Gold is mined on every inhabited continent and bought everywhere, yet the price is made in a small number of places. Two centres handle the bulk of wholesale trading.
One centre grew around physical settlement
London developed as the place where large bars physically changed hands, supported by vaults, refiners' relationships and a clearing system built over a long period.
Trading there is over the counter, meaning transactions are bilateral rather than routed through an exchange, and settlement involves transferring ownership of specific metal held in accredited vaults.
The practical effect is that a bar with unbroken custody in that system is accepted without re-assay, which is what makes very large trades cheap to execute.
The other centre grew around futures
New York's role is built on exchange traded futures, which are standardised, centrally cleared and settled through margin rather than through immediate metal transfer.
That structure suits participants who want price exposure and leverage without handling metal, which describes most funds and speculative traders.
Volumes there are far larger than the physical market could support, because contracts are opened and closed repeatedly without any bar moving.
The two are linked by arbitrage
Traders operate across both, buying in one and selling in the other whenever the prices diverge beyond the cost of moving or financing metal.
This keeps the physical and futures prices tied together, and it means a disturbance in one centre transmits to the other within minutes.
It also means the effective global price is produced by the interaction of the two rather than by either one independently.
Network effects entrench the position
Liquidity attracts liquidity. A participant wanting to trade in size goes where other large participants already are, because that is where a trade can be done without moving the price.
Vaults, clearing systems, legal precedent and standard contracts have accumulated around those centres over decades and cannot be replicated quickly.
New venues can therefore build substantial domestic volume without displacing the established centres from price formation.
Other exchanges serve regional functions
Exchanges in major consuming countries handle large physical volumes and set local reference prices used by domestic jewellers and refiners.
Their contracts settle in local currency and local bar sizes, which makes them useful domestically and difficult to arbitrage directly against the main centres.
Their growth has shifted where metal is stored and consumed considerably more than it has shifted where the benchmark price is determined.