Investing in the gold market requires a lot of forethought- at the very least you need to know exactly what kind of gold you’re going to invest in.
The primary types of physical gold that people invest in are gold bullion, but what are the differences between gold and gold bullion?
The terms are actually very different.
The following article will break down all the main differences between ‘gold’ and ‘gold bullion, as well as the differences between gold bars and gold coins.
What’s The Difference Between Gold And Gold Bullion?
The difference between gold and gold bullion is stark.
The term ‘gold’ can describe anything that contains the yellow precious metal, whether it’s gold ore from the ground, flakes of gold found in riverbeds, or gold jewelry.
Gold bullion, on the other hand, refers specifically to gold that’s of high purity.
Interestingly, gold jewelry that has a karat value of 24K (so the gold is 100% pure gold) doesn’t necessarily constitute gold bullion.
This is because part of the value of 24 karat jewelry comes from its form.
A simple way to look at this is that, when the trend of gold jewelry takes a dive, the cost of gold jewelry also goes down, regardless of the price of actual gold.
Gold Bullion Products
As gold bullion refers to the purity of gold, the term encompasses a number of different forms of gold, whether it be ingots bars or coins. Let’s take a look at these forms.
Gold Bars And Ingots
Part of the confusion surrounding gold bullion is that it’s often associated with bars and ingots.
While gold bullion refers specifically to the purity of gold, there are also big differences when it comes to the sizes of bars and ingots.
An ingot of gold is the mold in which the bigger bars of gold are cast.
Smaller bars of gold are made either via the process of stamping or minting.
When you picture Scrooge McDuck-Esque vaults of gold, you’ll probably be imagining large bars of equal size, but in reality, gold bullion can be bought in various sizes.
This can range from as little as one gram to one troy ounce, up to 100 grams, 500 grams, one kilogram, and 12.5 kilograms.
But what of gold coins?
Gold bullion isn’t only produced in the form of ingots and bars. In such regions as the Britannias and the Sovereigns, British gold bullion coins are actually legal tender, which makes them exempt from CGT (Capital Gains Tax).
They are closer to bullion gold bars than actual currency, though; their value is measured through the process of multiplying their gold content by the price of gold.
Some examples of gold coins that are considered legal currency include the United States Gold Eagle, the Gold Sovereign, the Canadian Maple Leaf, and the Gold Britannia.
Gold coins tend to be smaller than gold bars, and are therefore considered to be a more convenient, flexible, and cheap alternative. Their smaller size means they’re far easier to liquidate.
When Should You Invest In Gold Coins Over Gold Bars?
The main reason you’d be investing in gold coins rather than gold bars is if you appreciate the historical value that comes with gold coins.
Those who invest in gold coins will more likely be interested in more than just a financial investment- in some cases, you might even be starting your own collection of gold coins.
It’s worth bearing in mind that historical value can have monetary value, too.
Certain specialized investors will pay a pretty penny for gold coins of historical worth. Gold coins are known to increase in value over time, mainly because they are minted in continuing annual series.
While it tends to be harder to quantify the value of gold coins compared to the live price of gold per region, it’s still well worth considering when it comes to the potential rarity of certain coins.
When Should You Invest In Gold Bars Over Gold Coins?
Despite the benefits of investing in gold coins, there are circumstances in which investing in gold bars will be the better option.
The main reason for this is that you can very easily tell the value of your gold bars depending on their quantity.
This is because the purity and the weight of a gold bar tend to be inscribed on the item itself, which will make it a lot easier to determine the value of said gold when factoring in the live price of gold in your region.
Conclusion: What Is The Difference Between Gold And Gold Bullion?
There is a big difference between gold and gold bullion.
Gold bullion refers to gold that’s high in purity, while gold refers to anything that contains gold.
While gold can take the form of jewelry or even just gold flakes that have been found in a riverbed (and can also be in the form of gold substitutes, like gold certificates or Gold Exchange Traded Funds), gold bullion will most often be found in the form of gold bars or ingots or gold coins.
Whether you should be investing in gold bullion or simply gold depends on your personal preference.