Precious Metals
What Is Bullion? Definition, Benefits and How to Buy
By taking the right steps, you can maximize many different advantages of buying precious metals. It all depends on what your goals are and which strategies you use to reach those goals. Below, you’ll find the answers to some common questions on harnessing the full potential of gold investments, beginning with “What is gold bullion?” and going from there.
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Key Takeaways
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- Bullion refers to any precious metal in bulk form valued by weight.
- Bullion can be purchased as coins, bars, or rounds.
- Investing in bullion can take the form of physical possession or placement in a precious metals IRA.
- When buying bullion, factors to consider include purity, value, pricing, and premiums.
- Bullion is generally considered a good investment during times of economic volatility, as its value is based on the finite supply of precious metals rather than fiat currencies.
What Is Bullion?
We’ll start with the basics, which for many people, means providing a bullion definition. The Oxford English Dictionary defines bullion as "gold or silver in bulk before coining, or valued by weight." (Interestingly, the word "bullion" itself also refers to soup. Both meanings come from the Old French word boillon, "boiling liquid." That's about the only connection between broth and precious metals, though.) The key ideas are that bullion is refined metal that may be processed further, into coins or jewelry and so on.
With that said, bullion is sold by weight regardless of its form (coin-shaped "rounds," bullion-grade coins, bar or ingot). Weight is the most important factor, far more important than shape. The term "bullion" is non-specific and can apply to any precious metals, gold and silver, palladium and platinum. Granted, gold and silver are by far the most common.
"Coins" are what we call precious metals minted by (and guaranteed by) sovereign mints like U.S. Mint, the UK's Royal Mint, Royal Canadian Mint and Australia's Perth Mint. While not intended as circulating currency like banknotes, bullion coins almost always have a nominal face value assigned to them. This face value, a holdover from the old days of the gold standard, serves as a government guarantee of weight and purity.
The central banks of virtually all countries stockpile gold bullion as a sort of domestic savings account. Central bank gold reserves currently account for about 1/6th of all above-ground gold in the world. Most bullion, regardless of metal, is a minimum of 99.9% pure.1
What Are the Benefits of Buying Bullion?
It should be a big tip off that countries buy bullion for their own hard times and to protect against inflation, but it isn’t just central banks that benefit from buying gold and other bullion. Gold bullion has long been considered to have the standing of most inflation-proof precious metal due to its universal recognition as a valuable commodity.
When fiat currencies are losing value, tangible assets tend to be the preferred route to go – and for tradability, there’s nothing better than gold. During any time of market volatility, buying gold bullion is a great way of diversifying your savings. The bullion form of other precious metals is also held in high regard for similar reasons, with silver bullion being the second most popular bullion after gold.
Diversify your savings
Diversification is important, but what does it really mean? It’s as simple as not putting all of your eggs in one basket. Any investments that relate to a fiat currency will be vulnerable to how well that currency performs in the long term. Because of this, bullion can even offer short-term returns as fiat currencies dip.
Preserve your wealth
When planning for retirement, you want to “live tomorrow as you do today.” That means being able to enjoy your current lifestyle in retirement – without having to worry about finances. Well, during periods when the dollar declines and inflation risks rise, this preservation of wealth doesn’t seem so easy.
But when buying bullion, you can safeguard your purchasing power and protect your worth and your lifestyle. Gold bullion coins are a particularly popular choice for many, and some specific coins, as well as silver, platinum and palladium ones, are IRA-eligible for tax advantages. This makes bullion and coins, in particular, an excellent choice for the long-term preservation and growth of wealth.
Add more growth potential to your liquid assets
If the bulk of your money is sitting in savings accounts or CDs, then it’s probably not working for you as much as it could be. Consider converting those liquid assets to bullion, and you could see bigger gains as the value of gold and other metals increases.
Keep your investments safe
Investing in precious metals in the form of bullion can add a layer of security to your savings and investments by providing a tangible, stable, and globally-recognized asset that remains resilient during economic and geopolitical instability. Gold, silver, platinum, and palladium bullion are all viewed as safe haven assets that individuals turn to when seeking a secure store of wealth.
Hedge against inflation
Gold or silver bullion can act as a hedge against inflation. When currencies devalue due to inflationary pressures, precious metals prices often retain or even increase their purchasing power. This is because, unlike fiat currencies, the supply of gold and other precious metals is limited.
Over time, gold has historically kept its value over long periods, sometimes even outpacing inflation rates.2 During times of high inflation, as the purchasing power of paper money decreases, the price of gold tends to rise, effectively preserving wealth. This inverse relationship with currency value makes bullion an ideal asset for protecting your savings against the erosive effects of inflation.
Buying silver or gold can help create a financial buffer, allowing you to maintain your purchasing power even as the dollar's value fluctuates.
How Is Bullion Valued?
Bullion is primarily valued based on its spot price, or how much it sells for in the market. This spot price fluctuates constantly during market hours due to various economic and geopolitical factors. However, the final price of bullion differs from the spot price due to additional factors. Dealer premiums are added to cover costs and profit margins. Demand also influences prices, especially during times of economic uncertainty. Minting costs, including the processes of refining and distributing bullion, contribute to the overall price.
Weight and fineness (purity) are also contributing factors to bullion’s value. The weight of precious metals is typically measured in troy ounces, while fineness is expressed as a percentage of pure precious metal content.
The form of bullion, whether coins, bars, or rounds, can affect its value, with government-minted coins often carrying higher premiums.
How to Buy Bullion
For individuals looking to diversify their wealth and retirement savings, purchasing bullion can be a good option. There are two typical routes for buying bullion, which include physical possession or placement in a precious metals IRA. Regardless of the option you choose, buying bullion can help you diversify your portfolio with tangible assets that have historically shown resilience during economic uncertainties.
By following a few key steps, you can easily incorporate precious metals into your investment planning. Here’s how to buy bullion:
1. Choose your bullion
To reap the benefits of bullion, the first step is determining your preferred form of bullion, whether it be in coin, round, or bar form. You may want to determine your precious metal of choice or a particular mix that is right for your investment strategy.
While precious metals share many of the same advantages, there are some nuanced differences between them that should be considered. Gold and silver are typically the most popular and sought-after types of bullion, but platinum and palladium bullion are also great choices, and diversification is often advised by precious metal experts.
2. Take physical possession or open a precious metals IRA
Your next step is determining whether you want to take physical possession or place your bullion in a self-directed precious metals IRA. This specialized account allows you to hold alternative assets like physical precious metals in a retirement account.
When taking physical possession of bullion, you’ll have full control over it. After making a purchase, your bullion will be sent to your preferred address, where you can then store it in a safe location, such as a home safe, a safety deposit box at a bank, or a private vault.
If you’re buying bullion for placement in a precious metals IRA, you can fund your account in two ways:
- Make a direct contribution, subject to annual IRA contribution limits.
- Roll over funds from an existing eligible retirement account, including a Traditional IRA, Roth IRA, SEP IRA, SIMPLE IRA, 401(k), 403(b), or similar qualified plan.
At Birch Gold Group, we require a minimum of $5,000 to open and start your account. This ensures you have sufficient funds to begin building a meaningful precious metals portfolio.
When opening a precious metals IRA, you'll need to work with a precious metals custodian. This is a financial institution responsible for:
- Overseeing your account
- Handling transactions
- Executing withdrawals
- Completing necessary paperwork
- Ensuring IRS compliance
- Helps with the purchase and storage of bullion
The custodian manages the administrative aspects of your IRA, allowing you to focus on making investment decisions. Once your account is set up, you won't have to worry about physically acquiring or storing the bullion yourself.
It's important to note that self-directed IRAs, including precious metals IRAs, come with similar limitations as conventional IRAs regarding how much you can contribute annually and withdrawal rules. Be sure to familiarize yourself with these regulations and retirement plan contribution limits to understand what these accounts can and cannot do.
Unfortunately, when opening in a precious metals IRA, not all bullion qualifies for inclusion. The IRS has specific purity requirements for precious metals to be eligible for investment within an IRA3:
- Gold bullion: Must be 99.5% pure, with one notable exception: the American Gold Eagle coin, which is 91.67% pure
- Silver bullion: Must be 99.99% pure
- Platinum bullion: Must be 99.95% pure
- Palladium bullion: Must be 99.95% pure
An advantage of a precious metals IRA is that it offers access to purchase precious metals without the need to handle physical gold bullion coins or bars yourself. This convenience, combined with tax benefits, makes it a preferred choice for many experienced individuals looking to diversify their retirement savings.
3. Store your bullion
When you purchase bullion for physical possession or placement in a precious metals IRA, it's important to ensure it's secured safely. Physical possession may take the form of placing your bullion in a secure home safe, safety deposit box, or private vault at a depository. When buying bullion for placement in a precious metals IRA, the IRS requires that the physical precious metals be held in an approved depository. These depositories are specialized, secure storage facilities designed to safeguard valuable assets like gold, silver, platinum, and palladium.
Approved depositories offer several advantages for IRA account holders. They provide high-level security measures, including 24/7 surveillance, armed guards, and state-of-the-art alarm systems, ensuring your bullion is protected against theft or damage.
Additionally, these facilities are insured, offering an extra layer of protection for your investment. The use of a precious metals depository also simplifies the process of buying, selling, or transferring your precious metals, as these transactions can be handled efficiently within the secure confines of the facility.
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What is the difference between gold and bullion?
Gold refers to the chemical element itself, and it can be bought and sold in many different forms and purities. Bullion, for its part, could be a reference to precious metals sold in coin, bar, or round form. Bullion coins, bars, and rounds are minted primarily for their precious metal content. For example, there is gold bullion, silver bullion, platinum bullion, and palladium bullion. However, it’s important to note that not every coin is considered bullion. Bullion coins are valued solely for their precious metal content. Other coins, such as numismatic or proof coins, are not considered bullion. While these types of coins may consist of precious metals, their value is not only tied to their precious metal content but also their rarity, condition, or historical significance.
What is the difference between bullion coins, bars, and rounds?
While the shape is one obvious difference, there are a few key distinctions to consider.
Bullion bars and rounds are typically valued based solely on their metal content and weight. Because they are relatively simple to produce and do not carry legal tender status, they usually come with lower premiums over the spot price – making them a cost-effective choice for investors focused purely on metal value.
Bullion coins, on the other hand, are minted by sovereign governments and carry a legal face value, even though their metal value far exceeds it. Like rounds, they often feature detailed designs, but unlike rounds, their quality, weight, and purity are guaranteed by the issuing government. They are also frequently released as part of official series, which can add a level of collectability and, in turn, a higher premium.
In short:
- Bars and rounds: lower premiums, ideal for bulk investing.
- Coins: government-backed, often more collectible, typically higher premiums.
What is the difference between bullion coins, proof coins, and numismatic coins?
Understanding the difference between bullion coins, proof coins, and numismatic coins can help you understand how each type of coin works as an investment:
- Bullion coins: Bullion coins are a cost-effective option for investing in precious metals. Their value is closely tied to their weight and fineness, as well as the spot price of the precious metal they contain, such as gold, silver, platinum, or palladium.
- Proof coins: Proof coins are like bullion coins, but they are given a special finish at the mint that provides an exceptional polish and makes their design pop. They are also struck at least twice to give a unique appearance. Proof coins tend to have a higher premium cost because of this.
- Numismatic coins: Collectors also tend to prefer numismatic coins, which are ones from a specific time or place. The condition and rarity of numismatic coins tend to be the drivers of their value, rather than the metal content, keeping them out of consideration for most looking to future-proof their portfolios.
What are popular bullion coins?
Bullion coins are a favorite among those who buy precious metals due to their recognizability, liquidity, and, often, their beautiful designs. These coins are minted by government mints around the world and are guaranteed for their weight and purity. Here’s an overview of some popular choices:
- American Gold Eagle Bullion Coin: This iconic U.S. coin, which features Lady Liberty on the front and an eagle on the back, is composed of gold, copper, and silver.
- Canadian Gold Maple Leaf: Known for its high purity (99.99% gold), this coin displays the profile of King Charles III on one side and the signature maple leaf on the other.
- Britannia Gold Coins: Minted by the Royal Mint starting in 1987, the British Gold Britannia Coin is one of the world’s most widely recognized gold bullion coins. It features the iconic national symbol Britannia on one side and either Queen Elizabeth II or King Charles III (2023+) on the obverse. (Please note, some denominations of this coin are considered fixed mintage.)
- American Silver Eagle Coins: First issued in 1986, the American Silver Eagle Coin is the official silver bullion coin of the United States. It is a popular coin featuring Lady Liberty on the front and an eagle with an oak branch on the obverse.
- American Platinum Eagle: The only platinum bullion coin minted by the U.S. government, this coin features Lady Liberty on the obverse. Its reverse design changes annually, adding to its collectible appeal.
- Canadian Palladium Maple Leaf: This coin showcases the iconic maple leaf design and is one of the few government-minted palladium coins available. It’s prized for its .9995 fine palladium content and its status as legal tender in Canada.
What factors should you consider when buying bullion?
Several key factors can significantly impact your purchasing decisions and overall financial strategy when venturing into the world of bullion. Here are some crucial factors to consider:
- Purity: If you’re buying bullion for placement in a Self-Directed IRA, you must consider its purity to ensure it meets IRS eligibility requirements. However, if you’re purchasing bullion to store at home outside of an IRA, purity requirements don’t need to be a consideration, allowing for more flexibility in your choices.
- Value: Consider the intrinsic value of the bullion you’re purchasing. Supply and demand dynamics can significantly influence precious metal prices. For instance, silver’s extensive use in industrial applications can affect its market value beyond its status as a precious metal.
- Pricing: Take into account both the price and premiums of the bullion you’re considering. Coins, bars, and rounds have different premiums determined by market demand and economic conditions. For newcomers to bullion, bars and rounds often have lower premiums, making them more accessible. Coins typically carry higher premiums due, in part, to their government backing.
- Authenticity: Purchasing your bullion from a reputable precious metals dealer that verifies authenticity is crucial by ensuring you get genuine, high-quality bullion.
Is bullion a good investment?
Generally speaking, the volatility of the investment market is the biggest factor to consider when weighing whether or not gold bullion is a good investment for you personally. As fiat currencies go down in value, investments based in those currencies will similarly have less value, making it harder to purchase the same goods as before. Instead of fighting a losing battle against inflation, investing in precious metals can offer more financial security as the value of gold bullion is based on the finite amount of gold in the world.
Wrapping Up: What Is Bullion?
With a basic bullion definition that encompasses precious metals shaped into bars, rounds, or coins, it’s easy to grasp a simple understanding of what bullion is. You can buy gold bullion for home delivery or invest in a precious metals IRA that allows for the placement of physical bullion in your retirement account.
If this is the time for you to get into buying bullion and start building a reserve of your own, know that you’re following in the footsteps of giants – and the central banks have been walking the path of gold bullion for a long time.
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About Peter Reagan
Peter Reagan has covered precious metals and the economy for Birch Gold Group for over 15 years. His articles have been featured in several leading publications, including Newsmax and Zerohedge. At Birch Gold Group, Peter leverages his deep market insights to help educate website visitors and customers on why they should consider diversifying their savings into gold and other precious metals, and how that process works. Due to this commitment to education, his content has become a trusted source of information throughout the industry.
BGG - About the Reviewer About the reviewer Phillip Patrick
Phillip Patrick is a Precious Metals Specialist and spokesman for Birch Gold Group. Born in London, he earned a degree in politics and international relations from the University of Redding, and began his career as a wealth manager at Citigroup in London’s financial center. Since joining Birch Gold in 2012, Phillip has become a trusted voice on economic policy and precious metals, appearing as a guest on dozens of television and podcast platforms, including Newsmax, The Ben Shapiro Show, The Megyn Kelly Show, and Stephen K. Bannon’s War Room. In addition to his contributions on Birch Gold Group's blog, you can watch his interviews on Rumble and follow him on Gettr.
Sources
- “Gold Reserves.” https://www.gold.org/goldhub/data/monthly-central-bank-statistics
- “Safe-Haven Assets Explained.” https://www.forbes.com/advisor/investing/safe-haven-assets/
- “26 U.S. Code § 408(m) - Individual Retirement Accounts.”
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