London Good Delivery
London Good Delivery is the LBMA standard for the large gold and silver bars traded in the London wholesale market. A gold Good Delivery bar holds between 350 and 430 fine troy ounces at a minimum fineness of 995.0 parts per thousand.
Also called: Good Delivery bar · LBMA Good Delivery · 400-ounce bar · Good Delivery List
The London Bullion Market Association sets the specification and keeps the Good Delivery List of refiners whose bars the market accepts. For gold, the fine gold content must be between 350 fine troy ounces (about 10.9 kg) and 430 fine troy ounces (about 13.4 kg), and bars are generally close to 400 ounces, roughly 12.4 kg. Each bar must carry a serial number, the refiner's stamp and its fineness, and bars made from January 2019 onwards must also show the year of manufacture.
The point of the standard is fungibility. A bar from any accredited refiner can be bought, sold, lent, swapped or pledged in London without a fresh assay, because every party already knows what it contains. That is what lets central banks hold reserve gold in the Bank of England's vaults and trade it by changing the ownership record (see allocated gold), and what makes a gold swap or a gold loan possible at short notice.
Gold outside the standard is harder to use. Bars from a refiner not on the list, or old bars that no longer meet the specification, may need to be assayed or re-refined before the London market will accept them, which costs time and money exactly when a holder may need liquidity. For a reserve manager the practical question is therefore not only how much monetary gold a country owns, but how much of it is in Good Delivery form in a place counterparties will deal.
In practice
Good Delivery is a market standard set by the LBMA, not a legal requirement. Retail bars, coins and other markets use different sizes and specifications.
Example
A Good Delivery bar containing 400 fine troy ounces is worth US$1.2 million at a hypothetical gold price of US$3,000 an ounce. A central bank wanting US$600 million through a gold swap would need to deliver several hundred such bars, before any haircut.
Learn more on Money Wiki
This page gives the short answer. Money Wiki has a longer guide to London Good Delivery, with more detail and background.
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See also
- Allocated GoldAllocated gold is gold held in custody as specific, identified bars that belong to the account holder. The custodian holds the bars for the owner, so the owner has title to the metal itself rather than a claim on the custodian.
- Monetary GoldMonetary gold is gold that a country's monetary authority owns and holds as a reserve asset. In IMF statistics it covers gold bullion, including allocated gold accounts, and unallocated gold accounts with non-residents that give a claim to delivery of gold.
- Gold SwapA gold swap is a transaction in which one party exchanges gold for currency, usually US dollars, and commits to reverse the exchange at an agreed price on a future date. Economically it is a short-term loan secured on gold.
- Gold StandardA gold standard is a monetary system in which a currency is defined as a fixed weight of gold and the issuer promises to convert its notes or deposits into gold at that price, tying the supply of money to the stock of gold.
- Foreign Exchange ReservesForeign exchange reserves are the foreign-currency assets a central bank holds and can use at short notice: deposits and government securities in major currencies, gold, Special Drawing Rights and the country's reserve position at the IMF.