What is Bullion?
Bullion is a physical precious metal in the form of a bar, coin, or round that is almost entirely valued by its precious metal melt value alone.
Knowing the definition of the word "bullion" is not enough to understand the ins and outs of this financial asset. For a long time, precious metals like gold and silver were the base of the monetary system. Currency was valued in relation to gold and silver prices.
However, during the 20th century, with the ending of the gold and silver standard, the world saw the rise of a new monetary system: fiat currencies.
Fiat currency, or fiat money, is a form of currency issued by a central bank that is not based on any commodity.
The problem is fiat currencies are always subject to inflation and devaluation. That is where bullion, like gold and silver, usually comes in: as a portfolio diversifier to hedge against economic downturns.
Nowadays, most experts will suggest allocating 10% to 15% of your investment portfolio to physical bullion. But that number can go even higher, depending on market trends and your investor profile.
This page is a comprehensive guide to answer the question "what is bullion?" We tackle the basic questions people have about bullion value and the reasons why people invest in gold and silver.
Why invest in gold or silver?
There are many reasons why many investors seek to invest in gold and silver, along with other precious metals for that matter.
First of all, bullion investments refer to buying, holding, and/or selling physical bullion, though it is also possible to invest in derivatives such as futures contracts, ETFs, or even mining companies stocks.
As noble metals, gold and silver do not corrode or tarnish. They are a store of value that will last for generations. Archaeologists still find basically intact gold and silver coins from thousands of years ago.
Moreover, precious metals are rare metals on the crust of the earth. According to the U.S. Geological Survey, close to 244,000 metric tons of gold has been discovered to date. Of that total, it is estimated that only 57,000 metric tons remain in underground reserves, while 187,000 has been mined and refined. That sounds like a lot, but it is only enough to fill a cube 23 meters wide on every side.
And what's more: precious metals are not only scarce but highly coveted products in different sectors of the industry, including electronics, solar energy, jewelry manufacturing, and even for medicine and dentistry.
Finally, since the global financial crisis of 2008, precious metals have become a safe haven against inflation and fiat currency devaluation. The idea of having a diversified portfolio became a sensible way to hedge periods with low-interest rates, currency risks, and even a complete stock market collapse.
Central banks do not directly influence gold prices. On the contrary, it follows the basic laws of supply and demand. It has no default risk and very few counterparty risks. Therefore, the most important bullion value is to serve as a diversifier in investment portfolios.
The Bullion Market
Precious metals prices are centered around an average price for each one of them. This average bullion price is called a spot price. You can keep track of the gold spot price, silver spot price, and even the platinum and palladium ones.
The spot price of each physical precious metal is determined by trades occurring live on business days in markets such as the LBMA (London Bullion Market Association ) or COMEX (Commodity Exchange Inc.).
Bullion prices fluctuate during the day, sometimes by the minute.
What is Gold Bullion?
Gold bullion refers to products made almost entirely of gold. They are produced specifically for investment purposes. You can find investment-grade gold bullion at .9167 fineness level (22 karats) or .999 (24 karats).
Some examples of gold bullion include gold bullion coins, gold bullion bars, and even gold medals or rounds.
Gold Jewelry is not typically considered bullion. Pure gold is too soft, so jewelry manufacturers will often alloy it with other base metals (such as copper, nickel, or zinc).
Some of the most popular gold coins in the world include the American Gold Eagles and Canadian Maple Leaf Coins.
Some of the most prominent private mints that produce gold bars are Valcambi, PAMP Suisse and Argor-Heraeus Mint.
The gold price is usually more stable and many experts suggest that it is a long-term investment.
What is Silver Bullion?
Silver bullion is normally referred to as .999 pure silver products.
Silver bullion includes silver coins, silver bars, and silver rounds.
Arguably, the world's most famous silver bullion coin is the One-Troy-Ounce American Silver Eagle from the US Mint.
Silver prices tend to be more volatile than gold's because it has more industrial uses, hence, more demand.
What are Bullion Coins?
Bullion Coins are physical precious metal items struck in the shape of a coin and issued as legal tender by a sovereign government mint.
Gold coins and silver coins almost always have an enforceable face value (an exception being Krugerrand coins struck by the South African Mint). However, their real value comes almost entirely based on the precious metal bullion melt value with a slight seigniorage premium (intrinsic value).
Some of the most recognizable bullion coins in the precious metals industry include the American Eagle program and the Maple Leaf series.
Some bullion coins, especially some key dates, can be very valuable to collectors of rare coins. Thus, in certain occasions, a gold coin, for instance, can share a market with the numismatic community.
Silver Bullion Coins
Here is a list of the most popular silver coins among precious metals investors:
- American Silver Eagle;
- Canadian Silver Maple Leaf;
- Austrian Silver Philharmonics;
- South African Silver Krugerrand;
- Australian Silver Kangaroo;
- British Silver Britannia;
- Chinese Silver Panda;
- Mexican Silver Libertad.
Gold Bullion Coins
Gold Bullion coins that usually attract investors and coin collectors worldwide:
- American Gold Eagle;
- American Gold Buffalo;
- Canadian Gold Maple Leaf;
- Austrian Gold Philharmonics;
- South African Gold Krugerrand;
- Australian Gold Kangaroo;
- Gold Britannia;
- Chinese Gold Panda;
- Mexican Gold Libertad.
What are Bullion Rounds?
Bullion Rounds are physical precious metal items struck by private mints in a flat round shape, like a coin.
They do not enjoy legal tender status nor have a face value by law. Their value is almost entirely based on the precious metal melt value alone (with some rare collectible exceptions).
Rounds usually have lower premiums over the spot prices when compared to a silver or gold coin, for instance.
What are Bullion Bars?
Bullion Bars are physical precious metals manufactured in a bar formation. They can be poured by cooling molten gold or silver in a mold to give its shape or undergo a more precise process through minting, with the use of pressing machines that can add detailed designs. Their value is almost entirely based on the precious metal melt value alone (with some rare collectible exceptions).
Struck mostly by private mints, there are a few sovereign government mints that also strike gold bars and silver bars (e.g. Royal Canadian Mint bullion bars).
Some of the most prominent private and national mints that produce silver and gold bullion bars include:
- PAMP Suisse
- Valcambi SA
- Germania Mint
- Scottsdale Mint
- Sunshine Minting Inc.
- Royal Canadian Mint
- Royal British Mint
- Perth Mint
Silver Bullion Bars
You can find silver bars in various weights to accommodate any investment needs. You will find any of the options below on our website to purchase:
- Silver Gram Bars;
- 1 oz Silver Bars;
- 5 oz Silver Bars;
- 10 oz Silver Bars;
- Kilo Silver Bars;
- 100 oz Silver Bars;
- 1,000 oz Silver Bars.
Gold Bullion Bars
There are usually fewer size options when it comes to gold bars. The reason is that gold prices tend to be less volatile than silver's. In addition, silver is far more affordable than gold, so it allows for a bigger variety of options. These are the gold bar weights you will be able to find on our website:
Purchasing and Investing in Bullion
Buying physical gold or silver bars is not a complicated process. It is possible to shop at brick-and-mortar precious metal dealers. However, remember that an online bullion dealer can usually offer lower premiums over the spot prices as they tend to have lower business costs. Hence, it is possible to acquire more gold and silver for your dollar invested.
Experience shows that gold and silver coins tend to be a more liquid option regarding bullion reserves. Some of the most popular bullion products remain the bullion coins that are actively made by the United States Mint (aka US Min).
The US Mint produces the following government-guaranteed legal tender face value bullion coins sold not merely in the USA but all over the world year after year:
- American Eagle Silver Bullion Coins
- American Eagle Gold Bullion Coins
- American Eagle Platinum Bullion Coins
- American Eagle Palladium Bullion Coins
- American Buffalo Bullion Coins
On the other hand, as we have mentioned before, silver and gold bullion bars will likely fetch lower premiums from a bullion dealer. So you can acquire the same amount of pure gold and silver at usually lower prices.
Of course, when you feel it is time to sell bullion back to dealers or other precious metals investors directly, the premium prices you will get on the buyback process are also lower.
Frequently Asked Questions
What's the difference between gold bullion and gold?
The word gold, on its own, refers to a chemical element with the atomic number of 79 and is symbolized by the letters Au in the periodic table. It is a noble metal because it is resistant to oxidation and corrosion. In addition, it is a precious metal for its scarcity on the crust of the Earth and its different uses in jewelry, electronics, and industry, and as a store of value in investment-grade purity levels. When gold is used to produce products for investment purposes (e.g. gold coins and gold bars), it is referred to as gold bullion.
What is the cheapest way to buy gold?
Experience shows that purchasing gold from an online bullion dealer is the safest and potentially the cheapest way to buy gold. In general, online bullion dealers have lower business costs, which allows them to offer better premiums over the spot price when compared to local shops.
Is gold bullion a good investment?
Gold is less volatile than stocks or even other precious metals. Hence, many experts see gold bullion as a relatively safe investment. They believe it to be a sensible way to diversify a portfolio and hedge against inflation, especially during economic downturns.
What is the difference between bullion and coins?
The term coins refer to round, minted metals issued by a Central Bank or Government Mint that enjoys legal tender status and has a face value. Pennies, nickels, dimes, and quarters are coins. Bullion is a kind of precious metal product (gold, silver, platinum, or palladium, for instance) specifically produced for investment purposes. Bullion can have the shape of a coin, such as the American Gold Eagle coins. However, their real value comes from their intrinsic bullion content rather than from their face value.
What is the difference between bullion coins and proof coins?
Bullion coins are usually just designed for investment purposes. Proof coins are produced as collectible items, in addition to being a possible investment option. Bullion coins might enjoy a semi-numismatic value, especially some key dates. But that is not their general purpose. Proof coins undergo a more precise minting process and typically receive special treatment.
What is the difference between bullion coins and numismatic coins?
Numismatic coins are historical issues of old circulating coins, preferably in good condition and from key, rare dates. Some examples include the Liberty Head Nickel, the Flowing Hair Dollar, the Draped Bust Quarter, and the Seated Liberty Half Dollar, among others. Bullion coins, on the other hand, boast their value specifically from their precious metal content.
Buying Bullion Online at SD Bullion
SD Bullion has been in business since 2012 and has satisfied hundreds of thousands of customers. We offer the lowest premiums over the spot prices guaranteed! If you have any questions, contact our customer support service at 1(800)294-8732 or at firstname.lastname@example.org. We also have a web-chat option on the bottom right of your screen.