Gold Trading FAQ

Gold is priced in US dollars per troy ounce against two references: the continuously moving spot price and the LBMA Gold Price benchmark, set twice daily in London by electronic auction. Physical contracts usually fix against a named LBMA fixing. See What Is LBMA Pricing?

The London Bullion Market Association — the trade body for the world's largest over-the-counter gold and silver market. It sets the Good Delivery quality standard for bars and lends its name to the global gold price benchmark, administered by ICE Benchmark Administration.

The standard unit for precious metals pricing: 31.1034768 grams. It is slightly heavier than the everyday (avoirdupois) ounce of 28.35 grams.

Because doré is unrefined. Settlement applies the benchmark price to the assayed fine gold content only, then deducts refining and treatment charges and applies a payable percentage — reflecting the cost of converting doré into saleable refined gold.

Principally real interest rates, the US dollar, central bank buying, investment flows (ETFs and futures positioning) and demand from jewellery and technology, alongside geopolitical and macroeconomic risk sentiment.

The amount above or below the international benchmark at which physical gold trades in a local market, reflecting local supply, demand, freight and refining capacity. Dubai kilobar premiums, for example, fluctuate with regional demand.

In a typical doré sale: contract agreed, KYC completed, banking instruments issued, metal shipped CIF to the destination, weighed, melted and assayed at the refinery, then payment released on the assay result under the contract or letter of credit terms.

A long-term contract in which a buyer commits to purchase future production from a mine or supplier — typically at a formula price referencing the LBMA benchmark — giving the producer revenue certainty and the buyer secured supply.

A bank active in the wholesale precious metals market — trading, financing, clearing and vaulting gold for institutional clients. Bullion banks are the main participants in the London OTC market and the LBMA price auction.

The share of assayed fine gold content the refinery or buyer pays the seller for, commonly 98–99.5% for gold in doré. It is a core commercial term of every refining agreement.

The fine gold content is calculated from the net melt weight and assay result, the price is fixed per the contract, payable percentage and refining charges are applied, and settlement is paid — directly or under the governing letter of credit. See How Does a Gold Refinery Assay Work?

For an established, compliant counterparty chain: typically days to a few weeks — covering instrument issuance, export permits, secure freight, customs clearance, melt and assay, and settlement. First transactions take longer because due diligence dominates the timeline.

Most commonly: sellers without real metal, buyers without real funds, non-standard payment structures, missing export documentation, or 'you first' standoffs over instrument sequencing. Genuine deals feature verifiable counterparties, bank-confirmed instruments and standard documentation.

By specialist secure logistics firms, almost always as insured air freight with armoured ground transport at each end, sealed chain-of-custody packaging and full documentation. Transit insurance covers the metal to the named destination.

Cost, Insurance and Freight: the seller pays for and arranges insured delivery to the named destination — e.g. CIF Dubai — and the buyer takes the metal at destination, typically settling after assay. See What Is a CIF Gold Transaction?

Under CIF the seller pays freight and insurance to destination. Under FOB the seller only delivers to the carrier at origin and the buyer bears freight, insurance and transit arrangements from that point.

Commercial invoice, packing list, airway bill, insurance certificate, certificate of origin, export permit from the origin country and assay documentation. Customs and the receiving refinery verify the documents against the physical shipment.

Dubai combines refining capacity, vault and logistics infrastructure, deep regional demand, established customs procedures and proximity to producing regions — making it one of the world's largest physical gold trading centres and a recognised CIF settlement venue.

Under CIF terms, the seller arranges and pays for transit insurance to the destination, usually for the full value (often 110% of invoice value when required under a letter of credit).

A semi-pure alloy bar produced at a mine site, typically 60–95% gold with the balance mostly silver and base metals. Doré must be refined to investment-grade purity before it can be sold as bullion. See What Is Gold Doré?

Refineries receive doré and scrap, melt and assay each lot, then refine the metal — using processes such as the Miller (chlorine) and Wohlwill (electrolytic) processes — to 995.0–999.9 fineness, casting accredited bars and settling with suppliers on assayed fine content.

The reference method for measuring gold purity: the sample is fused with lead, base metals are absorbed into a cupel at high temperature, silver is parted with acid, and the remaining pure gold is weighed. Accurate to fractions of a part per thousand.

Net melt weight × assayed purity = fine gold content; the payable percentage is applied; the result is priced at the contractual benchmark fixing; refining and treatment charges are deducted. Every input is documented and verifiable.

The quantity of pure gold in a bar or lot — gross weight multiplied by fineness. All serious gold settlements are denominated in fine gold, never gross weight. See What Is Fine Gold Content?

The documented, unbroken record of who held the metal at every stage from mine to refinery — sealed packaging, transfer records, weights and signatures — supporting both security and responsible-sourcing compliance.

The LBMA's accreditation standard for refineries and bars. Good Delivery gold bars meet strict specifications including minimum 995.0 fineness, and only accredited refiners' bars trade in the London market.

An irrevocable undertaking by the buyer's bank to pay the seller when the exact documents specified in the credit are presented — the standard payment mechanism for international gold shipments, governed by UCP 600. See What Is an MT700 DLC?

The SWIFT message format a bank uses to issue a documentary letter of credit, carrying all the credit's terms — amount, expiry, shipment terms and required documents — to the seller's bank.

A DLC is the primary payment mechanism, paid against shipping and assay documents in the normal course. An SBLC is a standby security drawn only if the applicant defaults. See DLC vs SBLC

A bank guarantee — conventionally around 2% of contract value — issued by the seller's bank in the buyer's favour, payable if the seller fails to deliver as contracted. See Performance Bonds Explained

The ICC's Uniform Customs and Practice for Documentary Credits — the rulebook governing nearly all documentary letters of credit worldwide, defining how banks examine documents and when they must pay.

Bank-to-bank, over authenticated SWIFT channels. A genuine instrument is verified by the beneficiary's own bank; emailed PDFs, screenshots or 'bank officer' phone calls prove nothing.

Instruments marketed as 'leased' or 'rented' SBLCs are a recognised hallmark of advance-fee fraud. Genuine standby letters of credit are issued by a bank for its own customer against that customer's credit facilities.

Verification of the legal identity, ownership and beneficial owners of every party — seller, buyer and intermediaries — plus evidence of the metal's origin and the legitimacy of funds. Reputable refineries and brokers complete KYC before any commercial step.

Precious metals are a regulated high-risk sector for money laundering. Dealers must apply customer due diligence, monitor and report suspicious transactions, and comply with national AML laws and FATF-derived standards in their operating jurisdictions.

The OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas — the international framework for tracing metal origin and avoiding financing conflict or human-rights abuses, implemented by refiners through programmes such as LBMA Responsible Sourcing.

Sourcing practices that verify mine origin, lawful export, fair treatment of workers and freedom from conflict financing — evidenced through chain-of-custody documentation and supply-chain due diligence aligned to OECD and LBMA frameworks.

Because legitimate gold trading is documentation-heavy by design: origin certificates, export permits, corporate records, beneficial ownership and sanctions screening protect every party. A counterparty reluctant to provide documents is itself a red flag.

Yes. Gold of sanctioned origin, sanctioned counterparties and sanctioned banks are all prohibited exposures under UK, EU, US and UN regimes. Sanctions screening of parties, banks, origins and routes is a mandatory part of transaction due diligence.

They describe the same thing on different scales: 24 karat is pure gold on the jewellery scale; 999.9 fineness means 99.99% purity in parts per thousand. See What Is Fine Gold Content?

A 1-kilogram gold bar, typically 999.9 fine — the standard trading bar in Middle Eastern and Asian physical markets, including Dubai.

The large bar of the London wholesale market — roughly 400 troy ounces (about 12.5 kg), minimum 995.0 fineness, produced by an LBMA-accredited refinery to strict specifications.

A tonne is 32,151 troy ounces, so its value is that figure multiplied by the current gold price — fluctuating with the market. The arithmetic is simple; the current fixing supplies the number.

As a reserve asset independent of any issuer's credit — diversifying away from currencies, holding value through crises, and carrying no counterparty default risk when held allocated.

A stamped certification of precious metal content applied under a national hallmarking scheme, mainly for jewellery. Bullion bars instead carry the refinery's mark, fineness, weight and serial number.

Gold's role is typically diversification and crisis protection rather than yield — it pays no income and its price fluctuates. The right allocation depends on individual circumstances; this is general information, not financial advice.

Exposure to the gold price without holding metal — ETFs, futures, unallocated accounts. Convenient and liquid, but it carries issuer or counterparty risk that physical allocated metal does not.

An exchange-traded fund holding gold (usually allocated Good Delivery bars) whose shares track the gold price — the dominant retail and institutional route to gold exposure without physical handling.

Real interest rates, the US dollar, central bank activity, investment flows and risk sentiment — see the FAQ entry on what moves the gold price under Pricing, and the Knowledge Centre for market structure.

Wholesale markets use troy ounces (31.1035 g) and kilograms of fine gold. Jewellery markets may use grams, tolas (11.66 g) or taels depending on region.

Screening methods like XRF read surface composition non-destructively, and ultrasound can detect inserts. Definitive purity for settlement still relies on melt-and-assay — which is why bars carry trusted refinery marks.

In specialist vaults operated by banks, logistics firms and exchanges — with insurance, audited inventories, and allocated (specific bars) or unallocated (pooled claim) account structures.

Specific, serial-numbered bars held in custody in the client's name. The client owns the bars themselves, eliminating exposure to the custodian's balance sheet.

Typically a small annual percentage of value, varying with quantity, location and allocated vs unallocated structure. Insurance is usually included in professional vault arrangements.

Professional vaults carry insurance covering stored valuables, and clients can verify cover and limits. Insurance terms are part of custody due diligence, alongside audit and access rights.

Through bar lists (serial numbers, weights, fineness), independent audits, and for allocated holdings, physical inspection rights. ETFs publish bar lists publicly as standard.

Yes — Dubai offers extensive professional vaulting through DMCC-linked facilities and logistics providers, serving the hub's trading community. See The Dubai Gold Market Explained

It moves as insured valuables freight under chain-of-custody procedures — see How Gold Is Transported Securely

For meaningful values, professional vaulting is the norm: insurance for home-stored bullion is limited and expensive, and security risk is personal. Small holdings are a personal-circumstances decision.

The inventory document of a gold holding: serial numbers, refinery marks, gross and fine weights and fineness of each bar. It is the basic proof-of-holding document in professional storage.

Only the account holder or its authorised signatories under the custody agreement's procedures — with movements documented, signed and reflected in the audited inventory.

The sale and purchase agreement (SPA) with its schedules, the agreed form of letter of credit, any performance bond, the refining agreement where applicable, and the KYC packs. See Gold Purchase Agreements: The Key Clauses

The sale and purchase agreement — the master contract defining quantity, quality, delivery basis, pricing mechanism, assay rights, payment instruments, compliance conditions and remedies.

An 'irrevocable corporate purchase order' — a document common in broker chains but largely meaningless in law and absent from genuine institutional practice. Real deals run on SPAs and bank instruments, not ICPOs.

A 'full corporate offer' — like the ICPO, broker-chain paperwork with no standing in legitimate institutional trade. Its appearance usually signals an intermediary chain rather than a real seller.

Because banks, refineries and lawyers recognise SPAs and instruments governed by ICC rules. ICPO/FCO sequences are a parallel folklore that real counterparties do not transact on.

Trade slang for the agreed sequence of steps — documents, instruments, shipment, assay, payment. Disputes over 'procedures' usually mean the parties have not properly sequenced instruments in a contract.

A defined pricing window — for example the average of LBMA PM fixings over five days around delivery — used instead of a single fixing date to smooth volatility.

Either side may produce the first draft; what matters is review by commodity-experienced counsel and that all schedules (charges, instrument forms) are attached before signature.

Permitted variation in delivered quantity (e.g. ±5%) — practical for doré, where exact lot weights vary. Pricing applies to actual assayed content, so tolerance manages logistics, not value.

Well-drafted SPAs include termination rights if KYC fails, a party becomes sanctioned, or origin documentation proves false — compliance conditions precedent and continuing warranties.

Relief for defined events beyond a party's control (war, export bans, disasters) that prevent performance. The clause defines covered events, notice duties and consequences — it is not a general escape hatch.

Per the contract's governing law and forum clause — commonly arbitration in a neutral seat for international deals. Assay disputes specifically go to the contract's umpire mechanism first.

Decades as a gold trading entrepôt — the souk tradition, refining capacity, vaulting, re-export trade and deep regional demand. See The Dubai Gold Market Explained

The Dubai Multi Commodities Centre — the free zone authority hosting the commodities trading community, with its own licensing, accreditation standards and market infrastructure for precious metals.

DMCC's accreditation standard for refineries, analogous to LBMA Good Delivery — certifying assay competence, bar quality and responsible sourcing for the Dubai market.

Established customs procedures, accredited refineries, vaulting and immediate market depth make Dubai a credible, liquid settlement venue — the qualities a CIF destination needs.

Yes — federal AML law covers the precious metals sector, DMCC imposes OECD-aligned sourcing rules on members, and accredited refineries are audited.

Kilobars (999.9) and TT bars for regional and Asian demand, refined locally or imported, alongside the jewellery trade's substantial volumes.

No — physical premiums and discounts to the international price float with regional supply and demand, and are quoted continuously by the wholesale market.

Yes — subject to the universal requirements: KYC, licensed export from origin, provable chain of custody and the refinery's onboarding due diligence.

Investment-grade precious metals have benefited from favourable VAT treatment in the UAE; specific rules and rates change, so current advice should be taken for any transaction.

Flight time is hours; the full cycle — export formalities, secure uplift, import clearance, refinery receipt — commonly completes within about 48 hours for established flows.

Into regional jewellery demand, onward to Asian markets (notably India), into vaulted holdings, and into the global wholesale market via bank channels.

Yes — Dubai prices express premiums or discounts to the same international benchmark all wholesale gold references: the LBMA Gold Price.

High values, international counterparties, complex documentation and eager newcomers create ideal conditions for fraud theatre. The real market's mechanics defeat the scripts — see Gold Trading Scams and Red Flags

Doré settles below the benchmark by transparent refining economics (payable percentage and charges). Refined gold at a deep discount is the signature bait of fraud.

A scheme where the victim pays escalating fees — customs, storage, certificates — to release a shipment that never existed. Genuine CIF sellers pay their own delivery costs.

Through your own bank, bank-to-bank over authenticated SWIFT. Emailed PDFs, screenshots and 'bank officers' on phone calls prove nothing.

Staged proof — vault videos, gold-painted bars, fake certificates, actors as officials — designed to substitute appearances for verification. Structure deals so payment follows verified documents and assay, and theatre is harmless.

Mining investment is a real asset class transacted through regulated channels with audited disclosures. Unsolicited offers promising guaranteed returns from artisanal production are almost invariably fraud.

A small genuine delivery builds confidence before a large prepaid order disappears. Settlement structure is the defence: pay against assayed delivery, every time, regardless of history.

Anonymity and no verifiable footprint. Legitimate counterparties have registries entries, offices, banking relationships and verifiable references — and will engage through them.

Counterparty KYC verified against registries; licences confirmed with issuers; instruments verified by your bank; settlement structured against destination assay; and contract terms reviewed by experienced counsel.

Yes — smuggled or sanctioned metal, custody substitution, assay manipulation and documentary fraud all involve real gold. Compliance verification protects against more than fake metal.

Law enforcement in your jurisdiction and the counterparty's (economic crime units), your bank if instruments or payments are involved, and regulators where licensed entities are implicated. Preserve all communications.

Never paying anything in advance of verified value — structure every payment against bank-verified instruments, verified documents or assayed metal, and the standard scripts all fail.