One of the prime avenues for securing one’s future lies in investment. Investment involves an individual investing their capital into some form of market. The major investments are made in the stock market, with most of the working-class either directly or indirectly investing in stocks. While stock market investments can have high returns, there is just as much risk involved. An excellent alternative would be to invest in bullions. Bullions are any precious metal in the form of coins or bars, or ingots with minimal impurity (lesser than 0.1%). The word itself is derived from the french word “bouillon”, which translates to boiling.
This word refers to the boiling of metals during the refining process. The prices of bullion are subject to lesser fluctuations than stocks, making them a more dependable investment. Bullion includes gold, silver, platinum, and other precious metals. Governments and other agencies globally recognise these as precious metals, thus maintaining their value. Individuals, government and private organisations both invest in bullion for emergency cash.
THE PRICING SYSTEM FOR BULLION
Every day during 10.00 a.m. and 03.00 p.m. (GMT), the London Bullion Market Association (LBMA) sets the bullion prices in USD. While there are no significant fluctuations, the prices do vary from day to day. This fluctuation occurs because of the volatility of market demand and supply. When these forces get out of hand, it can cause the bullion market to crash. To deter the chances of this occurrence, major market players (government and other authoritative agencies) agree to maintain the demand and supply of bullion within this fixed rate. Once the rate is determined, the market forces strive to maintain demand and supply within the rate, making the bullion prices more reliable than stocks.
There are two pricing systems for bullion rate-fixing:
Spot Pricing System
This pricing system is the one followed by the LBMA and is operative when people or organisations purchase bullion on that particular day.
The Future’s Pricing System
Two mutually consenting parties agree on a price for the bullion, which they will trade at a future date. Therefore, the bullion rate declared on that particular date is not taken into account, and the parties make the trade on the previously agreed prices.
Platinum, silver and gold bullion prices determined by the LBMA depend on the following factors:
- Demand and supply of the precious metal
- Demand and supply of other commodities
- Twin Deficits
- Wage rates and affordability of the population
- Production costs of all commodities globally
WHY AND HOW TO INVEST IN BULLION?
Investing in any bullion (platinum, silver or gold) has a lot of advantages, such as:
- The perceived value of the precious metal is global and not subject to change.
- Value of currency and any fluctuation in the dame will not affect the value of bullion.
- The increase in inflation causes price surges and will also cause bullion prices to increase and, therefore, the individual’s asset value as well.
- In the event of a deflating economy, purchasing and selling bullion safeguards one against heavy losses.
- While gold mining has decreased, there is no shortage of demand for the metal, which will cause its prices to skyrocket. It is better to invest in them now before their prices increase drastically.
- Bullion rates are rarely affected by global crises like wars or natural disasters. People suffering because of these events can rely on their bullion to tide them over.
People or organisations wanting to invest in bullion can do so online, with the several agencies that offer online bullion trading services. It is important to arm oneself with all pertinent information before making an investment.