'Tiny' Gold Market Is Actually the World's Biggest

Source:

". . .the amount of gold that changes ownership each day is, in dollar terms, 3.5 times the dollar value of crude oil that is consumed each day"

  1. What is the biggest market in the world for a physical commodity?
  2. Is the gold market one of the smallest markets in the world for a physical commodity?
I would guess that you answered:
  1. Crude oil.
  2. Yes. Gold is one of the smallest commodity markets in the world.

    If those were your answers, you are wrong. What everybody believes to be the "tiny gold market" is in fact the world's biggest physically traded commodity market.

    Let's have a look at some facts.

    The London Bullion Market Association (LBMA) OTC gold market trades approximately 90% of the world's physical gold trade. The amount of gold sold each day is given at the LBMA's Internet site here.

    The LBMA reports the net gold traded, which is termed "ounces transferred." This is not the gross trading volume (e.g., if an investor were to sell 1 million oz. in the day and then buy 1.1 million ounces, the trade would be counted as 0.1 million oz., the net difference between the purchase and the sale and the amount of gold "transferred" to the investor's account. Thus, the numbers are the amount of gold that changes ownership each day.

    The value of the daily trading for November 2009 is given as $22 billion.

    From looking at the data you might think the trade amounts are for the entire month. They are actually average daily figures for the month. This is clear from another page of the LBMA Internet site, which states:
    "Gold ounces transferred rose from a daily average of 20.6 million in September to 20.8 million, an increase of 1.2%. There was a 4.7% increase in the average price to $1,043.16, resulting in a 6.0% rise in value to a daily average of $21.8 billion. The number of transfers dropped by 0.8% to a daily average of 1,908."
    The world consumes 82 million barrels of crude oil each day. At $77/barrel, the physical trade of crude oil is worth $6.3 billion each day. This means that the amount of gold that changes ownership each day is, in dollar terms, 3.5 times the dollar value of crude oil that is consumed each day.

Related Articles

Get Our Streetwise Reports Newsletter Free

A valid email address is required to subscribe