What is gold bullion? It’s the gold that comes in bars or coins that investors use to diversify their portfolios. In this guide, you’ll discover how to buy gold bullion, what investment options you have, and learn if alternatives like silver might suit your financial goals.
The price of gold increased by 5% in 2023 and is now up over 30% this year, reaching $2700 an ounce as of this writing. Economic uncertainty, concerns over national debt, and wars across the world cause people to want tangible investments. If that’s you and you are wondering why the industry uses the term gold bullion and what it really means, we’ll cover that in this article.
You’ll also learn how you can buy gold, what your options are, and how to choose the right gold dealer to work with.
What is gold bullion?
Gold bullion is a term for physical gold with a high purity of around 99.5% to 99.99%. It’s a tangible, real-world asset that comes in bars or coins.
Facts about gold
Gold is one of the densest precious metals, and one cubic foot weighs over half a ton.
Throughout all of history, we’ve mined about 212,000 metric tons of gold which is about the size of a small apartment building 70 feet on each side.
Historians believe the term “bullion” originated from Claude de Bullion, a 17th-century French Minister of Finance under Louis XIII.
People have leveraged gold as a currency and a store of value for over 3,000 years, with the first gold coins minted in Lydia around 700 BC.
Protect Your Retirement Today!
Physical GOLD offers financial stability and growth potential!
Receive your complimentary Precious Metals IRA FAQ and Timeless Truth About Gold and Silver report.
or call 800-289-2646.
Types of gold bullion products
If you want to add gold to your portfolio, here are a few options to consider:
Gold bullion bars: If you are making large amounts of bullion investments, gold bars have lower premiums over the spot price than coins. They come in various sizes, from small one-ounce bars to large 400-ounce bricks.
Gold bullion coins: Coins like the American Gold Eagle or South African Krugerrand are popular among investors because they are portable. They’re also easy to trade and widely recognized around the world. As one Redditor summed up nicely: “I buy coins, American Eagles, Buffalos, and Maple Leafs, over bars because I buy and sell them, and I find the demand for coins to be higher.”
Other forms: These are less common, but you can also buy ingots, rounds, and wafers.
The best form for you depends on your specific situation, and our expert team can provide guidance and ideas.
Differences between gold and silver bullion
If you are getting started in precious metals, you may wonder if you should invest in silver instead of gold. Both are excellent investments but for different reasons.
Market size and liquidity: Gold has a larger market and is more liquid than silver, so it’s easier to buy and sell without affecting the price. Silver’s smaller market size can lead to greater price volatility.
Industrial demand: Silver’s use in industries like electronics and solar panels makes its price more volatile. Meanwhile, gold demand mostly comes from its use as a financial asset and store of value.
Cost and accessibility: Silver bullion bars cost less per ounce than gold, making it accessible to smaller investors. Right now, the gold to silver ratio is about 80% meaning gold costs about 80% more.
The decision between gold and silver bullion depends on your risk tolerance and investment strategy. Many investors decide to add both to their portfolios to give them stability and growth potential.
Why invest in gold?
Experts often recommend keeping a percentage of your assets in gold because it helps you:
Diversify: Gold prices usually move independently of stocks. This gives you a way to balance your portfolio and reduces the risk you’ll lose everything if the market crashes.
Protect wealth: People have leveraged gold and other precious metals as a way to preserve wealth for centuries. When inflation spikes, gold prices often rise even more, making it a reliable hedge. Looking back, the World Gold Council found that gold returned about 15% per year when inflation was above 3%, and just 6% during lower inflation periods.
Hedge against uncertainty: During chaos and uncertainty like political turmoil, economic downturns, or financial crises, investors turn to gold. This is because it doesn’t rely on any company or industry or the stability of any one government.
How the gold bullion market works
The market for gold includes a global network where central banks, institutional investors, mining firms, and private investors buy and sell gold. All of these players shape the market dynamics and influence the gold price.
Market structure
The gold bullion market operates 24 hours a day with constant trading across different time zones. Transactions mainly happen via over-the-counter (OTC) or on exchanges like the London Bullion Market Association (LBMA).
Key participants
Central banks hold gold as a reserve asset to hedge against economic instability and also to reduce reliance on the U.S. dollar. Investors use it for insurance and as a way to reduce risk. Most trading happens on the “spot market” for immediate delivery at the current price.
There are also paper gold and futures contracts for speculating on prices without owning the metal, though these carry additional risks.
Pricing and valuation
The market quotes gold prices in troy ounces, and its fine gold content determines the value of bullion. The purchase price includes a premium over the spot price to cover costs like manufacturing and transport. You’ll often find that larger bars have lower premiums.
Selling prices are usually a bit lower than the spot price since sellers compete to sell their gold.
Market influences
Gold prices change based on:
Economic policies and interest rates: When interest rates are low, or inflation is high, investors tend to buy more gold.
Geopolitical instability: Gold prices usually rise during times of political unrest or conflict.
Currency fluctuations: Since people buy gold at U.S. dollar prices, changes in the dollar’s value can affect its price.
Supply dynamics: Mining companies affect gold prices depending on their production levels and operational factors.
Ways to invest in gold bullion
If you want to add gold to your investment portfolio, here’s a few options:
Direct purchase: The most straightforward investment method is buying physical gold bullion bars or coins from a trusted source. You can store and insure the gold yourself or through a third-party service.
Gold IRAs: A Gold IRA allows you to hold physical gold within a tax-advantaged retirement account. This option is great for diversifying your retirement portfolio with a solid, stable asset. With an IRA, you’ll use a custodian to manage your gold, which means they’ll buy and sell it on your behalf and handle secure storage.
ETFs and mutual funds: These offer exposure to gold prices without storing physical metal, but they are paper assets versus owning physical gold.
Futures contracts: For the more speculative investor, futures contracts allow you to bet on future gold prices.
Gold bullion tips
Here is some additional information you’ll want to know about gold bullion.
Buying details: If you decide to buy gold or other precious metals, ask about purity and weight. Compare the gold spot price and check for hidden fees. Look for marks like “999.9” and weight indicators such as “1 oz” on a gold bar.
Find a reputable dealer: Buy from an established dealer like Swiss America with a strong reputation and industry certification. Ask for Certificates of Authenticity (COA) and verify that they match the bullion’s weight, purity, and serial number.
Storage options: Plan for secure storage to protect your investment like home safes, bank vaults, and third-party storage facilities.
Selling considerations: Work with trusted dealers like Swiss America that have a buy-back program that makes it easy to sell when you are ready.
Why buy gold bullion from Swiss America
When you’re ready to incorporate gold into your investment portfolio, consider why thousands of investors turn to Swiss America to safely buy metals:
40+ years of experience: Since the early 1980s, we’ve helped investors through many economic cycles and market shifts. You’ll find us to be a reliable partner in the precious metals market.
Satisfied clients: We have a large base of happy customers who appreciate the timely delivery of high-quality metals, responsive and knowledgeable customer service, and consistent performance that meets or exceeds their expectations.
Expert guidance: We provide expert advice on secure storage, precious metals IRAs, gold-to-silver ratios, portfolio integration, and market trends. Our team can provide the information you need to make the best decisions for your needs.
Transparent pricing: We provide competitive rates with clear and straightforward pricing, so you always know exactly what you’re paying for.
Gold trade program: Our gold trade program allows you to sell your gold back to us when needed, offering liquidity for emergencies or if you need to rebalance your portfolio.
Bullion definition final thoughts
People turn to gold as a reliable and tangible way to guard against the world’s risks.
Gold bullion offers a time-tested method to diversify your portfolio and protect your wealth. As you consider investing, choose reputable dealers, decide on the different forms of gold bullion and your investment vehicle options.
To learn more, contact our team today to learn how to add this valuable asset to your investment strategy.
What is gold bullion? FAQs
What’s the difference between gold and gold bullion?
Gold refers to metal in general, while the term gold bullion means high-purity gold in physical forms like bars and coins.
What is meant by gold bullion?
Gold bullion is physical gold that’s usually 99.5% or higher in purity. It comes in coins or bars.
Why is it illegal to own gold bullion?
No, owning gold bullion is not illegal in most countries today. In the past, some governments restricted gold ownership in the past to control economic conditions, like the U.S. did in 1933 during the Great Depression.
Note: The information in this post is for informational purposes only and should not be considered tax or legal advice. Please consult with your own tax professionals before making any decisions or taking action based on this information.
