Gold Trading for Physical Buyers: A Complete Guide

Physical gold trading encompasses the buying and selling of actual gold metal — bars, coins, and other forms — as opposed to gold ETFs or futures contracts. The global physical gold market is estimated at roughly 4,700 tonnes annually, comprising mine production (~3,500 tonnes) and recycled gold (~1,200 tonnes). Major demand centers include jewelry (especially India and China), central bank reserves, investment, and industrial use.

The London Bullion Market Association (LBMA) oversees the standards for the international gold market, including the specifications for London Good Delivery bars — the standard unit for wholesale gold trading. The LBMA Gold Price (set twice daily) serves as the global benchmark.

London Good Delivery (LGD) bars are the standard for international wholesale trade — each bar weighs approximately 400 troy ounces (12.4 kg) and must be at least 99.5% pure gold from an LBMA-approved refiner. Kilobars (1 kg, 99.99% pure) are the standard in Asian markets, particularly for Chinese and Thai demand. Smaller bars (1 oz to 100 g) and coins serve the retail investment market.

Gold dore — the semi-refined product from mines — is shipped to LBMA-approved refineries (Valcambi, PAMP, Heraeus, Metalor, and others) for refining into Good Delivery bars. Chain of custody and responsible sourcing are increasingly important, with LBMA's Responsible Gold Guidance requiring due diligence on gold origins.

Gold is priced in US dollars per troy ounce, with the LBMA Gold Price as the primary benchmark. Physical gold trades at the benchmark plus or minus a premium that varies by product form, size, location, and market conditions. Kilobars in Shanghai may trade at a different premium than Good Delivery bars in London or Zurich.

The Shanghai Gold Exchange (SGE) is the world's largest physical gold exchange, with the Shanghai Gold Price serving as the Chinese domestic benchmark. The premium between SGE and LBMA prices reflects Chinese physical demand, import quotas, and currency factors. Dubai Gold and Commodities Exchange (DGCX) is another important physical market.

Physical gold logistics require specialized secure transport and storage. Gold is typically stored in vaults operated by LBMA-approved custodians in London, Zurich, New York, Singapore, and Hong Kong. Insurance costs for gold storage are relatively low (0.1-0.5% annually) given gold's high value-to-weight ratio and the security of approved vaults.

Shipping physical gold involves armored transport by specialized carriers like Brinks, Malca-Amit, and Loomis. Air freight is standard for international movements due to gold's high value-to-weight ratio. A single commercial flight can carry several tonnes of gold in its cargo hold. All movements require comprehensive insurance and security protocols.