Consulting a Gold Dealer
Gold dealers serve clients looking to purchase relatively small quantities of bullion bars, contemporary bullion coins, historic gold coins, gold options, and certificates. Gold dealers work with gold brokers, also called bullion brokers or bullion banks, in order to fill their orders.
Bullion brokers are usually investment banks and provide gold at wholesale prices to suppliers. They occasionally serve individual clients who want to buy larger quantities of gold, over 1000 ounces. These banks are generally members of the London Bullion Market Association.
Dealers generally manage and encourage strong communications with trade associations, national mints, financial journalists, and bullion banks. By maintaining and growing these associations, dealers assure their ability to offer competitive pricing and availability for their clients. By having appropriate information on market circumstances and the means for order fulfillment, dealers are able to assist their buyers by suggesting the right investment for their needs. After counseling a buyer on how to build a gold portfolio in the way most suitable for his or her investment goals, dealers charge a premium or commission for their services. This may vary depending on the type of gold a buyer seeks to invest, and its subsequent availability.
Gold bars are available in various sizes, and in some countries can be bought and sold tax free. Coins are a more popular way of holding gold, and are usually referred to as Sovereigns or Krugerrand. Coins typically weigh one troy ounce; this is the weight in which gold is sold. Gold certificates and gold shares allow for ownership without having to store the actual bullion. Bullion not already allocated may be held for an owner by a bank or bullion dealer as a general pool or stock, while allocated gold refers to bars and coins which are individually assigned to stock and certificate owners.
Investing in Gold
For investors, diversifying a portfolio by including ownership of gold is seen as a sensible and prudent investment. In traditional investment strategies, it was considered wise to allocate five to ten percent of diversification to gold. This practice was largely abandoned in the 1980s, but due to recently volatile markets, gold has experienced a resurgence as an investment option.
Gold has always been regarded as a store of wealth, even after the collapse of the monetary gold standard. Today, many people invest in gold because they believe if some world event causes existing economic structures to collapse, gold will survive as a currency.
Gold Pricing
The pricing of gold is a peculiar practice. The benchmark for its pricing comes from what is called the London Fixing, a meeting that takes place in London twice a day and consists of five representatives from bullion banks. Gold pricing, like all sales, is driven by supply and demand. Yet, gold is unique in that it has historically been hoarded. Moreover, all the gold in the world that has already been mined and produced is still available. These factors influence the pricing of gold, for if prices are set too high, the gold market might quickly find itself flooded with sellers.
