Most of the gold in circulation today is centuries old and comes from different countries throughout the world. Today, you can buy gold bars and coins in several sizes, shapes, and weights from many refineries all over the world. But are all gold bars and coins manufactured in the same way, and is gold from one country more valuable than gold from another country?
Interestingly, the purity of gold is its most important factor, not its origin or age. As a metal, gold is indestructible, does not age, nor lose its value over time. As such, there is no real difference between gold mined 3,000 years ago in ancient Egypt, and gold mined last week from a South African mine. In fact, 90% of all gold ever mined in history is still in use today! Your beautiful gold ring could have descended from a gold necklace worn by a Chinese emperor or Mayan king thousands of years ago!
Gold bars are now primarily used as an investment or a store of value. They come in different formats and sizes, each with its own distinctions and advantages. This chapter will explore gold bars in detail and demystify the choices available to you as a new investor looking to buy investment-grade gold bars.
Investment Grade Gold
The gold used in jewellery is designated in carats; 14, 18, 22, 24 carat, etc., which refers to the purity of the metal. For example, 18-carat gold is 75% pure gold, while 24-carat gold represents 99% purity. These variations are due to the fact that gold jewellery is alloyed with other metals such as silver, copper or platinum to strengthen it and also to create different colours such as white gold, pink gold, etc.
Investment grade gold is pure solid gold with the highest purity of 99.99%. This is what is also known as gold bullion and comes in the form of gold bars or gold coins. The value of gold bullion coins and bars depends on the spot price of gold, as well as an additional premium to cover the cost of production, handling, shipping, and the dealer's profit. Investment grade gold is stockpiled by banks, governments, and individual investors, and is the only form considered as an investment.
As a new investor in gold bars:
- How do you identify investment-grade gold bars?
- What shape, size, and weight of gold bars can you choose from?
- From which refinery or mint should your bars come from?
- How do you choose the best gold bars to buy, store, or sell?
- Is there a difference between owning gold bars and gold coins?
Despite the numerous and probably confusing options available, buying gold bars as a new investor is remarkably simple.
What Are Gold Bars?
A gold bullion bar is usually a rectangular and evenly shaped block of gold with 99.99% fineness. Gold bars are made in different sizes and weights to suit every investor's preference. Popular sizes such as 1 oz, 10 oz, 1 kilo, and 400 oz are .999 pure gold bars supplied by sovereign and private mints from around the world.
Most investment grade gold bar are very similar in terms of their characteristics. For gold bars, the weight, the purity, and consequently the value of the precious metal, are the primary considerations. For a gold bar to be accepted as investment grade, it must have a particular shape, purity, weight, and, especially for larger bars, a serial number. The name and logo of the sovereign mint or refinery are also engraved on each bar. These measures are used to prevent counterfeiting, and to help ensure authenticity.
Investment grade bullion bars are therefore easily identifiable, verifiable, traceable, easily authenticated and liquid. All recognised refineries and government mints adhere to strict standards and their gold bars are internationally accepted and can be bought and sold with ease.
Internationally renowned mints include:
- Perth Mint
- Royal Canadian Mint
- Credit Suisse
- MKS Pamp
- Johnson Mathey
- Argor Heraeus
Gold bullion bars that individually weigh 400 oz are known as London Good Delivery bars and are the most common form held and traded by large funds, institutional investors, central banks, and governments.
How Gold Is Measured: The Troy Ounce
Gold and other precious metals are measured in troy ounces which is equivalent to 31.1grams. The troy ounce is different from the regular or avoirdupois ounce, which equals 28.35 grams. The troy ounce has been the official measure of all precious metals in Britain since the 16th Century and thereafter around the world. On the other hand, the avoirdupois ounce or regular ounce is used to measure all other goods or products. Therefore, the troy ounce is heavier than the avoirdupois ounce.
Gold Bars or Ingots?
Investment grade gold bars are different from gold ingots. The word ingot is an old European and Eastern term used to describe metals, non-metals or precious metals that are cast into a specific shape. Ingots are usually not a final product but are cast in a form that is suitable for further processing into jewellery and other products, or transportation and storage. Ingots generally do not bear a stamp certifying the purity of the metal but are simply labeled with the name of the manufacturer and their weight. Gold ingots are therefore not used as investment grade gold since their shape, weight, purity, and refiner are not strictly specified.
How Gold Bars Are Made: Cast and Minted Gold Bars
Since its discovery, thousands of years ago, the processes of refining gold and minting gold bars have improved and evolved numerous times. Despite technological advances, gold refining still uses basic methods that have been perfected over the ages. The two main ways of doing this are through casting and minting.
Gold Cast Bars: This is a refining process that has been in use for almost 6,000 years. Also known as "molded" or "poured," it is a straightforward method used to refine almost any metal. Gold is heated to a high temperature until it melts into a liquid. Melting the metal allows impurities and other substances to separate from the pure metal. The molten metal is then poured into a mold, where it cools quickly and solidifies into the shape of the mold. The solid metal is then released from the mold as a cast bar, and engraved with simple details of the bar and name of the manufacturer. Gold cast bars are rough around the edges but have the lower premiums due to the fast and simple casting process used to make them. They can, therefore, be bought closer to the spot price.
Minted Gold Bars: The minting of gold bars is an elaborate, expensive and time consuming process used in producing high quality, investment grade gold. Unlike casting, minting bestows a shiny, brilliant finish with no blemish whatsoever. Bars of similar size are completely identical with the exact width, length, and height. Minted gold bars are struck in state of the art refineries, where they are individually registered, signed and sealed in the presence of independent assayers. Some minted bars are also securely packaged to prevent damage and cannot be touched with bare hands. Although minted gold bars fetch a slightly higher premium than gold cast bars, they tend to have a better resale value.
Popular Formats Of Gold Bars
Gold bars are designed in different sizes and weights to suit every investor's preference. The exact dimensions of a gold bar will depend on the refinery it comes from and whether it is minted or cast. Cast gold bars are generally thicker and larger than minted bars.
If you want to buy gold bars, you have the option of smaller sized bars such as 1 oz or 10 oz or opt for larger bars such as the 100 oz, one-kilo bar. There are advantages to buying one type of bar over the other but first, let us consider the different sizes available in the market today:
One Ounce Gold Bars: This is the most popular type of gold bar and weighs precisely one troy ounce or 31.107 grams. The one-ounce gold bars are thin and rectangular with tapered edges and average the size of a credit card. One ounce gold bars can vary in size and shape depending on the mint, but they all contain exactly one troy ounce of gold with a fineness of between 99.95% and 99.99%. A Perth Mint one ounce Kangaroo bar, for example, measures 41.60mm by 24.60 mm by 1.71mm.
10 Ounce Gold Bars: This is a popular format which contains exactly ten troy ounces of gold or 311.07 grams with a purity of 99.99% or 24 carats. A ten-ounce gold bar measures approximately 60mm by 35 mm and 8mm deep.
1 Kilo Gold Bars: These bars contain exactly one kilogram of gold or 32.1507 ounces with a purity of 99.99%. One kilo bars are increasingly popular with investors and conveniently measure approximately 80mm X 40mm X 18mm or about the size of an iPhone.
400 Ounce Gold Bars: Also known as London Good Delivery Bars, they are widely accepted by institutions and on many international exchanges, and are the favoured format of large investors, bullion banks and central banks. These bullion bars are manufactured with a weight of between 350 and 430 ounces to save on production costs. They have a minimum purity of 99.95% and weigh about 12.4 kilos. 400-ounce gold bars are about the size of a large brick and are made mainly through the casting method. Their large size ensures they fetch the lowest premium than all other gold formats.
Smaller Gold Bars: Many refiners also mint or cast smaller one gram, five gram and ten gram trinkets which are popular in the Middle East, India, and China. It is important to remember that the smaller the bar, the higher the premium since it costs about the same to cast or mint each gold bar. Smaller bars, therefore, have more considerable machining costs per unit as a percentage of their worth.
Gold Bars v. Gold Coins: Which Should You Buy?
Gold bars are minted by both sovereign and private mints, while gold coins, which are considered a legal tender, are struck by sovereign mints. Whether to buy gold bars or coins is entirely up to you; your particular needs and preferences should determine your choices.
Generally, gold bars fetch a lower premium than gold coins, because the cost of making a bar is generally lower than that of a gold coin (and considerably lower for large bars). Like some gold coins, gold bars can be attractively packaged but they also have a unique serial number to identify them. On the other hand, gold bullion coins come with intricate, which make them beautiful as collectibles but more importantly their legal tender status from leading government mints makes them a form of store of value money and a form of financial insurance. While each has its own characteristics, there are three main consideration when choosing between coins and bars:
1. Premiums: As noted above, gold coins and bars are bought at a slightly higher price than the spot or quoted price of gold. The higher amount covers the cost of handling, shipping, production and a reasonable profit for the dealer. Gold bars generally attract a smaller premium than coins, since it takes considerably more time and effort to design, shape, engrave and decorate a gold coin than a gold bar. The larger the bar, the lower the premium charged by the dealer. Buying larger gold bars, therefore, is more advantageous when it comes to saving on premiums.
2. Divisibility: If you buy a larger bar, e.g., a gold kilo bar or a 100-ounce bar, you cannot divide it if you need to sell a few ounces, but will be forced have to sell the entire bar in one transaction. Smaller bars such as the popular 1 oz bar or gold coins are more liquid and can be sold one or a few at a time as the need arises or as opportunity presents itself. However, for larger investors who are thinking more in terms of cost and in investment terms, large bars such as the 1 kilo or 400 oz are the cheapest option.
3. Storage: Once you have selected and purchased your gold coins and or gold bars, where exactly should you store them? As a valuable safe haven asset and wealth insurance, your gold bars should be stored securely to reduce counter party risk and to prevent theft and fraud. Only the safest vaults, in safer jurisdictions should be considered. At the same time, you need to have quick and easy access to your bullion bars and portability and the ability to take delivery in case of an emergency.
There are several options for storing gold bars. As with gold coins, small quantities can be secured in a safe in your home or other location. However, the safest and most recommended storage is in a secured and insured vault operated by professional custodians in the safest jurisdictions in the world.
GoldCore Secure Storage offers you high-security vaults located in Switzerland, Singapore, UK, US, Hong Kong and Ireland that are operated by professional third party specialist gold and silver storage providers such as Loomis and Brinks.