Bullion is non-ferrous metal
that has been refined to a high degree of elemental
purity. It ordinarily refers to bulk metal used in the production of coin
s and especially precious metal
s such as gold
. The word comes from the Anglo-Norman
term for a melting-house where metal was refined, and earlier from French
''bouillon'', "boiling." Although precious metal bullion is no longer used to make coins for general circulation, it continues to be held as an investment with a reputation for stability in periods of economic uncertainty. To assess the purity of gold bullion, the centuries-old technique of fire assay
is still employed, together with modern spectroscopic instrumentation, to accurately determine its quality.
The specifications of bullion are often regulated by market bodies or legislation. In the European Union
, the minimum purity for gold bullion, which is treated as investment gold with regard to taxation, is 99.5% for gold bullion bars and 90% for bullion coins
Investors may choose to purchase physical gold bullion for several reasons - to attempt to hedge against currency risks, inflation risks, geopolitical risks, or to add diversification to an investment portfolio.
London bullion market
The London bullion market
is an over-the-counter market
for wholesale trading of gold and silver. The London Bullion Market Association (LBMA) coordinates activities of its members and other participants in the London bullion market. The LBMA sets and promotes quality standards for gold and silver bullion bars. The minimum acceptable fineness of the Good Delivery Bars is 99.5% for gold bars and 99.9% for silver bars.
Bullion coins are contemporary precious metal coins minted by official agencies for investment purposes. Some bullion coins have been used as currency throughout the 20th century, such as the Maria Theresa thaler
and the Krugerrand
. However, modern bullion coins generally do not enter common circulation despite having legal tender status and nominal face value. Some modern bullion coins are produced as both business strike and collectible proof and uncirculated versions, such as the American Silver Eagle and American Gold Eagle coins. Private mint strikes called bullion rounds, bullion wafers, or bullion bars are typically sold at prices slightly above the underlying prevailing precious metals spot price commensurate with their overall precious metal content, whereas collectible versions are sold at a significant premium over their actual precious metal bullion melt value. In some cases, the grade and mintages of privately struck rounds, bars, or wafers can affect their value as a collectible too, so they can too at times be considered collectible numismatic pieces rather than bullion items.
A range of professional market participants is active in the bullion markets, such as bank
, and vault operators
or transport companies, as well as broker
s. They provide facilities for the refining, melting, assaying, transporting, trading, and vaulting of gold and silver bullion.
[A Guide to the London Precious Metals Markets: http://www.lbma.org.uk/assets/OTCguide20081117.pdf]
Besides the direct bullion market participants, other professional parties such as investment companies and jewelers use bullion in the context of products or services which they produce or offer to customers. For example, shares of the world's largest gold exchange-traded fund
, the SPDR Gold Shares
, represent a gold spot price mimicking derivative although shareholders in popular gold ETFs such as GLD are almost always unsecured creditors, meaning they own no vaulted gold
bullion potentially underlying the exchange-traded fund (ETF). Investors often prefer to own bullion outright over ETFs due to the minimization of counter-party risks inherent.
Private individuals use bullion primarily as an investment
or as a long term store of value. Gold bullion and silver bullion are the most important forms of physical precious metals investments. Bullion investments can be considered as insurance against inflation or economic turmoil, their sole direct counterparty risk is theft or government confiscation.
Compared to numismatic
coins, bullion bars or bullion coins can typically be purchased and traded at lower price premiums over the fluctuating spot price and their trading bid/ask spreads or buy/sell price differences are closer to the values of the contained precious metals.
* Official United States bullion coins
* List of bullion dealers