Precious metals like gold and silver are some of the most sought after investments for people concerned about inflation and financial crisis. Bullion is a form of gold and silver that is officially recognized as being 99.5% pure and investors consider it a reliable store of value for their wealth. Investors can purchase bullion in the form of bars, ingots or coins and either store them for future use or trade in the bullion exchange. Bullion is just one of many ways to invest in gold or silver but it can be a good option for those looking for a tangible form of currency that retains its value in different economic situations. Gold in the form of bullion often becomes a popular investment during unstable economic times because of its reputation as a way to prevent losses.
Trading in the Bullion Market
When investors purchase bullion they can begin to trade gold and silver in the bullion exchange to incur profits. The bullion market is open 24 hours a day and is primarily an over-the-counter market with most trading based in London. There are also limited amounts of trading on the New York Mercantile Exchange and the Tokyo Commodity Exchange. The bulk of global trading is done on the over-the-counter market with London being the largest global center for OTC transactions followed by New York, Zurich and Tokyo. Transactions in the bullion exchange are normally conducted electronically or by phone. Investors can trade gold and silver in forms other than bullion such as exchange-traded funds, futures, options and mutual funds which can be flexible options. Exchange-traded funds can be traded in the London, New York, Johannesburg and Australian stock exchanges.
Bullion trading is mainly conducted amongst members of the London Bullion Market Association which is loosely overseen by the Bank of England. Most of the wholesale over-the-counter trades of bullion are cleared by the LBMA although the physical market for gold and silver is distributed globally. In 2008 the average daily volume of gold and silver cleared in London was 18.3 million ounces and 107.6 million ounces. The amount of gold exchanged in the bullion market is 125 times the output of the world’s gold mines and twice the quantity of gold that has ever been mined. Surveys have proven that gold bullion has a high turnover rate with a $240bn daily average turnover in the London bullion market. This average is higher than the global daily turnover of any currency except for the dollar/euro, dollar/yet, dollar/sterling and dollar/Aussie dollar.
The Value of Trading Bullion
Trading gold and silver bullion is so popular mainly because these are precious metals that will always have a certain value in spite of economic circumstances. People often choose to sell gold on the exchange at the most opportune times to get the highest price such as when the world’s other financial markets are unstable. The price of gold can rise or fall depending on a number of factors and traders must learn to predict the changing price based on certain indications such as unemployment figures. Gold and silver are considered to be a recession-proof investment by people who buy and sell commodities because they are rare and have always had value for thousands of years. As worldwide currency prices start to dwindle, the value of gold begins to increase. It is in unstable times that trading gold can be the most profitable compared to other types of investments and exchanges. In a volatile financial climate, the stock market and other financial markets can be bad investments and result in losses. The bullion market remains profitable in times of economic difficulty because there is a finite amount of gold in the world and it remains valuable for all time. When other financial markets are at their most vulnerable people begin trading in gold and experiencing the benefits of exchanging in the bullion market.
Traders in the bullion exchange follow certain guidelines to get the most profit and value out of their gold and silver. They typically purchase their bullion when the world’s financial markets are stable because its price tends to drop in this period of time. When stock markets are in turmoil and people are panicking, gold and silver bullion remain financially secure and can be sold for a profit. Bullion investors normally pay attention to economic reports such as unemployment figures, inflation rate and currency fluctuation to determine the best times to trade. In the bullion exchange, traders can use coins or gold bars but coins are often preferred. The value of bullion coins or bars is determined by the weight and purity of the gold or silver. Every type of physical gold or silver has real value on the market, especially in times when other currency is failing. For traders who pay close attention to the market, they can make a profit and get a great return on the investment that they make in bullion.