What is Gold Bullion?
Gold bullion, the starring prop of many a Jason Statham film, is often envisaged as something quite large and heavy - a bar that can be barely lifted by Hollywood's token female robber, but easily stored in large numbers in the boot of a Mini. Whilst this popular perception of gold bullion is accurate to a degree, there is actually a great deal more to the precious metal, which need not take the form of the Good Delivery bars locked away in Fort Knox.
Why Gold Bullion?
Essentially, gold bullion is a type of gold that can be purchased and sold as an investment. The precious metal is popular among investors because its market value is remarkably resilient to economic and political instability. The value of gold bullion has tended to increase over time with relatively few fluctuations. The same cannot be said of other forms of investment, including shares, bonds and liquid debt. In fact, the price of gold bullion managed to soar during the credit crunch of 2007 and subsequent global recession.
Gold bullion, therefore, appeals to investors because it tends to retain or exceed value over time regardless of economic factors such as inflation, recession, national debt, a low base rate, austerity measures, market crashes and so on.
Good Delivery
The popular image of gold bullion bars sliding around in the back of a Mini, or threatening to tip a busload of criminals off an Italian ravine, has reinforced the misconception that gold bullion consists entirely of bars. The Good Delivery bar is the most recognisable form of gold bullion. Regulated by the London Bullion Market Association, the Good Delivery bar ought to weigh between 350 and 430 troy ounces. The dimensions of a Good Delivery bar are also carefully prescribed, as is its purity or fineness (no less than 995 parts per thousand fine gold).
Very few people and organisations, however, trade in Good Delivery bars. Typically, Good Delivery bars constitute the gold reserves of central banks and national governments, not to mention the International Monetary Fund (IMF). So, what kind of gold bullion is traded among private and commercial investors?
Types of Gold Bullion
Gold bullion is typically purchased in the form of bars, of a non-conforming standard to Good Delivery specifications and coins. Some investors view gold bullion coins with suspicion. Not entirely dissimilar to chocolate coins, at least in terms of appearance, gold bullion coins attract scepticism because they are regarded by some to be of a lesser quality than non-conforming bars. This is nonsense.
Gold bullion coins are every bit as precious and valuable as gold bullion bars. The important points to note about the value of gold bullion are purity (or fineness) and weight. A gold bullion teapot would be just as valuable (probably more so for its novelty factor) as a gold bullion bar or coin of equal purity and weight.
The most common type of gold bullion coin is the Krugerrand, which originates from South Africa, weighs 1 troy ounce (approximately 33.93 grams) and has a purity or composition of 91.67 per cent. There are thought to be around 1,400 tonnes of Krugerrand gold bullion coins in circulation, with each coin worth over £1,100. In the UK, the Sovereign is also very popular, weighing 0.2354 troy ounces (approximately 7.32 grams) and boasting a fineness of 91.67 per cent. Unfortunately, the proliferation of fake gold coins, which tend to be little more than gold-plated discs of lead, has done nothing to improve the perceived value of genuine gold bullion coins.
It is possibly the case that gold bullion bars are more popular than gold bullion coins for this reason, but one is not significantly different from the other. When buying gold bullion as an investment, it matters very little whether the purchaser chooses a bar, coin or novelty item, as fine weight is the attribute that determines market value.