A bullion market is a marketplace where buyers and sellers may exchange gold, silver, and related derivatives. There are many bullion markets scattered throughout the world, but the London Bullion Market is recognized as the main global market trading platform for gold and silver.
Understanding the Bullion Market
The market for dealing in gold and silver is known as the “bullion market.” Around the world, there are many bullion markets. These bullion markets are sometimes referred to as over-the-counter (OTC) markets.
The main market factors influencing the price of these precious metals are their industrial applications for gold and silver. A safe-haven investment or inflation hedge can occasionally be utilized with gold and silver traded on the bullion market, which may also have an impact on the value of these commodities.
There are other methods to invest in gold and silver, including through the bullion market. Mutual funds and exchange-traded funds (ETFs) are further choices. Due to their greater flexibility, these choices may be more alluring to investors. The SPDR Gold Trust, which has total assets of nearly $60 billion and a trading price of $169.09 as of July 2021, was the biggest gold ETF by assets.
Because physical bullion is a real asset that comes in bars and coins of fixed quantities and is challenging to acquire or sell in precise amounts, it offers less trading flexibility than alternative gold and silver assets. Bullion is extremely expensive to store and insure.
Types of Bullion Market
Around the world, there are several bullion markets, including those in London, New York, Tokyo, and Zurich. The main bullion market is the London Bullion Market. It is an OTC market operating 24 hours a day that trades gold and silver at market spot prices as well as trading futures and options on the metals.
The London Bullion Market Association, which oversees market maintenance, has established requirements for the production quality of metals traded and settled there. It provides a universal benchmark for transactions involving precious metals. On the London Bullion Market exchange, gold was priced at $1799.45 as of July 22, 2021.
The London Bullion Market now has 12 market makers, 58 associate members, and 75 full members from 23 different nations listed on its books.
Gold or silver bullion is the main source of income for membership firms. Members often pay between £6,500 and £17,000 ($8,900 to $23,300) a year for membership.