Gold Bullion Facts | Gainesville Coins Learning Center

The Value of Minted Gold Bullion

By Gainesville Coins
Published February 11, 2015

Gold bullion refers to gold coins that do not have numismatic value, and gold bars. Gold coins that have collectable value are typically graded by PCGS or NGC, the two primary precious metal coin grading firms. Gold bullion's value comes purely from the gold metal content of the coin or bar.

Investing in gold bullion has become an increasingly common feature in many investment portfolios due to the positive diversification effects adding gold represents. Adding precious metals, including gold, silver, platinum, and palladium, to an investment portfolio enhances its risk/reward profile. Generally, adding an asset class whose returns are not perfectly correlated with other asset classes in an investment portfolio will enhance the portfolio's risk/reward profile.

Gold Bullion Facts

When minted by a government, bullion gains face value as legally nominated tender. However, that face value is usually far lower than the material value of the bullion, at 1$ or 50 cents, for example, when the actual value is in the hundreds. At the same time, minted bullion has a greater numismatic value.

The material value of gold bullion depends on weight, purity and condition. Bullion purity usually starts at 99.9% and sometimes goes up to 99.999%.

There are three types of value that minted bullion coins can have. When raw, they begin with material value mentioned above. This value is not as directly linked to national banks and governments as the value of regular currency. There is the face value that comes with minted bullion because of the fact that they are minted. This value is largely symbolic and not used in purchasing or selling coins except to identify them. Finally, minted bullion, as opposed to the same metal with the same quality that is not minted, has added numismatic value. That is, it becomes more valuable to coin collectors.

For many investors and collectors, gold bullion is widely considered as a hedge against inflation and economic depression because of its intrinsic material value.

Gold bullion represents the purest form of this precious metal. It can come in the form of either bullion bars (also sometimes called ingots) or coins. Although bullion from other precious metals like silver, palladium, and platinum are available, gold bullion remains the most popular and valuable form.

Currently, the price of gold is set twice a day, a process known as London Gold Fixing. Via telephone, the five members of the London Gold Pool determine gold's price for the London market. Although the London Gold Fixing is the official price of gold only in London, it serves as a price guide by which the rest of the world buys and sells gold.

Because the price of gold remains relatively stable over time, bullion is an appealing option for investors. Unlike prices on the stock market, which are heavily dependent upon the economic health of businesses, the price of gold is largely determined by supply and demand. Because investors tend to buy gold and hold on to it for long periods of time, supply rarely exceeds demand. Furthermore, bullion can be purchased in virtually any quantity, from a half ounce to several kilograms. This makes gold bullion attainable for everyone, from the novice investor to the established trader. If the purchase and physical storage of gold is an unattractive option, investors can also benefit with gold certificates or exchange-traded funds.

Gold is forged into either bars (also called ingots) or coins. While bars are a satisfactory option for investors, coins are usually more popular for collectors. Often coins have an even higher value as collector's items than they do as mere bullion. Because gold is such a soft metal, coin collectors handle and store bullion with great care. Many choose to store gold bars in safe deposit boxes, where they take up little room. Coins may be easier to store at home, but they also lose value as collector's items if they show signs of wear or damage.

Collectors may note that dealers never advertise 100% pure gold. This is because the forging process introduces traces of other substances, making it impossible to certify complete purity. Therefore, the highest quality bullion is 99.99% pure. For gold coins, collectors and investors should look for proof-quality coins, which have no marks from wear or use.

Gold bullion offers investors and numismatists a beautiful opportunity to expand both portfolios and collections. With its versatility and stable value, gold bullion bars and coins are an excellent diversification option. Call 813.482.9300 to speak with a trader today, or see all of our Gold Bullion Coins & Bars at Gainesville Coins.

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