Below-spot gold explained: why African gold trades at a discount.

What “below spot” actually means

Gold pricing in the international market revolves around a single daily reference: the LBMA PM Fix. Published each business day at approximately 15:00 London time through an electronic auction administered by ICE Benchmark Administration, the Fix is the price — in USD per troy ounce — at which LBMA member banks are willing to deal in standard quantities of gold. It is the benchmark against which the overwhelming majority of institutional gold transactions globally are denominated, settled, and reported.

When a transaction is described as "below spot," it means the agreed price per kilogram is less than the LBMA PM Fix on the transaction date by a stated amount. In our current mandate, that amount is USD 5,000 per kilogram. At current spot levels of approximately USD 3,200 per troy ounce — or approximately USD 102,880 per kilogram of 999.9 fine gold — our mandate prices at approximately USD 97,880 per kilogram.

This is not below the gold's intrinsic value. The gold is real. Its elemental composition does not change because it has not yet been processed through a particular industrial facility. The discount is not to gold's value — it is to the LBMA Good Delivery standard, a set of requirements concerning bar format, refinery accreditation, and documentation. The buyer acquires gold that meets all quality requirements but has not yet completed the LBMA certification pathway.

Why African gold trades below spot

The LBMA Good Delivery standard is the key to understanding the discount. To be traded at the LBMA PM Fix price — to be "at spot" — a gold bar must meet LBMA specifications: minimum 99.5% fineness, specific weight tolerances, a serial number, and manufacture by an LBMA-accredited refinery. The list of LBMA-accredited refineries is published by the LBMA and currently contains approximately 75 facilities globally. No African-based refinery is currently on this list in full. The accredited refineries that process the bulk of African gold are in Switzerland (MKS PAMP, Argor-Heraeus, Metalor, Valcambi), the UAE (Emirates Gold, Al Etihad Gold), and Malaysia (Public Gold, Poh Kong Refinery).

African gold exported before processing through an LBMA-accredited refinery is therefore technically "pre-LBMA" material. It is not LBMA Good Delivery gold. It cannot be sold into the London bullion market at the PM Fix price until it has been processed and re-assayed by an accredited refinery. The structural consequence of this is the below-spot discount: the seller accepts a lower price because the gold requires an additional industrial step before it reaches full LBMA-standard value. The buyer captures the processing premium by acquiring the gold below spot and arranging the refining step.

This is not a legal grey area. Exporting gold with a valid mineral export permit is entirely legal under the laws of every gold-producing African country. The discount does not arise from any irregularity in the gold's legal status — it arises from its position in the industrial processing pathway. A Swiss or Malaysian refinery does not buy African gold at USD 5,000/kg below spot because they suspect something is wrong. They buy it at that price because they will spend approximately USD 1,000–2,000/kg on refining costs and sell the output bars at spot, capturing USD 3,000–4,000/kg as their gross margin.

The discount range — USD 3,000 to 5,000 per kilogram

The below-spot discount on African gold is not fixed. It varies within a range of approximately USD 3,000 to USD 5,000 per kilogram depending on several factors, each of which affects the buyer's assessment of risk, logistics cost, and processing yield.

Documentation quality is the primary driver. A lot with a recent independent assay from SGS or Bureau Veritas, a valid export permit, and a complete, traceable chain of custody from mine to exporter commands a smaller discount than a lot with partial documentation or older assay data. Documentation reduces the buyer's risk and uncertainty — and is therefore priced accordingly. Fully documented lots from established supply chains typically trade at the narrower end of the range (USD 3,000–3,500/kg). Partially documented or first-time supply chains trade at the wider end (USD 4,500–5,000/kg).

Origin country stability affects the discount at the margin. Well-established gold-producing countries with functioning mineral export permit systems — Ghana, Tanzania, South Africa — attract smaller discounts than newer or more operationally volatile supply chains. The discount reflects not just documentation quality but the buyer's confidence in the export permit's enforceability.

Transaction size also influences pricing. Larger transactions — 50kg, 100kg — can be negotiated at the narrower end of the discount range because the buyer's per-unit logistics and due diligence costs are amortised over a larger volume. Our current mandate at 10kg prices at the wider end of the range (USD 5,000/kg), which is appropriate for a first-transaction relationship without an established supply history.

Is this legal?

Yes. Unambiguously.

Exporting gold from an African country with a valid mineral export permit is a lawful commercial activity regulated by each country's mineral resources authority. There is no international law, FATF guidance, or LBMA rule that prohibits transacting in pre-refined gold at a below-spot price. FATF guidance on precious metals requires traceability and AML controls — it does not restrict pricing or prohibit below-spot transactions.

The question of legality is sometimes conflated with the question of fraud risk in this market. The confusion is understandable: a significant proportion of "below-spot African gold" offers in circulation are fraudulent advance-fee operations designed to extract money from buyers through fabricated documentation and fictitious gold. But fraud is not a property of below-spot pricing — it is a property of the parties involved. The structural discount on pre-refined African gold is entirely legitimate. The fraud risk is in the counterparty, not the pricing.

The mitigation for fraud risk is documentation verification and a settlement structure that ensures neither party is exposed before performance is confirmed. Our transaction structure — independent assay verification, bank escrow, specialist carrier logistics — is specifically designed to eliminate fraud risk from both sides of the transaction.

Who buys below-spot gold and why

The buyer base for documented below-spot African gold is defined by the ability to either process the gold into LBMA-standard bars or to hold it as a direct physical investment at a below-market cost basis.

Malaysian refineries — Public Gold Refinery, Poh Kong, and several smaller licensed refiners — are natural buyers. Malaysia is an LBMA-accredited refining jurisdiction and has established import infrastructure for African gold. Malaysian refineries acquire pre-refined gold below spot, process it into LBMA-standard kilo bars, and sell the output at spot through Malaysia's active bullion market. The economics are straightforward at USD 5,000/kg below spot.

Swiss refineries — MKS PAMP, Argor-Heraeus, Metalor, Valcambi — collectively process approximately 70% of the world's gold and are the primary destination for African feed material. They operate the same arbitrage: below-spot acquisition, LBMA-accredited processing, spot-price output. The processing margin at Swiss operating costs works at the current discount level.

Family offices acquiring physical gold as a reserve asset benefit from the below-spot acquisition by establishing a below-market cost basis. A family office that acquires 10kg at USD 5,000/kg below spot, arranges processing through an accredited refinery, and holds the resulting LBMA bars has effectively bought gold at a 4.9% discount to the market price on the day of acquisition. That discount is permanent — the cost basis is set at acquisition. At current gold prices, USD 5,000/kg on a 10kg purchase is a USD 50,000 saving versus buying at Fix price through a dealer.

Bullion dealers with refinery relationships operate the same trade as family offices but at scale, with the refinery margin as their primary return driver rather than a long-term holding gain.

The risk: is the gold real?

The primary risk in a below-spot African gold transaction is not pricing risk or legal risk — it is counterparty risk. Specifically: the risk that the gold does not exist, the documentation is fabricated, and the seller is operating a fraud operation.

This risk is real and the fraudulent segment of the market is significant. Advance-fee operations targeting gold buyers are well-organised, produce sophisticated-looking documentation, and have cost buyers substantial sums. The frequency and professionalism of these operations is why below-spot gold has a reputational problem — not because the underlying economics are unsound, but because the fraudulent actors have polluted the market's credibility.

The mitigation is documentation verification. An independent assay certificate from SGS, Bureau Veritas, or Intertek with a traceable report number cannot be faked in a way that survives direct verification with the laboratory. The procedure is: obtain the assay certificate, note the report reference number, and contact the issuing laboratory using contact information from their official website. Ask them to confirm that the report number corresponds to the described sample from the described party. A legitimate certificate will verify. A fabricated one will not.

The export permit can be verified with the issuing mineral authority. The chain of custody documents, while harder to verify item by item, can be cross-referenced against the assay certificate for internal consistency. An experienced buyer or their legal counsel can identify inconsistencies in documentation packages that a non-specialist might miss.

The transaction structure that makes it safe

A well-structured below-spot African gold transaction proceeds in stages, each of which protects both buyer and seller. The sequence is non-negotiable: any deviation from it benefits one party at the expense of the other, and typically benefits the fraudulent actor at the expense of the legitimate one.

Stage 1: documentation review. The buyer receives and independently verifies the assay certificate, export permit, and chain of custody documentation. This stage is complete only when the documentation is confirmed genuine, not merely reviewed. Report numbers are verified with the issuing laboratory. Export permit validity is confirmed with the mineral authority.

Stage 2: proof of funds exchange. The seller provides documentation confirming the gold exists and is available for shipment. The buyer provides a bank comfort letter or equivalent confirmation of available funds. Both parties have now demonstrated they are real.

Stage 3: escrow funded. The buyer deposits the full transaction amount into a licensed escrow account. The escrow agent confirms to both parties that funds are held. The seller's obligation to ship is now triggered — but only by escrow confirmation, not by a promise to fund.

Stage 4: carrier collects. A mutually agreed specialist carrier — Brinks, Malca-Amit, or Loomis — collects the gold at the seller's location or nominated hub. The carrier verifies the gold against the documentation, insures it for full replacement value, and takes custody.

Stage 5: airway bill issued. The carrier issues the airway bill at the point of taking custody. This document is presented to the escrow agent and constitutes the seller's proof of performance.

Stage 6: buyer receives. The gold arrives at the buyer's nominated facility. The buyer confirms receipt and inspects against the documentation.

Stage 7: escrow releases. On delivery confirmation, the escrow agent releases the funds to the seller. The transaction is complete.

This structure ensures that at no point is either party exposed without performance from the other. The buyer's funds are in escrow — not at risk — before the gold ships. The seller's gold is not shipped until the escrow is funded. The specialist carrier's custody and the airway bill provide independent confirmation of performance on each side.

Current mandate — USD 5,000/kg below LBMA spot

OnePiece currently holds an active mandate for 10 kilograms of investment-grade physical gold from Africa, priced at USD 5,000 below the LBMA PM Fix per kilogram on the date of settlement. The gold has an independent assay certificate from a recognised international laboratory confirming investment-grade fineness. A valid mineral export permit from the country of origin is in place. Chain of custody documentation is complete.

Settlement is through bank escrow or documentary letter of credit. Delivery is via Brinks, Malca-Amit, or Loomis to the buyer's nominated facility — Malaysia, Singapore, Dubai, Hong Kong, Zurich, London, or any other agreed destination served by the specialist carrier network. The transaction timeline from signed agreement to delivery is 10 business days.

Repeat supply at equivalent or improved pricing is available for buyers who establish a transaction history. Monthly and quarterly supply schedules can be arranged for buyers with ongoing acquisition programmes. Proof of funds and basic KYC are required before the full documentation package is released.