Why London sits at the heart of the global precious metals market

Over-the-counter trading: flexibility is the feature

The global precious metals market operates largely as an over-the-counter market, where trades are agreed bilaterally rather than executed on an exchange. Participants transact on a principal-to-principal basis, meaning credit, settlement and counterparty risks sit between the two parties.

That structure gives dealers the ability to quote variable quantities, qualities and forms of metal, and to tailor value dates and delivery locations. Compared with futures exchanges — defined by standardized contract sizes, delivery dates and settlement points — the OTC market provides wider customization for clients.

Why metals clear in London

While other hubs specialize in futures markets or small-bar trading, London remains the fulcrum of the international OTC precious metals market. In practice, cross-border trades between institutions frequently settle through London accounts — even when counterparties and underlying supply chains are located elsewhere.

This settlement role is often described in the same way as currency clearing centers: London for sterling, New York for the US dollar, Tokyo for the yen. London’s advantage is not production or consumption, but the infrastructure and conventions that make it the preferred place to net, transfer and clear exposures.

The historical roots of London’s bullion market

The London bullion market traces back to the late 17th century through the partnership between Moses Mocatta and the East India Company, which shipped gold into England. Soon after, during Sir Isaac Newton’s tenure as Master of the Royal Mint, gold was purposely overvalued relative to silver, encouraging gold circulation and accelerating England’s shift toward a gold-based coinage — while much of Europe remained silver-based until the 1850s.

Gold inflows expanded further after Brazil’s 1697 gold rush, contributing to the need for dedicated vaulting infrastructure in London — which the Bank of England established. Later gold rushes in California, Australia and South Africa reinforced London’s role as a storage, processing and settlement center.

Good delivery: the standard that makes the market work

In 1750, the Bank of England established the London good delivery list, recognizing refineries capable of producing bars that met required standards. Over time, the list became the globally accepted benchmark for wholesale bullion, ensuring that bars circulating through the market meet consistent quality thresholds.

That standardization matters because it allows large bars to trade and clear without constant reassay. In effect, good delivery turns bars into reliable “building blocks” of liquidity.

From five firms to modern governance

By 1850, five firms — N M Rothschild & Sons, Mocatta & Goldsmid, Pixley & Abell, Samuel Montagu & Co., and Sharps Wilkins — were established as core pillars of the London gold market’s functioning. In 1919, the market’s first formal gold price setting was established at Rothschild’s offices.

By the 1980s, the Bank of England concluded that maintaining and regulating the good delivery list required an independent body. That became the catalyst for the founding of the London Bullion Market Association in 1987, formalizing governance for the modern gold and silver market.

Hallmarking and the deeper logic of purity

The emphasis on recognized purity standards predates modern bullion trade. The text notes evidence of ancient gold mining as far back as 2000 BCE, with the first silver coins thought to have been minted around 2,700 years ago, followed by gold coins around 200 years later.

In the UK, hallmarking is linked to statutes dating to 1300 under King Edward I, requiring defined standards and marking with the leopard’s head, and a royal charter granted to the Goldsmiths’ Company in 1327. These institutions reflect a long-running market truth: monetary metals only function smoothly when quality is trusted.

Platinum and palladium: later metals, same London logic

Platinum was first isolated in the 18th century and palladium in the 19th, making them relatively recent compared with gold and silver. London nonetheless became an important trading center for both in the 20th century.

In 1973, the London Platinum Quotation was introduced as a twice-daily indication of the spot platinum price reported by leading dealers. In 1979, London and Zurich dealers agreed to standardize good delivery specifications for platinum and palladium. In 1987, trading was formalized through a deed of establishment into the London Platinum and Palladium Market, which began managing the good delivery lists for those metals.

LBMA and LPPM: the institutional spine

The LBMA is described as the pre-eminent body for the largest and most important market for gold and silver bullion, centered in London with a global client base that includes central banks managing reserves, investors, mining companies and others. Its membership is around 150 firms across trading, refining, production, fabrication, vaulting and secure logistics.

The LPPM plays a similar role for platinum and palladium, with more than 50 members involved across trading, mining and refining.

Precious metals don’t behave the same way

Gold is only lightly used in industrial processes and is generally held as a hedge against inflation or uncertainty and as a store of value. Silver sits between investment and industry, used heavily in photovoltaic cells and also in photographic film. Platinum and palladium are more firmly industrial, chiefly tied to catalytic converters used to reduce emissions from diesel engines (platinum) and petrol engines (palladium).

Different demand profiles, same settlement gravity: London’s market structure and quality standards keep it central across all four metals.