Sieron discusses some scientific study that examines the topic of who determines the price of gold. One of them, Lucey et al. (2012) monitor oil prices from London A.M. Fixing and closing price of COMEX New York since January 1986 until the end ofJuly, but found that there was nothing between them dominate on the market.
London and New York, according to the term Sieron, is bipolar world and interdependence with each other. Interestingly, the researchers also found that the share of the contributions of both the market at any price is unstable, depending on the situation. While the collapse of the Soviet Union, the exchange rate crisis of 1992 and theLehman brothers incident, London was the dominant market. But when the ruble currency crisis and the attacks of 9/11, New Yorkers tend to be mastered.
The Futures Market Power
Meanwhile, Hauptfleisch et al. (2015) intraday gold price data are used in London, the OTC market, and the US futures market from 1997 until 2014. They found that although the volume of gold traded on the New York trading volume is less than the spot in London, but the futures market tends to play a more important role in the value of gold. COMEX's dominance was further strengthened in 2016 when the 24-hour trading platform fully electronic Globex began to be used. Since that time, COMEXgold prices always lead all day, no matter at what time does trade.
Here it can be concluded that the mere volume of trading alone is not as importantas the structure of the market. Futures markets provide similar benefits as the spot market for investors, speculators, and perpetrators of hedging. The futures marketmore transparent, highly liquid, and allows participants to make transactions more quickly, both with leverage or option, without involving the delivery of physical goods.
Therefore, the futures market reacted more quickly to the emergence of direct information and include it in the price of gold. Its effectiveness so high up to the price ofspot gold is simply derived from the price of gold futures, although theoretically this is the price of gold futures must be determined from the spot price, level of risk, the maturity of the contract, and other factors such as storage costs. In practice, the spot price in fact is precisely determined by the price of the futures contract monthclosest to the highest volume.
The Price Of Spot Gold Price Instead Of The Current Physical
It needs to be stressed here: "the price of spot gold" is not the price that is quoted on the last physical transactions as well as the price of physical gold at the moment,nor the gold price of reference London Bullion Market Association (LBMA). The spotgold price is the net value (net present value) of the price of gold futures on a nearby Moon, whereas the LBMA gold price is a picture of the gold price quoted traders in OTC spot market wholesale deals on London.
Furthermore, the "actual spot price", is the price offered by the sellers of gold bullion (bars and coins) in contrast to the spot price of COMEX nor the London Fix. Goldbullion seller typically showing higher prices, because they bear the costs greater than wholesale traders, and then me-the price markup for profit.
Conclusion
In the end, though, the markets concluded Sieron theoretically have been globalizing, but in practice remain bipolar with U.S. futures markets are in a dominant position on the process of the formation of the gold price. It's not manipulation, but shows that there is evidence of the high efficiency and centralization of the futures marketthere rather than the OTC market are decentralized and not transparent.
Thus such: gold prices are mainly determined in New York. And who determines theworld gold prices here? the participants and their trading position COMEX who determines the price of gold.
Who Determines The Price Of Gold?
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