Infographic: Bullion Banking Mechanics

We recently discussed “What Causes Gold Prices To Rise?”. It is a big topic and a controversial and misunderstood one for that matter. But it is the paper markets where the price (for now at least) continues to be set.

It’s a difficult topic to get your head around but this infographic does a good job of explaining in pictures what is not easy to get across in words…

Infographic: Bullion Banking Mechanics

Bullion banks are some of the most influential participants in the global gold market. But who are these players and what do they actually do? And most importantly, how can these bullion banks trade thousands of times more gold each year than is actually in existence?

This infographic lifts the lid on bullion banking, looking at the world of fractional-reserve paper gold trading built on the unallocated gold account system. Topics covered include:

  • The identities of these bullion banks
  • The fractional reserve nature of bullion banking and the paper gold creation process
  • How the staggeringly large paper gold trading volumes are generated
  • The gold price discovery process and how the price of gold is set in London by unallocated trading which channels gold demand away from real physical gold and into paper
  • The secretive nature of the bullion banking club and how its activities in the City of London are deliberately shrouded in secrecy
  • How new competitors into the London Gold Market claim to be providing competition but are actually perpetuating the underlying unallocated gold account system of trading

For more information about the mechanics of bullion banking, please also see BullionStar Gold University article Bullion Banking Mechanics.

Read more: Paper Gold vs Physical Gold – What Should You Buy?


Bullion Banking Mechanics – An infographic hosted at

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Read more: Gold and Silver Commitment of Traders (COT) Report: A Beginners Guide

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