Precious metal bullion is an increasingly popular option for those who want to diversify their investments, especially with so much uncertainty surrounding the global economy. However, there are actually several great reasons for buying bullion beyond just the obvious benefits of diversification. Bullion as an asset class offers a variety of benefits, and specific metal types, such as gold bullion or silver bullion, will have their own unique advantages to consider.
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.
- What is Bullion?
- What Are the Benefits of Buying Bullion?
- How Can You Invest in Bullion?
- Bullion FAQs
- Key Takeaways
What Is Bullion?
We’ll start with the basics, which for many people means providing a bullion definition. Oxford defines bullion as “gold or silver in bulk before coining, or valued by weight.” With that said, bullion is most commonly sold as a coin, bar, or round, meaning the weight part is the most important part of that definition. It’s also important that bullion can be of other precious metals, as palladium and platinum bullion coins have a special place of interest for some investors.
While not intended as legal currency for circulation, bullion coins will often have a face value assigned to them by the country that minted them. Many countries stockpile bullion for their reserves with most bullion in reserves being 99.9% pure.
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 of a valuable commodity. When fiat currencies are losing value, tangible assets tend to be the preferred route for investors 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. Other precious metal bullion is always 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 (though you should expect to treat it as a long term investment to see the most gains).
Preserve your wealth
As an investor, 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, as the dollar continues to decline, and inflation risks rise, this preservation of wealth doesn’t seem so easy. But by investing in bullion, you can safeguard your purchasing power, 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 IRS-approved for tax advantages if put into an IRA. 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
If you’re serious about investing in precious metals and you want to maximize all the potential benefits, then you may want to consider placing gold or silver coins in an IRA. Gold IRAs let you enjoy all the tax benefits of a retirement account – without the anxiety. American Eagle proof gold coins, for example, were designed specifically with retirement accounts in mind. A limited number are made every year, which results in a scarcity that increases their growth potential beyond that of common bullion coins.
How Can You Invest in Bullion?
There are a few different tried and true methods of reaping the benefits of gold investments. The first is as simple as buying and storing bullion, whether it be in coin, round, or bar form. If you take this route, be sure to store your bullion in a safe and secure place. You may also 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.
Another option is to invest in a self-directed precious metals IRA. In this situation, you won’t have to worry about storing the bullion (or even physically acquiring it yourself). Instead, after picking a custodian for your IRA and a gold dealer, all you have to do is to convey how much and how often you’d like to buy it. Everything else is handled automatically.
Self-directed IRAs come with some of the same limitations as traditional IRAs (in terms of contribution limits and withdrawal limits), so it is important to read up on them to make sure you understand what they can and can’t do. The biggest benefit to investors that a precious metals IRA offers is being able to access the market without having to handle gold bullion coins themselves – making it the preferred choice for many who have been in the investment field for a long time.
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 any precious metal sold in coin, bar, or round form. There is silver bullion, platinum bullion, and palladium bullion.
What is the difference between bullion coins, bars, and rounds?
While the simplest answer comes down to shape (bars being longer and thinner and coins and rounds being small, flat, and cylindrical), there’s a bit more nuance to it than that. Rounds tend to have the lowest value as it is specifically tied to their metal content, and that can vary. Bars function in the same way, which reduces both of their potential for off-setting inflation. Bars are also larger and harder to physically trade. With that said, both bars and rounds tend to have lower premium costs attached to them, making them attractive to some investors.
Bullion coins are exactly similar to rounds in shape, and both can feature beautiful designs. Bullion coins, however, have a face value assigned to them by the issuing country, and since they are minted in large batches, their purity is well-documented. Additionally, they tend to be produced in series, adding a measure of collectability that increases their premium cost.
What is the difference between bullion coins, proof coins, and numismatic coins?
Bullion coins are specifically intended for investors; they aren’t sold to the general public from the mints that produce them but instead must be purchased by a dealer. 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, and generally aren’t as preferred by investors. 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 investors looking to future proof their portfolios.
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 offers more potential financial security as the value of gold bullion is based on the finite amount of gold in the world.
Key Takeaways: 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. Understanding how bullion can make a difference for you and your portfolio is a bit more difficult, but when broken down into its simplest parts – buy physical gold bullion, or invest in a precious metals IRA – it gets easier still.
If this is the time for you to get into buying bullion and start building a reserve of your own, then you need only consider whether you’d like to buy it and store it yourself or have your IRA custodian handle it for you. Whichever your decision, 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.