You often hear the term “gold market” whenever a financial analyst is discussing gold prices. Maybe you have heard from a relative who invests in gold and loves talking about his investments. Gold market is the unseen and intangible realm in which gold is traded for its “spot price.” The spot price is the rate at which gold is selling for at that specific point in time. Gold is traded in many different forms and under many different circumstances. Mainly, gold is traded in three forms on gold market: gold coins, gold bullion, and gold jewelry.
Gold coins are probably the first things that come to mind when you think of trading in gold. Virtually every town has a shop that buys and sells gold coins on gold market. If you have ever tried to buy gold coins in such shops, you probably have realized that they do not sell for their spot price per ounce. This is because you must pay a premium for the rarity of the coin itself.
Gold bullion is usually sold amongst countries and large central banks. Some companies also purchase gold bullion to melt down into other forms. It is possible for an average person to purchase gold in the form of bullion on gold market, but it is impractical. Gold bullion is gold in a bulk supply; thus making it costly to ship and inconvenient to store. Unlike gold coins, gold bullion usually sells at, or very close to, its spot price.
You may also invest in gold jewelry. However, gold jewelry is a very poor way to invest in gold. It is the first thing thieves look for if they break into someone’s home. The main reason jewelry is not a good way to invest in gold on gold market is that it carries a steep premium. You will pay well above spot price if you attempt to enter the market through the purchasing of jewelry.
Any investor can enter the gold market in either way, but first of all he should take into account the level of premium and liquidity of the forms of gold.