Gold bars come in a variety of weights and sizes, and serve functions as a personal asset, an official reserve currency, and a commercial financial tool. Typically, when investors think of gold bars, images of the truncated pyramid shaped bars (popularized by Hollywood) come to mind. However, because of the long and versatile list of roles held by gold, bars made from the yellow metal come in a large variety of shapes and sizes, from rectangular 1-gram gold bars to 400 oz “good delivery” bars in the shape of an elongated truncated pyramid.
Gold Bars as a Personal Asset
Due to golds inherent role as a store of value, people are often attracted to buying gold bars in various weights and shapes. When it comes to personal finance and saving, the story is much the same. Gold is often used as a hedge against inflation, or as a cash equivalent to help balance out a portfolio. Because no two investors needs are the same, gold bars come in a wide range of sizes, weights, and purities, which allows investors to make precise adjustments to the size and composition of their financial portfolios. Most commonly, gold bars are refined to a purity .999, or 99.9%, fine or higher. However this was not always the case; hence, many gold bars that were produced prior to 1980 (including many held in official reserves by the US Mint) only carry a purity of 92%.
Gold Bars as Reserve Currency
It’s no secret that gold has been used as a medium for exchange for thousands of years. However, the role of gold as a currency has been evolving rapidly over the last century. Whereas gold used to be used as a common circulation currency (in the form of gold coins), it is now used as a reserve currency (by most governments) in the settlement of international trade and a tool to stabilize currency values. Typically, gold used as foreign reserves comes in the form of the iconic 400 oz “Good Delivery” bar, which is in the shape of a truncated pyramid. “Good Delivery” bar standards are set by the London Bullion Market Association, and are produced by several private and government mints around the world. In some places in Asia, gold kilobars (or 1-kilogram bars) are the preferred form used for reserves.
Gold Bars as a Commercial Finance Tool
Gold bars are used by individuals and governments as a means of storing value, stabilizing a portfolio or balance sheet, or as a common or reserve currency. However gold bars have a useful function as a commercial financial tool as well. Much like governments and individuals, large corporations may seek to add gold bars to their asset holdings in order to lower their bond yields, allowing them to borrow at lower rates. ETFs, also known as electronically traded funds, accumulate massive amounts of gold bars, and then sell shares of those gold holdings in the form of paper gold. However, before an ETF can issue shares of a gold stock, they must first accumulate vast quantities of gold in the form of gold bars. Typically, much like with world governments, the preferred choice for accumulating such large quantities of gold are LBMA “Good Delivery” bars.