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Every time the price of gold reaches new heights, interest in precious metals investing goes through the roof. People rush to buy everything from government coins to scrap computer parts that contain the yellow metal. The rush for gold bullion, though, is where we see massive demand.
In fact, the rush for bullion coins occasionally is so intense that the U.S. Mint can’t meet demand. In these times, people often use “gold bullion” and “gold” interchangeably. There are actually significant differences between the two, though, and every investor should recognize them.
At Silver Gold Bull, we strive to ensure that all our clients are informed buyers. And if there’s one lesson you should walk away with, it’s that bullion items are more valuable than other gold products. Once you understand this, you can start making smarter investment decisions.
What Is Gold Bullion?
If you’ve ever done research to buy gold bars or other precious metal items, you’ve no doubt heard the word “bullion.” In fact, if you perform an advanced Google search for the word on our website, the results will feature over 17,000 pages of content.
The widespread use of the term gold bullion may lead some to believe that it merely describes items featuring the yellow metal. This isn’t the case. Gold bullion is an item whose precious metal content is at least 99.5% pure. This makes it perfect for investment purposes.
Other Types of Gold Items
While bullion items could contain higher percentages of gold, it’s typically beneficial to stick around the .995 purity level. That’s because the metal is very malleable. Without other alloy metals, high-purity gold can become bent or easily damaged.
When you start your journey of investing in gold, though, you’ll come across a variety of purities. The following are the most common you’ll encounter. On this list, anything below 23 karats has a lower precious metal content than gold bullion:
- 24 karats: 99.9% gold used in some medical devices and electronics. Typically, it’s mixed with alloys to create bullion items.
- 23 karats: 95.8 gold used in some plain jewelry items such as rings and chains.
- 22 karats: 91.7% pure gold commonly used in jewelry made in the Middle East and Asia.
- 14 karats: 58.3% pure gold that’s the most popular purity for jewelry in America. It’s very durable.
- 10 karats: 41.7% pure gold that’s very durable and the lowest purity that American retailers can market as “gold.”
- 8 karats: 33.3% pure gold that U.S. sellers cannot market as gold. In Denmark and some other countries, though, it can still be sold as the precious metal.
The lesson to take from these numbers is that lower purities equal more durability. Of course, a more durable item also means a lower precious metal content. This is why gold bullion is so popular for investing — it strikes a perfect balance between purity and durability.
Beyond the Karat — The Value of Bullion
The high purity of gold bullion certainly makes it more valuable than many other types of gold. Of course, this value goes far beyond purity and karats. There are a variety of additional factors that make bullion stand out among your other investment options.
Some of the following points only apply when comparing bullion to certain types of gold (e.g., scrap metals). In all cases, though, bullion remains superior.
Higher Liquidity
Gold bullion is simply easier to sell when you need to. Whether you own ingots, coins or bars, they’re always in high demand. This typically isn’t the case for other types of gold — such as jewelry or scrap.
Lack of Refining Costs
When you sell non-bullion gold, you’ll sometimes get much lower than its value. For example, someone selling their broken jewelry may get nowhere close to the spot value of the precious metal content. This is because buyers have to consider refinery costs.
The simple fact is that broken jewelry and many other gold items don’t hold the value of their original forms. This is true of everything from gold jewelry to computer processors. This means someone will eventually have to refine it, and that equates to lower resale value.
Loss of Jewelry Value
Buying jewelry is a lot like buying a car — it loses some value the moment you walk out the door. This isn’t typically an issue with gold bullion. When you buy jewelry, you’re often paying for a designer name. Unfortunately, that name has no bearing on the value of precious metals.
This means that — on top of having a lower purity than bullion — jewelry simply costs more than it should. If you’re willing to pay more for a fancy necklace or ring, you shouldn’t hesitate to do so. If your focus is to buy gold for investment purposes, though, it’s best to stick with bullion.
Gold Bullion Is More Trusted
Due to the heightened price of gold, there’s been an influx of fake items on the market. Even some pawn shops and jewelry dealers have fallen victim to these scams. This means it’s very unlikely that non-professionals will spot a fake Rolex or necklace.
When you buy bullion items, though, you know you’re getting the real deal. Private and public mints provide guarantees of purity. Of course, this is only the case if you buy from reputable dealers. Scammers can create fake bullion coins and bars, so stick with the professionals.
You’re Not Paying for Rarity
The entire point of gold bullion is that you’re getting what you pay for. The value of the item relates directly to the cost of gold. While the premium may vary, reputable dealers will not deceive you by charging significantly higher prices.
With other gold items, you may end up paying for rarity and collectibility. For instance, jewelry from certain designers will always remain in high demand. You can also get an idea of value by comparing rare gold coins to bullion.
Consider the value of the 1822 Half Eagle gold coin:
- Face value: $5
- Intrinsic value: ~$454 (i.e., just over 8 grams of gold in June 2021)
- Numismatic value: $8.4 million
While this coin is certainly more valuable than its gold content, this only means you’re going to pay more. When the time comes to sell such an item, though, there’s no guarantee that its numismatic value will have increased or even remained the same.
Imagine a situation where a banker discovers a hoard of 1,000 gold coins that were once thought permanently lost. With the return of those coins, the value of all known examples could drop significantly due to an increased supply. While rarity may offer more value than gold bullion, there’s no guarantee it will stay that way.
Gold Bullion Bars vs Coins
When you invest in gold, bullion is undoubtedly the way to go. Of course, you’ve got a few options in this arena as well. While some individuals enjoy stacking bullion bars, others may prefer to buy Australian gold coins. While these are both bullion, there are some major differences.
Benefits of Gold Bullion Bars
- Lower premium: Gold coins simply cost more to produce than bullion bars. This means you’ll pay a lower premium with bars.
- Easier to store: You can stack gold bars easier than coins. This means they’ll take up less space — a major factor in the value of your investment.
- Only investing in gold: Bullion coins are not meant to carry numismatic value. But if you opt for coins that fall below bullion categorization — such as the $5 U.S. commemorative gold coin — you may pay higher prices for certain specimens.
Benefits of Gold Coins
- Legal tender status: Gold bullion coins typically carry legal tender status. This means the price of gold could bottom out — a highly unlikely scenario — and you’d still have value on hand.
Are Bullion Coins or Bars Best?
Whether you invest in bullion coins or bars should rely on your goals. Review all the pros and cons of each option, and choose the item you feel will serve you best. Regardless of what you choose, you’ll get all the valuable benefits of choosing gold bullion over other precious metal items.
Start Investing in Gold Bullion Today!
Whenever the price of gold goes up, any item containing the yellow metal will increase in value. Of course, all these increases will not be equal. While a piece of low-purity scrap jewelry may only increase by a few dollars, a bullion coin could jump hundreds or even more.
At Silver Gold Bull, we want each of our clients to get the best and most high-quality items. You’re making an investment for your future, so it needs to be one that will pay off. The simple fact is that gold bullion is more valuable than many other types of gold.
While you can certainly find items with higher purity, you’ll sacrifice a sizable amount of durability. Review our Gold Items for Sale page to see some of your many options. No matter your investment goals, we have something that will help you meet them.
