How is physical gold traded?

Physical gold suitable for investments, also called gold ingots, can be purchased at the spot price, which is the price of gold without manufacturing plus additional costs, which vary depending on the seller. Physical gold can be liquidated in the unlikely event of a total economic collapse. Investors can buy physical gold bars and coins or gold-linked financial instruments, such as mutual or exchange-traded funds (ETFs). Investment demand can be very volatile depending on market confidence, but its average is around 1,000 tons per year, according to data compiled by the World Gold Council.

The wholesale gold trade landscape is quite complex and constantly evolving. The three most important gold trading centers are the London OTC market, the US futures market. UU. and the Shanghai Gold Exchange (SGE).

These markets represent more than 90% of global trading volumes and are complemented by smaller secondary market centers around the world (both OTC and publicly traded). Investing in physical gold can be a challenge for investors who are more used to trading stocks and bonds online. When it comes to physical gold, you'll usually interact with traders outside traditional brokerage agencies and you'll likely have to pay for storage and get insurance for your investment. The three main options for investing in physical gold are ingots, coins and jewelry.

The price of physical gold is determined by the supply and demand of physical gold. The global physical market can be divided into foreign exchange and bilateral trade. In addition to the physical market, there are several gold derivative markets that influence the physical market. To understand the whole machine, we will examine the operation of gold exchanges, bilateral transactions (networks) and derivative markets separately and, finally, how all derivatives are linked to the physical market.

Derivatives are traded on exchanges and also on a bilateral basis, but for the sake of clarity, we will discuss them independently. Trading gold could be profitable if you develop a system that allows you to detect potential trading opportunities. Demand for gold fell during the Covid-19 pandemic, as lockdowns prevented consumers from visiting physical jewelry stores. London's unique vault infrastructure, with its strictly enforced chain of custody, and the significant gold reserves found in it, contribute to the fact that London is often referred to as the “terminal market”.

Central banks often use interest rates to control the rate of inflation, which can also influence gold prices. Due to the high price of gold bars, it is especially important to go to an accredited dealer and pay for the delivery with insurance or to fork out for storage in a large vault or in a safe deposit box. People who choose to invest in gold through options or futures contracts must actively monitor their holds in order to sell, transfer or exercise their options before they expire, without any value. On the other hand, the fall in the value of the dollar makes gold cheaper for foreign buyers and demand increases.

A trading strategy designed for another asset, such as a stock or currency pair, may not work the same way for gold. Whether you believe in a positive or negative outlook for the price of gold, you can take a long or short position to try to take advantage of the price movement. Just remember that, like gold stocks, you don't buy gold, only paper that is theoretically backed by the debt or equity of mining companies or physical ingot futures and options contracts. This means that the value of gold, mutual funds and ETFs may not fully match the market price of gold, and these investments may not perform as well as physical gold.

Globally, the London bullion market, supervised by the London Bullion Market Association (LBMA), is the most dominant OTC gold market. While the U.S. dollar is no longer tied to the gold standard, gold prices tend to move in the opposite direction to the dollar. Well, if the neighbor refused the woman's offer, she would sell the bracelet to a jewelry store connected to the global gold market, where supply would increase.

Since gold is a commodity and the forces of supply and demand for raw materials are not the same anywhere and energy and time are needed to transport raw materials, the price of physical gold differs geographically. A call option gives the holder the right to buy gold at a fixed price on the date the option contract expires. . .