The bullion market is basically a hive of activity that operates 24 hours where traders buy and sell 'good delivery' gold over the counter based on market fluctuations for profit. The entire bullion market acts as a primary avenue that facilitates the trade or transactions of large volumes of gold and silver which also include exchange traded funds or ETFs, mutual funds, futures and stock options.
These financial instruments or derivatives that stem from the bullion market have high turnover rates due to the convenience and greater flexibility that it offers traders as trade is conducted electronically or via telephone which eliminates the need to transport actual physical gold or silver bullion in mass quantities which is not only considered to be a risk factor but also costly due to insurance, security and storage expenses.
However this does not mean that there are no individuals who buy gold bullion in physically small quantities and as a matter of fact those who purchase physical gold or silver bullion in small quantities at a small premium over the spot gold price as a form of savings are considered to be the main market movers or those who represent the 'real market' which keeps the 'gold related' derivative market in check based on the fact that the volume of paper gold that is traded on a daily basis far exceeds the actual gold that exists in the world by a staggering quadrillion dollars at current prices.
This situation has actually grown to become an area of concern that has been cited as the reason behind gold prices refusing to budge higher when they were supposed to and actually caused them to slide further down the slope when the Greek debt default situation unfolded and when the Chinese economy started slowing down drastically. It has become evident that the immense volume of paper gold is actually placing pressure on the 'value' of actual gold due to the fact that paper gold is being created as easily as money is being printed only because those offering paper gold, make a promise of delivering gold or the equivalent amount in currency. This has lead to a situation where it is almost certain that those who invest in paper gold WILL NOT receive gold and will only receive money due to the fact that it is impossible for the total amount of 'paper and electronic' gold to be liquidated.
Despite the fact that the value of all gold related instruments (physical, paper or electronic) is governed and finalised by the LBMA, they are not able to separate physical, paper or electronic gold and determine values based on formats due to the complexity and the complications that would most certainly follow suit. The association plays an integral role in maintaining market standards and determining the prices of gold and silver. The new branch of the LBMA that manages prices of gold on behalf of the LBMA, Inter-Continental Exchange (ICE) replaced the London Gold Fix on the 20th of March 2015, which effectively makes gold the last precious metal to switch to an electronic platform.