Gold Bullion: All You Need to Know


When you invest in Gold, you’re adding a steadfast asset to your portfolio that has been around since the dawn of civilization. Bullion can be an important component to the portfolios of investors seeking high liquidity, privacy, portability, security and an easily referenced value.

Central banks are able to create virtually unlimited amounts of their currency (dollars, euros, yen, etc.), which waters down the value of each currency unit in existence — which is the classic definition of inflation.

By contrast, gold is, and will remain, immune to inflation (it is mined at steady, predictable rates, roughly commensurate with increases in economic activity), and offers investors both flexibility and financial certainty. For millennia, gold has held consistent purchasing power and is an especially valuable investment during times of inflation and economic and political uncertainty.

Buying gold bullion – in the form of gold coins or gold bars – can represent a safe and convenient way for smart investors to own gold.

If you’re looking to expand your financial freedom, here are six essentials you should know before entering the world of gold bullion investment— “gold street talk,” so you can speak the language.

6 “Street Talk” Essentials You Should Know for Investing in Gold

Types of Gold

First, it’s important to note that bullion represents just one way you can own gold. Today, investors can buy and sell gold in several different ways, including:

  • Gold Futures
  • Gold Coins
  • Gold Companies
  • Gold ETFs
  • Gold Mutual Funds
  • Gold bullion bars
  • Gold jewelry

At ICA, we specialize in Gold Bullion Bars and Coins, primarily because when you invest in these forms of gold you are investing in a physical commodity that you hold, store, claim and own outright. In other words: We believe gold bullion is a guarantee.

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Bullion: Coins & Bars 101

Gold is purchased in what is known as “bullion”—a refined and stamped weight of precious metal that is kept as a store of value, or an investment, rather than used in day-to-day commerce. While many people think of gold “bullion” as large gold ‘bricks’ stored in a safeguarded vault, you can purchase “bullion” (gold and other metals) in one of two ways: Coins (rounds) and bars.

So what’s the difference between a coin and a bar?

Differences

Gold Bullion Coins are round pieces of gold that have the status of “legal tender” and are produced by a national government mint.  Most coins also feature a face value, and their purity and weight is inscribed somewhere on the back of the coin.

Gold Bullion Bars are thin, rectangular slabs of precious metal produced by private mints. Unlike coins, they are not“legal tender,” but large bars are an efficient way to buy physical gold, particularly if you plan to store your larger gold bullion investment in a precious metals storage facility. Gold bars are significantly larger in size than coins – measuring anywhere from one to ten kilograms ( 1 kilogram = 32.15 ounces) and shaped in a familiar rectangular slab.

Tall Double Shot Espresso Vanilla Latte: Choosing the Right Bullion Type for You

Deciding whether to choose a bar or coin is a lot like choosing what to order at a coffee shop—there are lots of decisions to make.

Bullion Coins and Bullion Bars both have pros and cons.

So which one should you choose?

While it all depends on your portfolio goals and values, if you’re just starting out, we generally recommend starting off with coins, primarily due to their “legal tender” status, universal recognition, and ease as an entry point for getting your feet wet.

Nevertheless, it’s important to evaluate the pros and the cons for yourself of both types of bullion:

Bullion Coin Pros

  • Authorized for investment in an IRA account
  • Weight, content, and purity are guaranteed by the government by which it was minted
  • Worldwide recognition as a currency
  • More liquid than bars due to their lower value denominations and legal tender status
  • More variety (in size, weight, design) than bars
  • Coins are viewed as collectibles—including a detailed design and year stamped on the obverse (or front)
  • Easier to store at home
  • Easier to gift or split among your inheritors

Bullion Coin Cons

  • Sold at a premium over a comparable weight of gold in bar form
  • Not all coins have certificates—so confirm legitimacy with the mint and  supplier prior to purchase/li>
  • Varying carats (Some coins are 24-carat, but others may be as low as 21.6)

Bar Pros

  • Also authorized for investment within IRA accounts
  • You can purchase and stack bars from various mints
  • Lowest premium over spot price for both gold and silver
  • Easy to store
  • Pure value. Most bars are 24-carat, or .9999% fine and most 1 oz gold bars are 99.99% pure.
  • Bars are one of the fastest ways you can build your precious metals portfolio

Bar Cons

  • More difficult to liquidate a large gold bar in the event of market uncertainty
  • Potential higher market risk since you invest more in one commodity
  • More difficult to store at home (more obvious than coins)
  • Oftentimes command a weaker bid at liquidation than coins

Price Terms

Before you invest in precious metals, there are a few basic terms that you’ll want to familiarize yourself with prior to making your first purchase:

Spot Price – The market price of gold or other precious metal. It fluctuates from minute to minute, like any other commodity traded in the market. Spot gold prices are quoted as the price of 1 troy ounce of .999 percent fine gold deliverable now. This means you can usually purchase one ounce of gold bullion for right around this price plus the dealer’s premium.

Premium – The additional cost of any precious metal above the spot price. This accounts for outside costs of doing business, including fabrication and distribution, as well as any additional collectible, or numismatic, costs for rare items.

Spread – The difference between the bid price (what the dealer will pay for it) and the ask (purchase) price. It incorporates the cost of fabrication, wholesale premiums, and brokerage fees as well. The spread can be more significant than the premium.

Worth

So how much is your gold really worth then?  Many factors influence the spot price of gold, including:

  • Current events
  • Market predictions

  • Supply and demand

  • Current currency values

  • Buying power

You can keep up to date with the latest worth and “going rates” for gold here

Of all the precious metals and forms of currency the world over, Gold is generally viewed as the most “lasting” investment. Regardless of market highs and lows and geopolitical headlines, gold has successfully preserved wealth for investors throughout thousands of generations.

The same, however, cannot be said about paper-denominated currencies…

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If you’re interested in learning the specific gold bullion investments we encourage investors to make, you can read more

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The Switch: Dealers & Brokers

To move forward with your investment, most people traditionally turn to a “dealer” or “broker” to help. Generally, a broker is an “agent”—the person who finds the person or business who wants to sell or trade with you on your behalf and executes the trade or purchase for a commission.

A dealer, on the other hand, is generally known as the person who will trade, buy and sell securities on their own account—the other side of the deal. A broker would call on a gold dealer—someone who stands ready to make a bid and offer price on gold for a client.When it comes to the broker vs. dealer argument, we prefer to choose option “C.”  At ICA, we pair our clients with a precious metal advisor. Advisors put the interests of their clients ahead of their own. You want to utilize the services of the most ethical and self-regulated company in the industry.

Recommendations

To move forward with your investment, most people traditionally turn to a “dealer” or “broker” to help.

For peace of mind and a guarantee that you are getting guidance with integrity (that is protected by law), we highly recommend working with an experienced Advisor for all precious metals transactions.

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