What is Bullion & How to Buy It | Info for Investment Newbies

Bullion is a term used for coins, bars and rounds that are made from precious metals that hold a value that’s based on the fineness of the gold or silver that they contain. They typically carry a small premium above the spot price of the metals they are made from and are a great way to diversify your portfolio – so here’s how and why.

What is Bullion?

Bullion is a word that refers to physical precious metals such as gold, silver, and platinum that are in their pure or near-pure form which is usually in the form of coins and bars that are stamped with weight and purity markings to help investors determine how much precious metal is contained within a given piece.

Although the term is often used to refer to a gold bar or coin, it can also be applied to other types of physical precious metals in their less refined forms.

Investing in these forms can be considered as a way to diversify one’s investment portfolio and hedge against inflation or currency risk as these assets are typically held in safe deposit boxes, in the bank, or through third-party depository accounts.

These forms of precious metals can be a good choice for investors who want to take advantage of the stability that comes with owning physical gold or silver which, unlike stocks and bonds, has no counterparty risk when they are physically held in a bank or a depository account.

As such, these investments can be a great way to hedge against the volatility of fiat currencies while still maintaining a solid amount of long-term value while gold and silver continue to be the most popular types of precious metals for investing and other metals, such as platinum and palladium, are becoming increasingly coveted due to their unique qualities.

While these financial instruments may offer some level of protection against inflation or currency risk, they should be considered as a last resort and should only be used as a component of a well-diversified portfolio.

Why Buy Bullion?

People buy Bullion for a variety of reasons: they may be looking for protection against inflation or a hedge against geopolitical risk, or they might simply want to add the stability and privacy of physical gold to their investment portfolio, but whatever the reason, there are a number of different forms of bullion to choose from.

Some of the most popular forms of bullion include coins, medals, and bars (or ingots); each form has its own benefits and drawbacks.

For example, while coins are popular for investors, they can be hard to find and expensive, but in contrast, bars and ingots are often cheaper than coins, easier to find, and often come in smaller sizes that are more affordable for new buyers.

In addition to being a safe investment, investing in physical gold also gives you the opportunity to diversify internationally which is especially important if you live in a country that is not a major global power.

Historically, gold has performed well during times of economic turmoil and uncertainty which is why it is so popular among investors, even in today’s uncertain economy. With the current political climate and tensions between many countries, it is important to consider purchasing some gold as a means of protecting your wealth.

How to Calculate Bullion Value

When you buy or sell gold, it helps to know how much your precious metals are worth as knowing this can help you make informed decisions and avoid overpaying or settling for less than what you deserve.

Generally speaking, a product’s premium is determined by the spot price of the metal plus a few other factors, such as market supply, demand (learn more here) and it is a significant part of the cost of buying and selling precious metals, so it’s important to consider its impact before you purchase or sell.

As I mentioned, the spot price of gold and silver can vary greatly from day to day and year to year, and during times of high volatility, sellers are more likely to mark up their prices to prevent running out of inventory or securing profits.

For instance, during the Great Recession, dealers were willing to pay big bucks for gold bars and other precious metals to keep up with the demand.

The best way to calculate the actual gold or silver worth of your coins, rounds, bars or ingots is to use a quality calculator like the one First National Bullion offers alongside a range of online and in-store tools from other banks. Gold coin and silver coin calculators will show you the true gold or silver value of your items, and the gold or silver melt value of any bar or ingot based on the weight.

How to Buy Bullion

Investing in precious metals such as gold and silver can be an excellent way to diversify your portfolio and also help to hedge against inflation. However, investing in these currencies can be challenging and can result in large losses if you are not careful.

The most common way to buy bullion is to purchase physical bars or coins. They are most-commonly sold by the gram or in ounces, and are required to have the purity, manufacturer and weight stamped on them. Check out Bonds Online to see examples of what I mean. There are tons of measured sizes to purchase and invest in, so there’s something for everyone.

Another popular way to invest in precious metals is through ETFs which are exchange-traded funds that trade on stock markets and hold contracts backed by a precious metal as their main asset.

A third option is to buy a bullion futures contract, which is similar to a futures contract on other commodities and sets the price for the precious metal and the seller commits to delivering it to you at a specific date in the future.

This option can be a good choice if you are a first-time investor in precious metals or are a risk-averse investor, and the downside is that you will not own the metal outright and will be subject to the volatility of precious metals prices.