Editing Gold fixing (section)

==Process==
{{sources|section|date=June 2024}}
The five participating banks are [[market maker]]s. They may have gold orders on their own behalf ([[proprietary trading]]), their clients' behalf ([[brokerage]]), or frequently some of each. A sell limit order is not executed unless the price is above a preset value. A buy limit order is not executed unless the price is below a preset value.

The lead participant will begin the fixing process by proposing a price near the current gold [[spot price]]. The participants then simulate the result of trading at that price.  The simulations do not merely factor physical gold, but include gold trading contracts ("Paper Gold") which are marginally backed and which therefore inflate market volumes and alter the supply/demand valuation formulas that would otherwise apply to the physical gold commodity.

First, each bank looks at its limit orders and determines how many are eligible to trade at that price. They can also consider how much gold their proprietary trading desk would trade at the same price. The bank then states a single value, the net amount (in ounces) of gold they wish to buy or sell. After each bank provides this value, they determine if the overall net amount is zero. If so, all transactions succeed and the fix is complete. The chair then states, "There are no flags, and we're fixed."

Otherwise, the chair must change the proposed price. If the amount of gold the banks proposed to buy is higher than the amount proposed for sale, he must raise the price. That will decrease the number of proposed purchases, both because more buy limit orders will fail and because of proprietary traders. At the same time, it increases the number of proposed sales, both because more sell limit orders succeed and because of proprietary trading.

Conversely, if the amount proposed for sale is higher, he must lower the price. This will have the exact opposite effects from above, increasing the number of proposed purchases and decreasing the number of proposed sales.

This process iterates until a fix is found. Buyers are charged 20 cents per troy ounce as a premium to fund the fix process; this results in an implicit [[bid–ask spread]].

As with other forms of market making, participants attempt to predict the direction of the market and increase profits through timing.<ref name="bullionvault">{{cite web | url=http://gold.bullionvault.com/How/GoldFix | title=The Gold Fix Mechanism | work=BullionVault | access-date=January 2, 2012}}</ref>

Participants can pause proceedings at will. Originally, it was done by raising a small [[Union Jack]] on their desk. Under the telephone fixing system, participants can register a pause by saying the word "flag."