Gold Bullion Meaning
Let us begin with some basic definitions of the two terms in question:
Gold - (n) a yellow inert precious metal created in star supernovae, chemical element #79. Valued since ancient times for adornment, as a dependable store of value, with increasing high technological and aerospace applications.
Bullion - (n) an item highly valued by the precious metal it contains. Comes in various forms like coins, bars, ingots, wafers, rounds, dust, grain, or shot.
What is Gold Bullion used for?
Typically for long term owners, gold bullion is held in a coin or bar form as a dependable store of value and universal purchasing power.
Long term gold bullion owners include national governments, central banks, commercial banks, hedge funds, pension funds, exchange traded funds, individual investors, and common people the world over.
Of the over 6 billion ounces of gold ever mined almost all is still with us today. Just under half is held by investors or government central banks in physical gold bullion.
The following is an image of 400 oz gold bullion bars recently taken at the central bank of Germany.
What is Gold Bullion worth?
Gold bullion is almost totally valued by its overall precious metal content and overall weight.
Thus a 1 kilo gold bullion bar (which has just over 32.15 troy ounces of .999 fine gold) will cost over 32Xs the price of a typical modern day government or private mint issued 1 oz gold bar or a government issued 1 oz gold bullion coin.
Today’s gold bullion values are mostly measured in financial markets by their reciprocal value in various fiat currencies.
For example, in the United States, we mostly measure the price of gold bullion based on the fluctuating 1 oz gold spot price in US dollar terms.
On the other side of the world for example, the world's second largest gold bullion buying nation overall, is India.
Indians mostly measure the value of gold bullion based on their fluctuating 1 gram gold spot price in their local Indian ruppe fiat currency.
For those wondering, 1 troy ounce of gold bullion is equal to 31.1035 grams of gold bullion.
Here is a chart of hold gold has performed in Indian ruppes throughout almost this entire post 1971 full fiat currency era.
What are key differences between Gold and Gold Bullion?
Of the newly mined and old recycled gold supplies coming to market each and every year (just over 100 million ounces), about half of this physical gold is being used for fabricating gold bullion bars, coins, and other physical investment grade gold bullion products.
China and India are the world's largest and second largest physical gold buyers respectively for both gold jewelry and gold bullion combined.
Just under half the gold which comes to the world’s newly mined and recycled scrap gold supplies are being used to make gold jewelry.
Here is a breakdown of where and into which industries physical gold flows to these days.
21st Century Indian, Chinese, and other eastern civilizations demand that their gold jewelry have exceptional attributes.
From beautiful intricate designs, to high purity levels made with 24k gold (which is .999 fine) or 22k gold (which is .916 fine). The price many eastern nations pay for their high purity gold jewerly is not much more than 10% over the gold spot price. This includes all design, fabrication, inventory, marketing, and presentation costs associated.
This is certainly not the case in the west in terms of gold jewerly buying. Western gold jewerly is often less pure (18k or 75%, 14k or 58.3%) and exorbitantly more expensive than in the east.
It is only in the west where the masses often accept paying hundreds of percentage points over the gold melt value. In other words often 58.3% pure 14k gold jewelry often is sold many multiples (e.g. 300% or mored) above its melt value.
What is physical Gold Bullion?
Common sense would presume that gold bullion is by definition physical. Of course this is indeed the case. When we refer to gold bullion we are talking about the real thing.
Yet in our highly financialized world there are many more synthetic financial derivative price bets in existence, than there are real physical ounces of gold bullion above ground.
Physical gold bullion is highly liquid meaning it is easy to sell quickly in virtually in country in the world. Yet physical gold bullion thinly traded meaning there is not a lot of available physical gold bullion to purchase at current prices as most investors will not sell gold bullion allocations unless much higher prices come about.
When you see or hear the explicit term ‘physical gold bullion’ the writer or speaker is likely making a conscious decision to differentiate actual physical gold bullion vs other financial derivatives.
Derivatives are often used to trade gold spot price action. These derivative proxies for gold include futures contracts on fractionally reserved commodities exchanges, or in ETFs like GLD or IAU, or within other paper gold machinations which far out-trade the less than likely 3 billion ounces of gold bullion above ground in existence today (and even the more than likely 3 billion ounces of gold mixed within above ground gold jewelry today).
We suggest limiting your counterparty risks by buying and owning physical gold bullion outright.
Is Gold Bullion a Good Investment?
Gold is not like many other investments, as first and foremost gold is universal money that never fails. Gold requires no counterparty to performance unlike most other asset classes.
Buying and owning gold bullion is akin to saving fiat currency in a bank yet these days many bank balance sheets are non-GAAP and possibly insolvent if truly marked to market. As well savers make very little interest with US dollars in most banks these days thus owning gold bullion is attractive to many.
In a negative real interest rate environment like we have currently today, gold bullion values tend to appreciate. In other words gold bullion begins to buy more stuff.
Often today, middle class individual investors pay secure logistics companies and gold depositories to oversee and insure a portion of their directly owned gold bullion (paying typically 50 to 25 basis point annually).
Large gold bullion buyers often now choose to keep their gold bullion away from the banking and financial system entirely, as a true hedge against the inevitable restructuring ahead and to avert potential frauds.
As well, average US citizens are also taking direct discreet delivery of their gold bullion purchases to door for safe long term keeping and savings.
So long as the United States issues Federal Reserve Notes (i.e. fiat currency) as its official monetary issuance, gold bullion values will likely be the benefiting reciprocal of lessening US dollar values ahead and over the long term.
Thank you for visiting SD Bullion.