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Money Advice Tips

What Bullion Should I Buy: Bar, Coins, or Pool Allocated?

September 8, 2016

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Precious metals are often considered as a good long-term investment. Investors of bullion often buy when the prices are low and sell when the prices are high, earning a nice profit. But this is not as easy as it seems, since bullion prices tend to behave differently from equities and other commodities.  The value of gold bullion cannot be changed or controlled by government and its value will rise based on the pure forces of supply and demand. The biggest disadvantage to owning gold is that it is likely to have a big difference between the bid and ask price.

This can make it difficult to turn a quick profit. Still, many financial analysts agree that it is a good thing to be invested in commodities, including precious metals. Gold can be bought in various physical forms such as, bars or coins. Or it may be owned in non-physical varieties.

Bullion

Bullion is the traditional way of investing in quantities of precious metal, such as gold, silver, platinum or palladium. These precious metals are measured by weight and then cast as bars. When investing in gold bullion, do not expect a fast profit. While it is possible to acquire gold at wholesale and later on sell at retail, it will generally require a large price jump for the investment to break even. Besides, gold bullion should not be treated as a speculative asset. Rather it should be used a defensive asset for holding value. It is like an insurance policy that must only be used in emergencies. Gold bars generally have lower price premiums than gold bullion coins. This is because gold bars have an increased risk of forgery due to less rigorous specifications. It is difficult to tell that the gold bar is not just a gold plated lead bar from its appearance.

Coins

Gold coins the most common way for people to own gold. Gold coins are quite popular with investors and individuals who see the advantage of owning legal tender bullion coins. Gold coins allow investors to own legal tender gold coins like the one-ounce American Eagles, Canadian Maple Leafs, or South African Krugerrands. The value of bullion coins and bars is always based by the price of gold, and thus will follow the market’s bullion price.

Allocated accounts

Allocated accounts involve ownership of specific gold coins and bars. Investors can acquire gold coins and bullion from a bullion brokerage such as Gold Bullion Australia. Once the transaction is complete, the bullion brokerage then transfers the gold to the individual’s account in a depository or bank where gold can be readily sold or bought. It is understandable that rational steps should be made on allocated gold account providers as well as the history, security, credit rating and net worth of the provider. Every gold bar is audited and accounted for and it is considered a safe way to own bullion.

Overall, it may be convenient for a small investor to acquire gold in the form of coins, shifting to allocated accounts when dealing in large quantities for security purposes and for convenience.