What is Gold Bullion?

By Kent Ninomiya

Gold bullion is investment-grade gold. It is usually purchased in the shape of coins or bars. Gold jewelry and other gold items are not considered gold bullion. Many people buy gold bullion as an investment especially during difficult economic times. Gold tends to increase in price when the economy is doing poorly. Gold bullion is therefore a way to maintain the value of your assets while stocks are falling.

Size

The most popular form of gold bullion is one-ounce gold coins. They are called "coins" even though they are not legal tender. Gold bullion's value comes from its gold content. Some have a value stamped on them but it is only for show. Gold bullion is technically not money. It is easy to buy and sell gold bullion coins. Gold dealers and collectors recognize and trade them frequently. Mints around the world make one ounce gold bullion coins. The most famous are the American Eagle, the South African Krugerrand and the Austrian Philharmonic. Gold bars are also sold as bullion but they are harder to find and sell.

Identification

The purity of gold bullion ranges from 22 karats to 24 karats. 24 karat gold is pure gold but very few coins are made this pure. It is incredibly difficult and expensive to remove all the impurities from gold. Cyanide gas must be used. Pure gold coins are also very soft and do not hold their shape well. Despite this, some investors are willing to pay a premium for pure gold bullion. Some Canadian Maple Leaf gold coins and Chinese Panda gold coins claim to be 99.9% gold. The purity of gold bullion is actually not very important. Gold bullion prices are based on how much gold is actually inside a coin or bar. A one ounce 90% gold coin has the same amount of gold as a 99.9% gold coin. The 90% coin just weighs a little more because of other metals that are mixed in.

Features

Even though gold bullion's value is based on the gold content, a premium is commonly paid for quality gold bullion coins. Collectors appreciate the aesthetic value of the artwork on gold bullion coins. Untouched coins in "brilliant uncirculated" condition are especially prized. In fact, many gold bullion collectors wont buy a coin that is not BU. Coin grading services rate gold bullion coins and seal them inside plastic holders. Some collectors value this service while others think it is subjective and a waste of money.

Effects

The price of gold bullion fluctuates with the spot price of gold. Gold prices are stated in dollars per ounce. This price changes daily based on gold trading markets throughout the world. In general, the price of gold tends to rise during difficult economic times and fall during periods of prosperity. Gold prices are heavily dependent on the strength of the U.S. dollar. The weaker the dollar, the stronger gold becomes. Other factors like supply, demand and production also influence the price of gold bullion.

Considerations

Gold bullion can be purchased from gold dealers, coin dealers, private individuals and directly from the mint that produced it. A small premium is always paid above the spot price of gold. This covers the cost of minting the gold bullion. In some states there is no sales tax on gold transactions over $1000. Some dealers also offer a price breaks, free shipping and free insurance for large quantity purchases.

About the Author

Kent Ninomiya is a veteran journalist with over 23 years experience as a television news anchor, reporter and managing editor. He traveled to more than 100 countries on all seven continents, including Antarctica. Ninomiya holds a Bachelor of Arts in social sciences with emphasis in history, political science and mass communications from the University of California at Berkeley.