock.
- Local taxes — VAT or sales tax where it applies; investment-grade gold is exempt in many places.
- Making charges — for jewellery only, and often the largest single component.
Making charges on jewellery are frequently 10–25% and are essentially not recoverable when you sell. A piece bought as a store of value at a 20% making charge needs gold to rise 20% before you are level — which is why a bar or coin is the better vehicle if saving is the actual goal.
Working out today's fair price yourself
Two steps, and they take a minute.
Step 1 — price per gram of pure gold:
spot price per ounce ÷ 31.1035 = price per gram (24K)
Step 2 — adjust for karat:
| Karat | Multiply by |
|---|---|
| 24K | 1.000 |
| 22K | 0.916 |
| 21K | 0.875 |
| 18K | 0.750 |
| 14K | 0.585 |
So for 21K at a spot price of $2,400/oz: 2400 ÷ 31.1035 = $77.16 per gram pure; × 0.875 = $67.52 per gram of 21K.
Multiply by the weight and you have the metal value. Anything above that is premium, making charges and tax — and now you can see exactly how much, and ask about it.
Why local prices differ from the global one
Even after converting currency, local gold prices diverge from spot for real reasons: import duties, local supply and demand, currency controls, and how much competition exists between dealers in that market.
A persistent local premium above the global price usually signals either import restrictions or strong local demand. In countries with currency controls, gold sometimes prices off the parallel exchange rate rather than the official one — which makes the local gold price an informal indicator of what the currency is really worth.
The short version
Gold has a continuously traded global spot price in dollars per troy ounce, benchmarked twice daily in London. Your local price is that number plus fabrication, distribution, dealer margin, tax and — for jewellery — making charges. Do the two-step calculation before you walk into a shop, and every one of those layers becomes visible.
This is general educational material, not financial advice. Local taxes, import duties and dealer practices vary considerably; verify current rates and rules where you are buying.