The term bullion refers to gold, silver and other precious metals (such as platinum and palladium) in the form of bars, ingots (blocks) and coins.
The origin of the word bullion is thought to have come from the French language.
The most common image of bullion you’ll see are bars (think about a movie with a bank heist scene and you’ll think of vaults full of bars of gold). The difference between a bar and an ingot is its size.
Ingot cast moulds are larger in size, and bars are usually smaller and made by minting or stamping.
Bullion bars and ingots can be purchased in a range of sizes and weights from 1g, 100, 500g, 1kg and 12.5kg.
Various mints around the world produce bullion in the form of coins. The value of the coin is still measured by the precious metal content and worth against the market rate (for example, what the gold trading rate is at the time you want to sell). Coins are considered a more flexible and convenient way of buying gold in relation to being able to make a quick sale in times of need.
Gold bullion is valued based on its rarity and purity. All gold bullion must be made from new gold (mints and dealers will not use old gold) and to be suitable as an investment asset it must be at its purist level—being 24 carat (or 999.9% pure).
Unlike money that can be printed and therefore lose value; gold is a natural metal and is limited in the world, meaning it cannot lose value in the same way money can. It is said that although gold is not a high-yielding asset (meaning you could make larger sums of money by investing in other assets that are higher risk), gold is an asset whose value will endure.
You may choose to invest in gold bullion for many reasons. Bullion is less risky than currency, and you may find it a good way to hedge against inflation and geopolitical risks (remember the GFC?). Bullion can also add diversification to your investment portfolio.
There are many registered bullion dealers and traders throughout Australia and a simple google search will deliver a handful in seconds. Make sure you do your research—you should look for competitive premiums and commission rates and always compare the rate to that of the Australian market.
Gold is also traded on the bullion market and is open 24 hours a day.
One such path is the Exchange Traded Funds (EFTs) who offer a convenient and cheap way to trade. However you should know that by purchasing your bullion through EFT, the actual buy is not held by the provider but a large global bank (such as HSBC or Morgan Stanley) and if another GFC were to occur, you could see your investment gone. According to Money Morning, there are reports that there are now one hundred times more ‘paper gold’ in the world than physically exists above ground. To safeguard yourself, it is always better to hold the physical asset of gold bullion. The $50,000 worth of gold bullion up for grabs in the latest Mater Prize home lottery is actual, physical gold bars that will be handed to the winner.
You could invest in a home safe, but a better alternative that is safer, is to hire a safe deposit box or store your bullion with a dealer or private company for a fee. You can use a safe deposit box at a bank—just be aware that your asset is now in the hands of a bank and should the bank go bankrupt, your asset may be lost.
The aim is to buy when prices are low and sell when prices are high. However much like every other market, timing is everything. You can never predict a crash in the market—so gold bullion is ideally a long-term investment asset to hold onto and sell when the time is right.
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