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Gold is a dense precious metal known for its lustrous yellow shine. You may remember from chemistry class that gold carries the symbol of Au on the periodic table of elements.
Gold is a fascinating subject, with a rich history and massive future potential. Yet, it’s often misunderstood. This article will shed some light on gold bullion, its advantages and disadvantages, and what individuals should know before investing in it.
So, what is gold bullion?
What Is Gold Bullion?
- Gold Bullion is Investment-Grade Physical Gold
- A Brief History of Gold Bullion
- The Gold Standard
- Gold Is an Ancient Asset with Intrinsic Value
Key Facts About Gold Bullion
- Types of Gold Bullion
- Gold Bars - Low Cost, High Purity, Wide Availability
- Gold Coins - Moderate Cost, Global Recognition, Legal Tender
- Gold Rounds - Low Cost, High Purity, Not Legal Tender
How Much Is an Ounce of Gold Worth?
Why Invest in Gold Bullion?
- Gold Preserves Wealth
- Gold Is a Powerful Hedge
- Gold Helps Improve Diversification
- Gold Is a Physical Asset
How to Buy Gold
How to Sell Gold
Gold Bullion is Investment-Grade Physical Gold
Gold bullion refers to physical gold that is valued based on weight. It takes the shape of gold bars, coins, and rounds.
To be considered bullion by international standards, gold bars must contain at least 99.5% pure gold. Gold coins must contain at least 90% pure gold.
Bullion is pronounced as “bool-yuhn”, or sometimes “bool-yen”. It should not be confused with bouillon (pronounced “bool-yon”), which is a culinary ingredient used to make soup. We do not recommend using gold bullion for your next chicken noodle soup. Likewise, beef bouillon cubes are not a good long-term investment!
While it makes a lousy soup, gold bullion is an excellent long-term store of value. It can help preserve wealth, protect against inflation, and improve the diversification of an investment portfolio.
A Brief History of Gold Bullion
Historically, gold has been used as both a store of value and a common currency. Most societies throughout the millennia have valued gold highly. Many common coins were minted out of pure gold or gold alloys, wealth was often stored in the form of gold. Interestingly, the value of gold has kept up with inflation over much of written history, helping to preserve wealth for thousands of years.
The Gold Standard
In more modern history, we can look to government policies such as the Gold Standard. Up until 1933, every dollar in circulation in the United States was technically backed by physical gold bullion held by the government.
Under this system, every US currency note could be exchanged for physical gold. The federal government was unable to print more currency without first obtaining more physical gold bullion.
The gold standard was abandoned in 1933, with the last remnants of the system remaining in place until 1973. Today, the US government still holds huge quantities of physical gold bullion. However, the US dollar is not backed by gold or any other hard assets.
Gold Is an Ancient Asset with Intrinsic Value
Bullion is highly valued for its intrinsic value, otherwise known as the melt value. This means gold bullion is worth approximately the current value of the gold it contains. It generally carries little to no collector value, and is instead priced based on the current spot price of gold.
Collector coins are not generally considered bullion, even if they contain high concentrations of gold. Similarly, a piece of jewelry containing 24 karat gold would not be considered bullion, and would likely be worth more than its gold melt value.
Key Facts About Gold Bullion
- Gold bullion comes in the shape of bars, coins, and rounds
- It is valued based on the melt value of the gold it contains
- Gold bullion purity is measured in fineness (999.99, instead of 24 karat)
- Gold is typically measured in troy ounces (31.1 grams), grams, or kilograms
- The central banks of most major countries hold large reserves of gold bullion
- Many institutional and individual investors also hold physical gold bullion
- Physical gold bullion can be traded through reputable bullion dealers
Types of Gold Bullion
Gold bullion is available in a variety of shapes, sizes, and weights. The most common forms are:
Gold Bars - Low Cost, High Purity, Wide Availability
Individual investors can select gold bars made by both government mints and private producers. Gold bars typically contain 99.5%+ pure gold. The weight of a gold bullion bar can be as small as 1 gram and as much as 1 kilogram, or more. Central banks hold large gold bars, often weighing hundreds of ounces each.
Gold Coins - Moderate Cost, Global Recognition, Legal Tender
Many governments around the world offer official gold bullion coins. Examples include the American Gold Eagle (1/10oz, 1/4oz, 1/2oz and 1oz), and the Canadian Maple Leaf (1/20oz, 1/10oz, 1/4oz, 1/2oz and 1oz). These gold coins tend to command a small premium over spot price. Interestingly, many gold coins are technically legal tender, but their face value is usually worth far less than the actual gold value of the coin.
Gold Rounds - Low Cost, High Purity, Not Legal Tender
Similar to gold bars, gold rounds are produced by a variety of mostly private mints. While they look similar to gold coins, they do not carry a face value, and are not legal currency. Standard sizes are generally 1/10oz, 1/4oz, 1/2oz and 1oz.
How Much Is an Ounce of Gold Worth?
One troy ounce of gold (31.1g) is worth approximately the current gold spot price.
The gold spot price changes constantly. It is traded nearly 24 hours a day on the global spot market. Gold spot price is affected by demand from industry, jewelers, and investors alike. World events, expectations of inflation, and other factors can all contribute to the current gold price.
Gold Bullion Costs Slightly More Than Spot Price
When buying gold, you will usually need to pay a small premium above the current spot value. This premium covers the cost to design, produce, and distribute the bullion.
In some cases, a gold coin or bar may be worth slightly less or slightly more than spot price. This depends on the item’s collectible value, condition, and market demand.
Why Invest in Gold Bullion?
Gold is a popular investment class and store of value. It’s held by government central banks, investment funds, and individuals alike. A few benefits of investing in gold include:
Gold Preserves Wealth
Gold has been considered valuable for thousands of years. It is a powerful tool to preserve generational wealth, while protecting against long-term inflation.
Gold Is a Powerful Hedge
Gold can serve as somewhat of an insurance policy. It can help investors hedge against fluctuations in currencies, market crashes, and inflation.
Gold Helps Improve Diversification
As an asset class, gold helps improve the diversification of an investment portfolio. It tends to move independently of other assets, which can help smooth out the bumpy ride of investing.
Gold Is a Physical Asset
For those seeking a tangible asset, gold is very attractive. It’s one of the few investments that you can actually physically hold, gift to your children, or stash away for a rainy day.
There are many valid reasons to invest in gold — these are just a few of our favorites. For more information, see our full guide to investing in precious metals.
How to Buy Gold
Unless you happen to live in Abu Dhabi, where gold can literally be purchased out of a vending machine, you will likely find the most success with buying gold online. Residents of large cities can also look into local coin shops, but few coin shops can match the selection or pricing of online retailers.
Choose a Reputable Bullion Dealer
Choose a Type of Bullion
Store Securely
It’s very important to work with a well-established and reputable gold dealer. This ensures that you will receive authentic, investment-grade bullion at a fair price. SilverGoldBull is the most trusted gold dealer in the industry, with more than 130,000 positive reviews from customers.
Gold bars tend to carry the lowest premiums, while gold coins are often more durable, and feature more intricate designs. Regardless of which style you choose, SilverGoldBull offers industry-leading premiums and one of the widest selections available online.
Gold bullion is extremely valuable. Care should be taken to ensure that it is stored securely and discretely. For investors seeking peace of mind, the SilverGoldBull Bullion Storage service allows for safe, insured storage in our world-class secure facilities.
How to Sell Gold
SilverGoldBull also buys gold directly from individuals. We offer some of the highest payouts in the industry. The process is simple:
Contact Us to Receive a Quote
Mail In Your Items
Get Paid the Next Business Day
Call in to talk to our friendly and knowledgeable agents. We will issue you a customized quote based on the value of your items. Value is determined based on a combination of an item’s gold value, its condition, and any potential collector value. SilverGoldBull buys almost any form of precious metal, including bullion, coins, scrap gold, and more.
You will be emailed a prepaid shipping label, which you can use to send in your items. Shipments are fully insured, so you can rest easy knowing that your valuables are safe. When the package arrives, our representatives open the package under video recording to examine the package’s contents. Items are then verified and valued by our skilled staff.
As soon as your items have been verified, we process payment immediately via bank transfer. Payments are made within 1 business day of item verification. Pricing is always locked in during the initial phone call. Even if the spot market changes between when you receive a quote and when we verify your items, you will always be paid the agreed upon amount.
SilverGoldBull is proud to offer a fast, simple and stress-free selling process to our valued clients. Contact us today to learn why over 100,000 customers trust us with all their bullion needs!
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