It is no secret that the precious metals industry is indeed capital intensive and the reason for it is not only because precious metals are rare, but there is also the business of constructing mines and building production facilities in the middle of nowhere and these initiatives takes a lot of capital. However, this does not mean that investing in bullion is a non profitable initiative as a matter of fact the only reason any individual should invest in gold is to protect themselves from economic conditions that are uncertain. It is imperative for anybody who is planning on investing in gold bullion to understand this.
It is also important for would be investors to understand the factors that play a big role towards how gold prices are influenced in the market. These influences may range from variables such as fabricator demand, expected inflation as well as central bank demand which has a tremendous effect on the demand curve that push supply lines that in turn creates upward stress on the price ceiling or resistance levels of the market. Thus if we look at the structure of how gold bullion prices work it becomes more obvious that gold is heavily pegged to the patterns or the whims and fancies of the supply-and-demand patterns. Another aspect of the industry from a ‘production perspective’ is the fact that when the prices of the precious metal is low production is low due to the fact the mining companies would not be able to make profits when gold prices are low and most resort to keeping the stock of until prices are more feasible for release and of course in contrast high prices result in high production. Nevertheless it is market forces that determine price the prices of gold, silver and other precious metal bullion. This simply means that controlling costs is vital towards maintaining the financial health of mining companies when prices are low.
Other formats of bullion trading would include commodity ETFs or Exchange traded funds which is available for gold, silver and platinum. ETFs are instruments that are typically convenient for purchasing gold or selling gold and are easily liquidated with a push of a button. However, ETFs does not necessarily mean you will get the gold at the end of the transaction as it is a promise of gold delivery OR a sum of money that is equivalent to that of the gold you hold on paper. Other formats of gold related investment instruments include Common Stocks and Mutual Funds which are basically shares of precious metals mining companies and unless you have a good definition of how mining stocks values are arrived as it would be much safer to use the services of fund managers who have a proven track record. If you do not have sufficient funds for engaging fund managers, then the best option is to buy small gold bars from a reputable dealer systematically and slowly. The smaller the gold bar denominations you buy, the better it is for your future liquidation purposes.