Bullion Market Trading Tips

What Is a Bullion Market?

A bullion market is a market through which buyers and sellers trade gold and silver as well as associated derivatives. There are various bullion markets around the world with the London Bullion Market known as the primary global market trading platform for gold and silver.

KEY TAKEAWAYS

  • The bullion market is where gold and silver are traded.
  • The primary market is the London Bullion Market, which allows trading 24 hours a day and facilitates futures and options trading.
  • Companies with a membership in the London Bullion Market exchange derive most of their revenues from gold or silver.

Understanding the Bullion Market

The bullion market is commonly regarded as the market for gold and silver trading. Multiple bullion markets exist across the globe and are typically characterized as over the counter (OTC) markets.

The industrial uses of gold and silver are the primary market drivers for the pricing of these precious metals. Gold and silver traded in the bullion market can sometimes be used as a safe-haven investment or hedge against inflation which may affect their trading value.

The bullion market is just one of several ways to invest in gold and silver. Other options include exchange-traded funds (ETFs) and mutual funds. These options can be more appealing to investors because they offer greater flexibility. As of July 2022, the SPDR Gold Trust is the largest gold ETF by assets, with total assets of over $55 billion and a trading price of $159.01.1

Physical bullion offers less trading flexibility than other gold and silver investments because it is a tangible object that comes in bars and coins of established sizes, which can be difficult to buy or sell in specific amounts. Bullion is also expensive to store and insure.

Types of Bullion Markets

There are various bullion markets across the globe in locations like London, New York, Tokyo, and Zurich. The London Bullion Market is the primary bullion market. It is an OTC market open 24 hours a day that transacts gold and silver at market spot prices, and also includes trading of forwards and options on the metals.

The London Bullion Market is maintained by the London Bullion Market Association, which has established standards for the production quality of metals transacted and settled within the market. It offers a global standard for precious metals transactions. As of July 15, 2022, gold was trading at $1706.15 on the London Bullion Market exchange.1

The London Bullion Market currently has 74 full members, 59 affiliate members, and 12 market makers on its books from 23 countries.2 Membership companies primarily derive the majority of their business revenues from gold or silver bullion. Members pay approximately £6,700 to £17,500 ($6,842 to $17,872) annually for membership.3

What Are Bullion Coins?

The United States Mint gives investors a convenient and cost-effective way to add physical gold, silver, platinum, or palladium to their investment portfolios through Bullion Coins. The American Eagle Bullion Coin Program was launched in 1986 with the sale of American Eagle Gold and Silver Bullion Coins.4

What Is Gold Bar Integrity?

As of March 2022, the London Bullion Market Association (LBMA) and the World Gold Council (WGC) are collaborating to develop and implement an international system of gold bar integrity, and chain of custody. Over time, this will help consumers, investors, and market participants to trust that their gold is genuine and has been responsibly and sustainably sourced.5

What Types of Members are Part of the London Bullion Market Association?

Members of the LBMA include commercial banks, fabricators, miners, refiners, transport companies, and brokers. These companies provide facilities for trading, production, refining, melting, assaying, secure transportation, and vaulting services for gold and silver bullion.2

The Bottom Line

A bullion market is a market through which buyers and sellers trade gold and silver. The London Bullion Market is regarded as the primary global market trading platform for gold and silver. Trading for bullion is conducted on an OTC market, open 24 hours a day, that transacts gold and silver at market spot prices.

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