Bullion can be a great way to diversify your portfolio and protect yourself from market volatility. To make things easier, we created this guide that provides an overview of the different types of bullion available and how to invest in them.
What is bullion?
When it comes to investing in precious metals, bullion is the term used to describe physical gold, silver, and other metals. Unlike stocks or bonds, bullion is a tangible asset that can be held in your hand. It’s also one of the oldest forms of currency, dating back thousands of years.
Today, many investors buy bullion to hedge against economic uncertainty and inflation, protecting their portfolios against market downturns. They are often used as a store of value (an asset that maintains value instead of depreciating) during economic uncertainty.
Types of precious metals
Many different types of precious metals exist, including gold, silver, platinum, and palladium.
- Gold is the most popular precious metal for investors and has been used as a form of currency, jewelry, and investment for centuries.
- Silver is also a popular choice for investors and has many industrial uses.
- Platinum and palladium are less common investment options but have a variety of industrial uses. These metals are even rarer than gold and silver, so they tend to be even more expensive.
Precious metals can be bought in the form of bullion bars, coins, or rounds.
- Bullion bars are produced by private mints and come in various sizes, from 1 gram to 400 ounces. They are typically made from gold, silver, or platinum and are stamped with their purity and weight.
- Coins are minted by governments and usually have a face value that is lower than their actual worth. However, they typically have a higher premium than bars because they’re considered legal tender.
- Rounds look similar to coins, but are not quite the same. Rounds are minted privately and not seen as legal tender, meaning their value equals the melted value. Although they are generally a more affordable entry point into bullion investing, they offer little protection against spot price volatility.
When buying bullion, it’s important to remember that you’re not just paying for the metal but also the fabrication, shipping, and dealer markup.
Gold bullion vs. silver bullion
Gold and silver bullion are the most popular forms of investing in precious metals. Both have their benefits and drawbacks.
Gold bullion is typically more expensive than silver bullion. It is also more durable and has a higher resale value. Gold is also less volatile than silver, meaning its price doesn’t fluctuate as much in response to economic conditions. However, gold is subject to inflationary pressures, so its value can erode if not properly managed.
Silver bullion, on the other hand, is considered a more speculative investment. This is because silver prices tend to be more volatile than gold, meaning they can rise and fall more sharply in response to short-term events. However, this also means that silver has the potential for more significant gains in the long run. And because silver is cheaper than gold, you can start investing with a smaller amount of money.
Benefits and risks of investing in bullion
Investing in bullion has many advantages and disadvantages, so it’s important to research before making any decisions.
Fiat currencies (government-issued currencies like the dollar) lose value due to inflation; gold and silver generally increase in value. This makes bullion a good way to hedge against inflation.
Gold and silver bullion can be easily sold for cash, making them a very liquid asset.
Store of value
Unlike paper money, which governments can print at will, there is a finite supply of gold and silver. This makes them valuable commodities, which can hold their value over time.
Gold and silver bullion are very secure investments, as they can be stored in a safe or vault. This makes them much less vulnerable to theft and depreciation than other investment forms.
The bullion price can be volatile, and investors may experience losses if they invest in these metals. In addition, the bullion market is relatively small, so prices can be more volatile than other asset classes, like real estate, bonds, equities, etc.
Investors may experience losses if the issuer of bullion-backed security defaults on their obligations. For example, if a company that mines gold goes bankrupt, investors may not receive the full value of their investment.
Investors may incur costs to store their bullion investments, and there is always the possibility that the metal could be lost or stolen.
How to buy and store bullion
When it comes to bullion investing, there are a few things you need to keep in mind to make the most of your investment.
You can purchase it directly from a mint, dealer, or refinery. You can also buy it through an exchange-traded fund (ETF), mutual fund, or options contract.
- When purchasing bullion, be sure to select a reputable dealer.
- Look at online reviews and compare prices before making a purchase.
- Pay attention to the weight and purity of the bullion you’re buying, and any fees associated with the transaction.
- Pay attention to the spot price; the current market price constantly fluctuates. Buy when the spot price is low and sell when it’s high to make a profit.
Once you’ve purchased your bullion, you’ll need to store it safely. The best way to do this is by using a secure storage facility, such as a safe deposit box at a bank. You can also store your bullion at home, but take precautions against theft and fire damage.
- Keep detailed records of your bullion holdings, so they can be easily replaced if lost or stolen.
It’s important to insure it against theft and other types of losses.
- If you’re storing your bullion at home, speak to your homeowner’s insurance about amending your policy.
- If you’re using a storage facility, ask if they offer insurance for their customers.
What is the investment period for bullion?
When investing in any asset, it’s important to invest for the long term. Don’t expect to get rich quickly by investing in gold or silver bullion – it takes time for these assets to appreciate. But if you hold onto your investment for the long haul, you may be rewarded with significant returns.
So, if you are looking for a great way to diversify your portfolio and protect against inflation, bullion is an excellent choice. And if you need a trustworthy online store to make a bullion investment, Express Gold Refining is just a click away.