BACKGROUND AND CONTEXT: THE LONDON BULLION MARKET

London is the focus of the international over the counter (OTC) market for gold and silver, with a client base that includes the majority of the central banks that hold gold, producers, refiners, fabricators and other traders throughout the world. Members of the London bullion market typically trade with each other and with their clients on a principal-to-principal basis, which means that all risks, including those of credit, are between the two counterparts to a transaction.

The London bullion market is a wholesale market, where minimum traded amounts for clients are generally 1000 ounces of gold and 50,000 ounces of silver. The OTC market allows flexibility, unlike a futures exchange, where ...

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