Where does the desire for gold come from? The oldest gold artifacts date back 6,000 years. Unearthed by accident in 1972 in the town of Varna, Bulgaria, near the Black Sea coast, when a backhoe operator digging a foundation struck a Neolithic tomb, the treasure includes a miniature breastplate, tiny, exquisitely fashioned antelope with curled horns, and a delicately curling helix, like a snippet of gold ribbon. All perfectly useless. Why did people make them? In The Golden Constant, a classic study that tracked gold’s purchasing power through time, the University of California, Berkeley, economist Roy Jastram confessed to a “nagging feeling that something deeper than conscious thought, not an instinct but perhaps a race-memory,” was behind our attachment to gold. In other words, we loved it because we always had.

Two years ago I set off into the gold world, at a time when the gold price was smashing records. Bullion trades were flying around in London like one-ton chunks of hail. Sixty centuries after our distant ancestors had hammered out their ravishing little objects, we, their descendants, staggered through a tempest of assets, a world immeasurably richer than the one glimpsed at Varna. I had written about gold and diamonds on and off for 30 years but had never seen a fever like the one then sending drillers out to ransack the planet for gold. On assignment for Vanity Fair, and to write a book, I set out to take its pulse.

THE FIX

Every weekday morning at 10:30, a bullion dealer in the precious-metals trading room of HSBC Bank in London picks up the phone and punches in to a special line. The dedicated line connects him to four other bankers—the members of a powerful and self-policing group called the London Gold Fixing. They set one of the best-known asset prices on earth: the price of gold.

“There are loads of different places in the world to buy gold,” said Jeremy Charles, a trim, tough-looking native Londoner who started out at 19 as a tea boy in the gold rooms of the N. M. Rothschild bank. “But at 10:30 you find things sort of stop, while the whole market watches London.”

Charles would know. From taking care of the tea-things at Rothschild’s, he went on to run HSBC’s global bullion operations. He became chairman of the London Bullion Market Association, the group that oversees the world’s biggest gold market. He saw that market expand in 10 years from a sedate trade, tucked into the tangle of lanes behind the Bank of England, into a hairy, trillion-dollar casino. The only thing that hasn’t changed is its secrecy. Of the five banks that run the fixing (the others are Deutsche Bank, Barclays, Societe Generale, and ScotiaMocatta, the gold-trading arm of Canada’s Bank of Nova Scotia), HSBC was the only one that would even let me in the door.

The fixing starts with the “nomination” of a price by the bank holding the rotating chair. Often, this opening number is midway between the last recorded London buying and selling prices. The chairman asks who would buy and who would sell at the suggested figure. If the numbers of buyers and sellers fail to match, the figure is adjusted up or down, until it hits a point where both are equally enticed into the market. When the banks locate that point of equilibrium—buyers matching sellers—the price is “fixed” and flashed out instantly around the world. They repeat the process in the afternoon.

London has been the world capital of gold since 1671, when Moses Mocatta bought 75 ounces from the East India Company and founded the first bullion bank. Some of the firms dealing gold in London have been doing it for centuries. When Jeremy Charles started in the business, in 1975, Rothschild still banked from its old stone building at 1 King William Street. The daily gold fixing took place in a paneled room hung with portraits of deceased grandees. In those days, a small Union Jack flag lay on its side on the desk in front of each banker. As the fixing got under way, bankers would raise their flags and shout, “Flag!” when they wanted to draw the chairman’s attention to a change in their position. The price was not fixed until all the flags lay on their sides again, signaling that sellers finally matched buyers. Today, most of the banks have moved downriver to the towers of Canary Wharf, yet the bankers still bark, “Flag!” into the phone as the action of the fixing surges to and fro, and the gold they trade in has not changed. Market makers deal only in bars refined to the standard known as London Good Delivery. When central banks and hedge-fund billionaires want gold, that’s the kind they want.