Bullion exchanges carry several key risks. Counterparty risk is significant: if the dealer or exchange fails financially, buyers may lose deposited funds or metal held on their behalf. Counterfeit or adulterated bullion can enter the market, especially with unverified sellers.
Price volatility exposes traders to sudden losses, since gold and silver prices swing with currency movements, interest rates, and geopolitical events. Storage and custody risk arises when metal is held by a third party rather than the buyer, creating exposure to theft, fraud, or mismanagement.
Liquidity risk can appear during market stress, with wide bid-ask spreads or delayed settlement. Regulatory and jurisdictional differences also matter, since protections vary by country. Finally, premiums over spot price can erode returns, particularly on small purchases or resale.
