What Are Gold Bars and What Are They Used For?
What Are Gold Bars?
Gold bars are a popular way to buy gold bullion. Although they are less common than gold coins, they are usually preferred by investors for bulk purchases.
You may think that all gold bars are basically the same. In truth, there are many different brands and designs to choose from. Consumer trust and familiarity with particular refiners and mints are an important consideration. Name-brand gold bars are easier to sell (i.e. more liquid) but therefore come at a higher premium.
Follow this link to shop for gold bars. Keep reading below for more valuable information about the different kinds of gold bars.
You can also check out our gold buyer's guide for a comprehensive overview of how to purchase gold in general.
Gold Bars Are Used as a Personal Asset
Due to gold's 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.
Poured gold bars from Australia's Perth Mint
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. This 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%.
Today, many gold bars come sealed with their official assay card. This is similar to a Certificate of Authenticity.
The proof of assay shows where the bar was manufactured and helps the customer ascertain the credibility of the refinery. The assay card also includes the technical specifications of the bar, such as actual metal weight, purity, design, and dimensions.
This helps provide greater peace of mind and confidence for investors that buy gold bars.
Various brands of 10 oz gold bars
Major refiners such as the Royal Canadian Mint, PAMP Suisse, and many other reputable private gold refineries have made the accompanying assay card a standard procedure.
Gold Bars Are Used as a Reserve Currency
It’s no secret that bullion 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.
Gold was once 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.
Central banks frequently buy gold as a way to bolster their reserves. 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. These bars 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.
Large size gold bars
No matter what size is used, central banks all over the world buy gold bars on the open market in order to shore up their balance sheets with something tangible.
There is an enormous market for physical gold in certain financial hubs such as London, New York, Shanghai, and Dubai. Yet it is oftentimes the case that the primary sellers of such gold bars are also central banks. The Bank of England, for instance, famously sold off millions of ounces of its bullion gold reserves in the 1990s.
Gold Bars Are Used 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 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. This can help lower their bond yields, allowing them to borrow at lower rates.
ETFs, also known as exchange-traded funds, accumulate massive amounts of gold bars. The funds then sell "shares" of those gold holdings in the form of paper gold.
However, before an ETF can issue shares that are designed to track the bullion gold price, they must first buy gold in vast quantities. Usually this takes the form of gold bullion bars.
Typically, much like with world governments, the preferred choice for accumulating such large quantities of gold are LBMA “Good Delivery” bars.
In this way, when ETFs are buying gold in large volumes, this has the effect of driving the average gold bar price higher as demand for gold rises. The same is true of large financial firms or central banks (collectively known as "institutional investors").
An investor handling a gold bar
After weighing their various options, investors next need to determine where to buy gold bars for the best available price.
Gainesville Coins carries a virtually endless array of choices to buy bullion that are always available at competitive pricing. Our selection ranges in size from as small as 1 gram gold bars to as large as 1 kilo gold bars (32.15 troy ounces).
There are many options in between, of course, including the standard 1 oz gold bar.
We carry a wide range of investment-grade gold bars, meaning they are at least .995 fine (99.5% pure) and often exceed this level of purity.
Some refiners, such as the Istanbul Gold Refinery and the Royal Canadian Mint, even produce gold bars of .9999 fineness, sometimes referred to as "four-nines" or "extra pure" gold.
Many of these types of gold bars are IRA-eligible, meaning they're approved for inclusion in an individual retirement account (IRA). This applies whether it is a Roth IRA or Traditional IRA.
In either case, you can fund a self-directed precious metals IRA with any .995 gold bar produced by an accredited refinery.
Find more information about gold bars in the infographic below.