Understanding the bullion market and its Indian context
Buying bullion can certainly serve as a safe refuge for investment and a rewarding way of diversifying the risks. However, it certainly needs a fair degree of knowledge, market insights, analytical precision and experience to invest in bullion trading skillfully and earn windfall gains like a real player. Considering the same, let's get started from the very scratch.
What is Bullion
Bullion is typically referred to a significant proportion of precious metals like gold, silver, palladium or platinum, which are being measured by weight and casted as bars. Both gold and silver can be bought and sold in the form of coins (however, palladium and platinum coins are comparatively rarer). Furthermore, gold can also be traded in the cast of small grains.
What are Bullion Coins
Bullion coins are typically formed of expensive metals and bought for earning feasible returns. Value of the coins mostly depends on the bullion content and the prices fluctuate on a significant note. Some of the popular options are the Canadian Maple Leaf, the British Sovereign, the South African Krugerrand and the American Golden Eagle.
Introducing the Bullion Market
The bullion market refers to the trading platform where buyers and sellers trade on gold and silver and its allied derivatives. The London bullion market is widely known to be the chief global bullion market for gold and silver. However, there are several other bullion markets penetrating in the genre which, are classified as over the counter markets. Some of the other notable bullion markets are present in Zurich, New York and Tokyo. Bullion market trading generally reflects a high turnover rate with the transactions being conducted by phone or electronically. The industrial use of gold and silver are considered to be the key drivers of the market for establishing the pricing of precious metals.
How the Bullion Market Works
The simple mantra being considered in the bullion trading process is; to purchase when the price is low and to sell it when the price is high. However, the market certainly doesn't exhibit any strong assurance of predictable returns. Precious metals are considered to be a long-term investment and in context to it, even if you get a random chance to buy during the period of a slight decline in prices, you cannot call every twist of the market while buying gold. Being a rational investor, you should keep this into consideration that the bullion trends generally drive on a different track in case of equities and to other crucial commodities. This in turn, works as a valuable hedging option for the losses incurred in other significant investment classes.
Upsurge of Bullion Market in the Indian Financial Landscape
Considering the global perspective, the number of bullions owned by a nation serves as a key indicator of its total wealth possession. Needless to say that; the Indian bullion market is strictly managed by our Federal Government. Until 1990, the possession of gold bars by the citizens was as per the legal implications of the Gold Control Act.
Though the picture has drastically changed since the post 90s, when the trading in small bars increased to a considerable extent both imported and locally made, which were being proliferated from the local refineries. During the period of mid 90s, people started using Gold as a way of veiling the riches when the value of local rupee increased steadily. This crucial investment in gold prices remained as an undisturbed territory in 1998 when around 40 tonnes of gold from bonds, which was being primarily issued by the RBI were being reimposed back to public.
With the gradual passage of time, Gold trading started competing with the investment in high-scale industries, stock market and a variety of durable consumer goods. However, the rural people still have a tendency to invest in 22 carat jewelry. To get strong hold over the hoarding of gold, our Government introduced a new proposal in the budget 1999-2000. This enabled the commercial banks to collect deposits in the form of coins, gold bars or jewelry against interest payments.
Following here is a quick rundown on some of the key pointers that will help you get a glimpse of the present situation of Indian bullion market.
- India is one of the key investors in gold jewelry
- The domestic consumption of gold is sensitive to marriage, harvest and monsoon seasons
- Gold is majorly appreciated as a secondary point of supply for investment after bank deposits in India
- The fate of Indian jewelers is highly sensitive to price surges and more to instability
On a concluding note, it can be drawn that the Indian bullion market has certainly retained the position of serving as an ideal index for evaluating the financial growth of our nation despite of undergoing through a series of significant corrections and legal revisions.