In liquid financial markets customers will see both a buying price and a selling price available to them. The buying price is always higher than the selling price, which is obvious because otherwise the two people quoting the prices would trade with each other.
The difference between the buying and selling price is called the spread.
As customers we are usually destined to pay the spread. If we buy one moment and sell the next, when nothing has changed, it will cost us the range between the two prices. Continually paying the spread is what usually makes active trading a losing strategy in the long term.
Where does that money go? It is earned by the people who have the courage to make you those prices in the first place. What they are hoping is that they will buy from you when you are selling (at the lower price) and sell to someone else when they are buying (at the higher price). Their courage to be out there, making prices and taking on gold inventory, earns them a small profit, provided that the market conditions don't change radically while they hold inventory.
One of the things that makes BullionVault unique is that you too can earn the spread. There are two ways you might take advantage. Firstly when you want to buy you could 'beat the best buying price', and when you sell you could 'beat the best selling price'. Both of these have explanations in the 'How to do it' section of BullionVault's help.
But if you want to you can also make both selling and buying prices at the same time. You can do this with a tiny amount of your gold and money if you want because BullionVault's minimum trade sizes are only 1 gram. This way you will be able to experience - on a small scale - how market professionals in financial markets all over the world actually make their money.
Perhaps some users will even scale up and become significant liquidity providers in gold.
© BullionVault Ltd .