DEFINITION of 'Bullion Market'

A bullion market is a market through which buyers and sellers trade gold and silver as well as associated derivatives. The London Bullion Market is known as the primary global bullion market trading platform for gold and silver.

BREAKING DOWN 'Bullion Market'

The bullion market is generally known as the market for gold and silver trading. The bullion market is the primary source for gold and silver trading quotes throughout the day. Multiple bullion markets exist across the globe. These bullion markets are typically characterized as over the counter markets. Bullion markets exist in New York, Zurich and Tokyo with London serving as the location for the largest global bullion market. Bullion market trading is known to have a high turnover rate with transactions conducted electronically or by phone. The industrial uses of gold and silver are the primary market drivers for the pricing of the 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 also affect its trading value.

The bullion market is just one of several ways to invest in gold and silver. Other options include exchange-traded funds and mutual funds. These options can be more appealing to investors, because they offer greater flexibility. The SPDR Gold Trust (GLD) is the largest gold exchanged-traded fund by assets as of November 30, 2017. Assets in the fund were $34.6 billion with a trading price of $121.10.

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.

London Bullion Market

The London Bullion Market is the primary bullion market for trading globally. The London Bullion Market is an over the counter market open 24 hours a day. It transacts gold and silver at market spot prices and also includes trading of forwards and options on the metals. The market is maintained by the London Bullion Market Association which has established standards for production quality of metals transacted and settled within the market. It offers a global standard for precious metal transactions. As of November 30, 2017, gold was trading at USD1,280.20 or GBP948.88 on the London Bullion Market exchange. The London Bullion Market includes approximately 150 members from over 30 countries. Membership companies primarily derive the majority of their business revenues from gold or silver bullion. Members pay approximately £5,000 to £12,000 ($6,735 to $16,164) annually for membership. 

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