London, the key financial center of the UK, has had a special role in setting the gold price in the UK. For several years, a small group of financiers met and set the price of gold every day. While this price setting scheme no longer operates, London still exerts significant influence on the price of gold in the UK, Europe, and the rest of the world.
The London Bullion Metal Association or LBMA, controls how the price of gold is set by two auction markets during the day. At the end of each auction, the LBMA issues the new price of gold. While still an important price, the rest of the world has moved to electronic markets that respond instantaneously and resolve market dislocations more quickly.
For those who are interested in buying actual physical gold rather than paper promises or certificates for gold, buying gold in the UK or Europe is more expensive than in the US. Both in the market price and with the added taxes, sometimes known as VAT, gold buyers in the UK will pay a premium over their counterparts in the United States.
Essentially, the bankers want to discourage people in the UK and in Europe from storing their wealth in the form of precious metals like gold.
Despite the influence from the LBMA, UK gold prices are also tied to internationally active gold markets. For example, when the New York markets open and set the price of gold, this will have an impact on UK gold prices. The same principle applies when the Shanghai gold market opens or the Dubai markets open. All markets have become international in terms of pricing for commodities.
The Forex market has a big impact on the price of gold in the UK. The UK does not produce any significant amount of gold and must import it for selling to the population or for investment purposes. This means that foreign currency has to be exchanged in order to bring gold UK market. If the foreign currency market is favorable for the great British pound, then the price of gold will go down in the UK versus the rest of the world. The same principle holds in reverse.
Getting the best price for gold in the UK is a matter of watching foreign-currency flows and choosing the right time for the most effective point to invest.