Bullion: Definition, Uses, and Complete Guide
What Is Bullion?
Bullion is an umbrella term that refers to valuable or precious metals, most commonly gold, silver, platinum, and palladium.
According to the Oxford Dictionary, the meaning of the word bullion is "gold or silver in bulk before coining, or valued by weight".
In practice, definitions vary a bit. Some people also consider base metals like copper, nickel, and zinc “bullion.” But the bulk of bullion investors buy, sell, and trade silver, gold, platinum, and palladium as investment products.
The key requirement for a metal product to qualify as bullion is high purity, with metal content typically well above 90% pure. For this reason, gold jewelry is generally not categorized as bullion unless it is 24 karats (i.e. 99.9% pure gold, also called .999 fine gold).
Bullion can come in the form of bars (also called ingots), rounds, or coins. Bullion rounds and bars are usually manufactured at private mints, whereas all coins are made at government mints. Examples of bullion coins include the American Silver Eagle and American Gold Eagle coins issued by the United States Mint.
Summary: Bullion is any highly pure precious metals used primarily as an investment.
The popular Silver Buffalo round is 99.9% pure silver, which is typical for bullion.
What Is Bullion Used For?
There are three primary uses for bullion: investing, trading, and banking.
Gold Used as an Investment
Precious metals investors can include popular bullion products in their investment portfolio or "Gold IRA". Because it is a tangible asset, bullion is often used to meet specific financial goals, such as:
- hedging against inflation
- mitigating currency risks
- preparing for geopolitical risks
Gold Used in Banking
Bullion also plays a key role in the banking industry, typically in the form of gold reserves held by central banks like the Federal Reserve. Although money itself is no longer backed by gold, these bullion reserves are among the most important asset classes held on central bank balance sheets.
Gold Used in Trading
Experienced investors and market participants will be most familiar with bullion as a commodity that is traded around the world. In major hubs like the London Bullion Market Assocation (LBMA), this takes the form of large gold bullion bars. These "Good Delivery" bars are the most cost-efficient way for gold to move between bullion banks. Bars are also the underlying asset for financial products like futures contracts. These are sometimes referred to as paper gold contracts.
Silver and gold have long histories as commoditized precious metals. Today, platinum and palladium are also widely coveted. These precious metals are used for many purposes, including money, art, and jewelry. They are also essential for various industrial applications such as those in the automotive and medical fields.
Therefore, the versatility and relatively scarcity of precious metals ensures strong demand and thus makes them valuable commodities.
Summary: Gold bullion's primary uses are for investing, banking, and trading. Gold is also used in industry and for jewelry, but these are generally not considered bullion.
The Difference Between Coins and Bullion
Pre-1933 gold coins from common dates sometimes trade for similar prices to generic bullion items.
Many coins are considered bullion in the conventional sense. For example, some dealers and investors often categorize American Eagles as both coins and bullion. They are simply “bullion coins”—essentially one and the same in that case. The same is true for the Canadian Maple Leaf coins from the Royal Canadian Mint, among other government-issued bullion coins.
Well-worn and common pre-1965 90% U.S. silver coins (i.e. "junk silver") are also frequently sold as bullion. To a lesser extent, so are very common pre-1933 U.S. double eagles, which sometimes trade for relatively low premiums over their spot value.
The difference between gold coins and bullion in the most practical sense here is that gold coins are not always considered bullion. Also, bullion doesn’t always necessarily refer to gold. Bullion refers to high-purity precious-metal items that are bought and sold primarily on the basis of their intrinsic value.
Gold coins are often scarce and valuable far beyond their intrinsic value. Thus these coins aren’t always traded on speculation of their gold value alone. Any numismatic coins that are collectibles, such as proof coins, are generally not considered bullion, even if they are made of rare metals.
Which Is Better to Buy: Gold Coins or Gold Bars?
The answer to this question goes back to the points raised above. Which is better depends on the whims and strategies of the buyer. Gold coins are more expensive but also contain a legal-tender value and are backed by the issuing government. Some gold coins are also highly collectible, giving them a second market and thus bolstering their market viability.
Gold bars are less expensive than gold coins but have no face value and are frequently issued by private companies. Some gold bars have a collectible element to them but are normally traded solely within bullion circles.
Follow the link below to shop for gold coins and bars at Gainesville Coins:
One troy ounce Credit Suisse gold bar.
Which Is Better, Bullion or Coins?
Collectible coins can be both very rare and valuable. Take the 1804 Draped Bust Dollar, which sells for north of $5 million yet contains only a few bucks of silver content. Not all rare coins are that valuable—most aren’t. However, their value is based on numismatic demand—that is, the demand for these coins as collectibles, not as vessels of precious metals.
Bullion, on the other hand, is generally a much more viable option from the cost standpoint. The value of bullion coins is also much more dependent upon the prevailing winds of precious metals prices.
Since bullion can be obtained through (some) coins, buyers are able to get the best of both worlds in purchasing precious metals collectibles such as pre-1965 90% silver coins, pre-1933 U.S. gold coins, American Eagles, and other pieces with high contents of gold, silver, platinum, and palladium. Broken down between bullion (as in precious-metal coins, medals, and bars) or coins (vintage collectibles), both have their advantages.
Ultimately, it’s up to the buyer to decide which avenue is better.
Summary: Choosing between gold coins or gold bars depends upon the goals of the individual buyer (collecting, investing, decoration, gifts, etc.).
Bullion as an Investment
Bullion metals are among the most popular investments in part because they are “hard assets." Unlike stocks, bonds, cryptocurrencies, and non-fungible tokens (better known as NFTs), precious metals have intrinsic value and can be physically held. Bullion, like any investment, goes up and down in value. However, it is a terrific hedge against inflation and historically has performed well over time.
The conventional wisdom of buying low and selling high is advised when investing in bullion. But the question becomes: how do you know when precious metals are at their highest or lowest prices? The answer is that there really is no way to know. Nobody has a crystal ball on bullion metals, and sometimes gold and silver prices don’t seem to play by the proverbial rules.
Therefore, it pays to keep an eye on bullion prices. Buy when you can afford it, sell when it makes sense to you to do so, and invest enough in it to realize a sizeable profit when times are good—but not so much that you lose your shirt when times are bad.
Physical gold and silver bars are one of the most common forms of bullion.
Is Gold Bullion a Good Investment?
Gold bullion can be a sensible long-term investment when it’s viewed in the greater context that it may serve as a hedge against inflation. However, gold prices go up, and gold prices go down. Be wary of anybody who says that gold “will go to” $3,000, $4,000, $5,000, or any other astronomical price.
Nobody knows this for sure, and many of these claims have been bandied about for years and years without ever even coming close to fruition. Some of these individuals make such claims to propagate hysteria for the sake of gaining internet clicks or selling gold bullion to panicked individuals who fear missing out on perceived incredible profits.
We can say with absolute certainty that gold is a time-honored commodity and has served many investors well over the decades.
Summary: Investing in gold bullion is a proven way to preserve wealth over the long term.
How should you buy bullion? Well, let’s start with the basics: purchase quality pieces from a reputable source.
Unfortunately, the precious metals industry has seen a huge spike in counterfeit bullion in recent years. This is perpetuated by scammers selling what they portray as cheap silver or gold either via online marketplaces or through community swap-meet sites, some of them requiring the buyer and seller to meet in a parking lot.
How to Find a Reputable Bullion Dealer
Buy your physical bullion from a trusted coin dealer or precious-metals broker. Hallmarks of reputable dealers are those that have the following:
- physical addresses
- many years in the industry
- customer-satisfaction policies
- affiliations with professional organizations like National Inflation Association and the National Coin & Bullion Association
The modern Gold Eagle is both bullion and a legal tender coin.
There are a variety of options available for people who want to buy bullion, including coins, medals, and bars (or ingots). Each has their advantages, and it’s up to the buyer to decide which characteristics make one better than the other for them and their investment purposes.
Whatever an investor buys, it pays to keep up with bullion pricing, which can make major moves even over the course of just one day. A retail customer generally cannot buy bullion for less than spot value and, in most cases, will pay a small premium. Buyers should know what fair market value is on the day of their purchase. One place to obtain the latest bullion prices is Gainesville Coins.
Summary: Be sure to purchase your bullion from a reputable, professional dealer to avoid getting a bad deal or buying a counterfeit product.
We know many folks have common questions about bullion, and we can help answer them. Here are some of the most frequently asked questions we receive:
How much is gold bullion worth? What is bullion value?
Bullion value refers to the melt value of a given precious metals product, irrespective of its actual retail value.
Is gold bullion real gold?
Yes, gold bullion is supposed to be real gold. However, one can only rest assured that the bullion they have is real by purchasing it from a reliable source. Bullion dealers have devices similar to metal detectors that can verify the authenticity of any gold product.
What is the difference between gold and bullion?
Gold is a chemical element. It has the symbol Au and the atomic number 79 on the periodic table. Bullion describes a physical gold product (or silver, platinum, or palladium product) that is highly pure and used as an investment.
What carat is gold bullion?
Carat, or karat in the United States (carat in the U.S. refers to the purity of gems), is a measure of purity, with 24 karats being wholly pure. The vast majority of gold coins traded primarily for their bullion value have a fineness of .9167 (22 karats) or higher.
Do banks sell gold bullion? Do banks accept gold bullion?
This depends on both the bank and the type of gold bullion. In general, in the United States, you can't buy or sell gold at a bank. You can always contact the financial institution of choice for more information about their gold bullion policies.
Why do gold bars cost more than gold?
Virtually all bullion is traded in the retail sector above bullion prices. Why? Quite simply, because mining companies, wholesale distributors, and retailers have to make a profit to cover overhead expenses and stay in business. Moreover, there are manufacturing costs and labor costs involved in minting bullion. This raises the price above that of the raw commodity itself.
What is the best gold coin to own?
This all depends on what the “best” gold coin is to the buyer. For some, the best gold coin might be a classic United States Saint-Gaudens double eagle, while others might fancy a British sovereign or South African Krugerrand.
Buyers should purchase the coins they like, whether it be for collectible or investment purposes. Each coin has its merits, and no coin is perfect.
How much is a bar of gold worth in 2022?
Gold bar prices in 2022 or in any other year can be readily found online at Gainesville Coins. Follow this link to shop for gold bars online or check out the gold bars for sale listed below.
Joshua McMorrow-Hernandez is a journalist, editor, and blogger who has won multiple awards from the Numismatic Literary Guild. He has also authored numerous books, including works profiling the history of the United States Mint and United States coinage.
Read more about buying bullion and investing in precious metals from Gainesville Coins' experts:
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