An Inside Look at the World’s Biggest Paper Gold Market (Infographic)

Jeff Desjardins
Visual Capitalist via ZeroHedge

Every day, there are a whopping 5,500 tonnes ($212 billion) of gold traded in London, making it the largest wholesale and over-the-counter (OTC) market for gold in the world.

paper-goldTo put that in perspective, more gold is traded in London each day than what is stored at Fort Knox (4,176 tonnes). On a higher volume day, amounts closer to total U.S. gold reserves (8,133.5 tonnes) can change hands.

How is this possible?

The infographic below tells the story about gold’s foremost trading hub, as well as the paper gold market in London, England:

[Click to View Expanded Image.]


London is dominant in global price discovery for gold.

In 2015, it accounted for roughly 88% of gold trade – most of which occurs between banks on behalf of their clients. Further, 90% of London trade is spot trading, which further emphasizes London’s importance in price discovery for gold markets.

While the high-level details of the market are visible, the individual mechanisms behind the London gold trade are less clear. There is very little detailed information provided on physical shipments, outstanding gold deposits or loans, allocated or unallocated gold, or clientele types. Trade reporting also breaks down at a more granular level, and datasets on the GOFO (Gold Forward Offered Rate) were also discontinued in January, 2015.

Almost all gold (95%) traded in London is unallocated and without legal title. This makes it easier to trade, but it also raises concerns about a market that is opaque to begin with. There are 5,500 tonnes of paper gold exchanging hands on paper each day, but there are only 300 tonnes of gold vaulted in London outside of the reserves for ETFs or the Bank of England.

What would happen if there was ever even a small rush to get the physical asset behind the paper? Is there a system in place for such an event, and how does it work?

Orignal Graphic: Bullion Star

9 thoughts on “An Inside Look at the World’s Biggest Paper Gold Market (Infographic)”

  1. James/Admin.

    Start a New Free Friday..

    it’s not too Late.

    It’s only 5:26 pm here in the wonderful experiment
    they call “Liberals Run Amuck” ..haha

    Beautiful Los Angels, California….!!

    I don’t have Duck’s like the Dubsters, but I have 12 Ground Squirrels who hang with me and eat me veggies.

    They are sooo cute.

  2. There is widespread belief among some experts that the gold, silver and other precious metals markets are rigged.Today, and the last time Yellen spoke, leveraged inverse gold etf’s like DUST shot up (10% and 20 % respectively). I think that gold is undervalued and the dollar way overvalued. NUGT was trading at 20 a few months ago and has come down from highs of around 125 to about 70. There is speculation that if a market correction or inflationary event took place gold could easily breach 1400 and NUGT could see 2000 (its valuation just several years ago).

    1. It’s called the London Fix Price for a reason.

      AS to speculation about gold breaching 1400 etc., I’ve been hearing how gold is ‘going to fly’ for 10 years now. The only thing that is flying is the horse manure. Gold is fixed by the big families. They aren’t letting gold go anywhere into the stratosphere. The next big con game is carbon, not gold.

      1. I think that oil is headed for a manufactured spike due to unprecedented CAPEX cuts. I think Lukoil, Gazprom, and Petrobras will be fairly valued at 3 to 5 times where they are now when this happens (think huge reserves) by early 2018. In my opinion, you will see gold slip below 1200 this week, and, given that the same anticipated Fed rate hike that brought it down about 12%, with a stronger dollar, will surly swing it back within months because longer term higher rates will help to inflate commodities. I think that within the next couple of months NUGT will be trading at maybe $40 to $50, and by the end of the year it will surpass its 52 week high of $123

  3. I’m pretending it is Free Form Friday with an off topic post.

    There are some interesting anomalies brought out by Google Earth about the street Adam and Nancy Lanza allegedly lived on – 36 Yogananda Street in Newtown. You are not allowed to “visit” using Street View.

    In fact, there are a number of different “hot spots” in Newtown without Street View. You can now “walk” past Sandy Hook School. You couldn’t do that until it was torn down.

    When you use the time slider function (the clock with the arrow), you can see the satellite views going back to a variety of dates. In 1992, there were no houses there. It looks like it was just a field. The timeback slider has a number of dates: 1992; 7/2005; 8/2006; 7/2008; 2/2010; 3/2012; 9/2013; 9/2014; 9/2015 and 4/2016. The place looks deserted if you go up and down the road. There are a couple of cars on 10/2006 near Silo Road. There is a truck driving down the road on 8/2010. You get to 3/2012 and this is when they got had started staging the thing. There are piles of vehicles, many of them white, parked on the road and in driveways. There are two across the road and a bit north of 36 Yogananda. A white truck is just south of Bresson Farm Road. There is a white vehicle two doors south of that and a dark car south of that. There is a dark vehicle next door to the south, white vehicle south of that. Two houses south across the road have dark vehicles. There are vehicles on Osbourne Hill Road – four properties, two on each side of the intersection with Yogananda.

    By 9/2013, we are back to 5 vehicles total, 2 white. 9/2014 there is a lot of activity going on with white vehicles galore. I counted 17 vehicles total, 10 white. They have expanded to Charter Ridge Road and across Osborne Road. If these people actually lived there, wouldn’t they park in the garage in a lot of cases. Maybe DHS had more vehicles there, and they are in the driveway. By 9/2015 we are down to one white car across from Bresson Farm Road. By 9/2014 there are three vehicles, two white. As Alan Powell pointed out on The Real Deal with Jim Fetzer, there were DHS white vehicles staging the school.

    1. Actually, I lied. There are some white vehicles in 8/2010. I counted 16 total vehicles on Yogananda and adjoining streets. Four cars are parked across the road from the Trentacosta residence.

  4. This is a fascinating topic. My guess is that the nature of such trading is poorly understood in most conspiracy circles. Therefore, I appreciate the lucid structure of this pithy article.

    Thank you,


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