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I INTRODUCTION
Bullion is the most widely traded form of the precious metals.
Bullion refers to precious metal in the tradable form of bars, wafers,
ingots, and coins. The minimum purity of the precious metal in
bullion is 0.995.
Bullion takes the shape of coins, bars and ingots. Prices are based
primarily on the precious metal weight and content. Bullion coins
are minted by a country, and are legal tender in that country (although
unlikely to actually be used as currency). South Africa was the
first country to mint bullion coins, with the Krugerrand. Bullion
coins tend to be quite rare, many with mintages of less than 10,000. They
have been minted since the late 1960s by a variety of countries, although
most have been minted since 1980. They are designed to be bought and sold
based on their metal content, not their face value.
II PROPERTIES
By far, the most popular, most liquid form of bullion is the coin.
Opinions differ as to the true properties of a bullion coin. Most people
feel that a coin must be legal tender to be a bullion coin, but that would
prevent the 1982 Gold Pandas from being bullion coins, while allowing the
later years to be bullion coins. Some people consider coins with
very limited mintages (1,000 or less) to be bullion coins. The major
bullion coins include the American Eagle, South African Krugerrand,
Canadian Maple Leaf, and the Austrian Philharmonic. These coins are
available in one ounce, half-ounce, quarter-ounce and one-tenth ounce
sizes in gold and silver, with the Eagle and Canadian Maple Leaf also
available in platinum. Bullion coins are most common in 1 ounce
sizes, although most are also available in 1/2 ounce, 1/4 ounce and 1/10
ounce sizes. Sometimes there will also be smaller 1/20th ounce or
1/25th ounce sizes, as well as larger 2oz, 5oz, 10oz, and larger sizes.
III MARKETS
On December 31, 1974, Congress restored Americans' right to own gold in
bullion form. Previously, Americans could own only numismatic coins whose
prices were determined more by the coins' condition, dates, mint marks,
and rarity than by the value of their gold content. Such coins normally
sell at prices many times the value of their gold content.
The restoration launched a new era in precious metal investing.
Trading in restrikes of the Mexican 50 Peso and Austrian 100 Coronas
bullion coins became quite popular. The introduction of South African
Krugerrands to the U.S. however, laid the foundation for today's modern
bullion coin market. Today, American Gold Eagles are the best
selling gold bullion coins in the United States. Canadian Maple Leafs are
a distant second. Krugerrands, Mexican 50 Pesos, and Austrian 100
Coronas remain popular, and a liquid market exists for them.
IV INVESTING
Bullion is the most affordable way to own precious metal. Bullion
can reduce the volatility of
a portfolio while adding significant profitability.
Bullion survives and actually thrives on inflation. When economies
falter and currencies become devalued, bullion tends to retain its value.
The disadvantages of bullion can include short term fluctuations and a
loss of privacy since forms are required upon sale. There is also a remote
possibility for the government confiscation of gold bullion although this
happened only once before in 1933.
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