Gold bullion is simply investment grade, almost pure gold, in mass in the form of both coins and ingots, more commonly known as bars.
The price of gold bullion is closely correlated to the gold price, with a small premium to cover the refining and minting costs of the gold bars or gold coins. Therefore, a gold price chart would closely resemble the gold price chart of a popular gold bullion coin.
People and companies buy gold bullion to hedge against currency risks, inflation risks, geopolitical risks, or to add diversification and financial insurance to an investment portfolio.
GoldCore often hears from first-time gold buyers who say to us "I want to buy gold, but I don't want to pay the expense of buying gold coins. How do I buy just plain gold bullion?"
It is a misunderstanding of what gold bullion is. The common perception is that gold bars are the most cost effective, and perhaps the only available, form of gold bullion. The same thinking has it that gold coins are not gold bullion. There is also a common misperception that all gold coins are limited in supply, expensive, and indeed collectors' items.
Gold, silver, platinum and palladium bullion is precious metal with a known weight and fineness or purity of the metal. They can be purchased at the current gold price or the spot price of the precious metal, plus the premium or small percentage costs incurred in refining, fabricating, minting and shipping that bullion to you.
The word bullion derived from the French Minister of Finance under Louis XIII, Claude de Bullion.
In the EU, the minimum purity for gold bullion, which is considered investment grade gold with regards to taxation, is 99.5% for gold bullion bars and 90% for bullion coins.
The Major Benefit of Gold Bullion Over Other Options
As a physical asset, gold bullion is inherently valuable. It means that physical precious metals have a tangible, intrinsic and innate value. They are, therefore, the only asset class that is not another entity's or third party's liability - as is the case with a stock or bond.
Therefore, investors who directly own the physical asset will enjoy the sense of security derived from knowing that their investment portfolios are strengthened by the presence of a real and tangible asset with intrinsic value. It is regardless of whether the precious metals are held in their personal custody or stored safely in their name in an insured account at a qualified facility. It is not just a piece of paper or derivative product that serves as a proxy for the precious metal.
In contrast, "paper gold" and “digital gold” investments raise considerably different risk-reward considerations. Buying shares in a mining company, for example, provides ownership in a corporation that mines silver or gold. However, it does not give direct ownership of the precious metal’s themselves.
Management and accounting ability and competence, environmental risks, hedge book exposure, potential political turmoil, and many other crucial considerations need to be taken into account and evaluated when deciding to buy shares of a mining company.
Marc Twain once said, “A gold mine is a hole in the ground with a liar standing on top of it.” While this is clearly a humorous exaggeration on his part, it nevertheless underlines another potential risk of mining shares – that the company may fail to extract the gold ore for whatever reason or that geologists have overestimated the gold reserves in the ground.
To conclude, gold bullion is not just the large bars seen in Goldfinger and other movies. Rather, it is simply a refined to very high purity and stamped weight of precious metal in the mass form of gold bars or gold coins.