What is bullion gold?
The term bullion refers to precious metals in bulk form that are regularly traded on commodity markets. The value of bullion is determined by the value of its precious metals content, which is defined by mass and purity.
The most common bullion is gold bullion. Gold bullion is pure gold. In many countries, the minimum purity is 99.5% for gold bullion bars and 90% for gold bullion coins. The typical purity for gold bullion bars is 99.9%. A higher purity is technically difficult to achieve.
Gold bullion that meets the defined minimum purity requirements is also called investment grade gold or just investment gold.
Bullion gold bars
If gold bullion is cast into ingots, those ingots are called gold bullion bars. Smaller bars are often produced by minting or stamping.
The standard gold bars of the London Bullion Market Association (LBMA), the trade association for the professional bullion market, are called good delivery bars and have a minimum acceptable fineness of 99.5% gold. The weight of the standard gold bar is approximately 400 troy ounces. An exact standard weight is not specified. These bars can vary between 350 troy ounces (ca. 10.9 kilograms) and 430 troy ounces (13.4 kilograms).
Other gold bars in Western countries typically have weights anywhere between 1 gram and 1 kilogram.
Bullion gold coins
Gold bullion coins are available in different weights. The most common size is the 1 troy ounce coin, but there are also larger and smaller coins such as 1/20, 1/10, ¼, ½ of a troy ounce or 10 troy ounces, 1 kilogram (the Australian Gold Nugget) and even 100 kilograms (the Canadian Maple Leaf).
Gold bullion coins are legal tender, meaning their technical specifications are regulated and valid for trade. Bullion coins can have a nominal or no face value. Normally the face value is much lower than the value of the fine gold content of the bullion gold coin. A bullion coin’s price is therefore determined by its gold content and the price of gold.
The cost of bullion gold – be it bullion gold bars or bullion gold coins -, is primarily driven by the gold content and therefore depends on the price of gold. Bullion gold typically has no collector’s value.
In general, costs for the production of bullion gold coins are higher than the costs of producing bullion gold bars. Bullion gold coins are typically minted, whereas bullion gold bars are cast.
Both bullion gold bars and bullion gold coins are normally sold at a low premium or mark-up above the value of their gold content as compared to non-bullion gold such as collector coins or ornamental gold bars, also called investment bars.
The relative production costs increase with smaller bars and coins since there are fixed costs per unit.
How to buy bullion gold?
Investors can buy bullion gold through gold bullion dealers, online shops or providers of vaulted gold.
Choosing a bullion gold provider should be based on the following criteria
- Is the provider trustworthy?
- Does the gold bullion offered come in a standard form, e.g. in terms of size and purity, and is it from a credible bullion bar or bullion coin manufacturer?
- Are the rates offered for the bullion gold competitive?
In choosing a provider of vaulted gold, additional criteria should be considered. Please see our information on vaulted gold.
Liquidity and fungibility
Standard gold bullion from reputable producers is typically accepted and bought back from gold bullion dealers. Some reputable bar producers of bullion gold bars are for example: Johnson Matthey, Umicore, Heraeus, PAMP and Rand Refinery. See more information on international bullion gold bars providers.
Among the most common gold bullion coins are the Krugerrand (South Africa), Maple Leaf (Canada), American Eagle (USA), and the Britannia (United Kingdom).
Owners of bullion gold should ensure that the gold bullion, be it bars or coins, remains sealed in its protective covering and that any certificates of authenticity are safely kept with the bullion gold. In the case of a lost certificate, damaged packaging or even worse, scratched gold bullion, a resale of bullion gold can become very difficult and/or costly.
High liquidity and fungibility make a compelling argument for vaulted gold. In the case of professionally vaulted gold, the bullion gold is often in the form of standard bullion bars, i.e. good delivery bars, and normally does not leave the vault or chain of integrity, even if ownership changes hands between investors. This keeps vaulted gold bullion’s costs low and liquidity high.