Starting out in bullion investment can be overwhelming for newbies. The unfamiliar jargon, concepts, and wide range of product options like physical bullion, gold and silver bullion storage, and self-managed super funds can be a lot to take in.
But don’t worry; there are many good reasons why you might want to invest in bullion. Perhaps you’re looking for a low-risk and stable investment to protect yourself and your loved ones in case of financial hardship. Alternatively, you might be seeking a new source of income through investment.
Whatever your motive, this article is here to guide you through every aspect of bullion investment, from choosing the right product for you to investing, buying, selling, or storing bullion.
What is Bullion?
Let’s begin with the fundamentals. What exactly does the term “bullion” mean?
The word “bullion” first appeared from the French word “bouillon,” — which means “coin mint.”
Bullion is a term used to describe investment-grade precious metals traded according to the metal price. Gold, silver, palladium, and platinum are among the common precious metals, and they are typically traded as bars or coins.
Although it is rarely used as a form of payment directly, Bullion is highly liquid and can be quickly and easily converted into cash almost anywhere.
Bullion Investment
You may still be wondering what people do with bullion. They simply invest in it.
And if you’re a savvy investor, you should consider adding bullion to your investment plans, particularly gold bullion.
Why? Because it’s a reliable hedge against global economic disasters and helps protect against inflation and deflation.
Bullion is most often seen as a long-term investment, and here are six reasons why you should invest in it.
All Other Forms of Currency Have Failed:
Yes, you heard right. Creating a currency that can handle all free market forces doesn’t always seem to work as expected. In fact, according to history, all currencies except gold and silver have failed. Gold and silver remain the longest-lived forms of currency today, largely due to their finiteness and physical properties.
Unlike fiat currency, which can be reissued as often as needed, gold and silver bars are finite and eventually run out. This helps preserve value.
As a result, bullion is a safe investment against currency devaluations and crashes. In fact, when fiat currencies failed in the past, people always looked to quality money which is; gold and silver.
Diversifying Holdings
Bullion typically follows its course regarding other supplies and the stock market. This means that gold appreciates during periods of decline in other investments, acting as a loss-hedging tool. Because of this, owning bullion is a fantastic way to diversify your investment portfolio. And any astute investor would concur with this.
Purchasing Power Remains The Same
Gold has held its value over the years, especially when compared with paper money. You’ve probably heard, “With an ounce of gold, an individual could buy a fine suit of textiles in the time of Shakespeare, in the time of Beethoven and Jefferson, and in the Depression of the 1930s.”
A decent suit would still cost an ounce of gold in today’s market, but $1 in today’s money would cost much less than it did four decades ago. This demonstrates that, unlike currencies, gold’s purchasing power is constant.
The value of gold is higher today than it was in 1968, almost 50 years ago, when measured by its purchasing power. Even though gold fluctuates, its overall purchasing power is consistent, especially over extended periods.
Exceptional Results During Periods of High Inflation
It is common knowledge for most financially savvy people that inflation risk rises as central banks keep printing money. Now, gold accomplishes two goals at once here. First, gold offers excellent protection against currency devaluation. Also, gold does well when inflation is high. Because of this, buying gold is a fantastic way to safeguard money from economic risks.
Appreciation in Value
Bullion is not an investment with rapid growth that can easily be traded and sold, like the stock market. Instead, bullion is best viewed as a long-term strategy, where you can see the return on investment. In fact, gold has been priced at around $271 an ounce since 2000 and traded at $1300 as of April 2019. It’s quite a huge return.
Current State of The Global Economy and Protection Against Severe Economic Crises:
One of the most frequently asked questions about gold is whether it is a good investment for today’s economy. The answer to that is a big, bold YES. It’s no secret that a massive economic crisis is looming thanks to global debt, and the economy is beginning to show serious cracks.
Fiscal deficits, trade deficits, and government debt are at insane levels. Similarly, real estate, stocks, credit cards, debit cards, and derivatives have lethal bubbles. And as history shows, all bubbles burst! But gold bullion has historically always outperformed all other assets.
How to Invest In Bullion
The goal, when investing in bullion, is to buy when the price is low and sell when the price is high (just like any other investment). Remember that bullion is best seen as a long-term strategy to accumulate wealth, primarily as a safe hedge against other investments.
But when it comes to bullion, the market is often unpredictable, and it can take a long time to keep up with the latest bullion news and forecasts. It can also be difficult to know where to start and where to get the most reliable information. A question often asked by first-time investors always concerns how to buy gold and the minimum investment amount. The answer depends on you and your reason for buying gold.
Many people are worried about an economic collapse. So, they prefer to buy gold and silver in smaller sizes, such as quarter ounces, five grams, and ten grams.
Buying gold and other precious metals in smaller sizes carries a higher premium per ounce or gram. Therefore, if you are looking to buy gold for expense purposes, it is recommended to buy bars from 1 ounce to 100 grams. This ensures you get the best value for your money while ensuring an easy-to-transact product.
Premium decreases as the physical size of the bullion purchased increases. So, buying a 1kg bar lowers the price per ounce/gram. But, on the downside, it makes it harder to sell. For starters, consider a minimum asset of just under $2000- $3000 for 1-ounce gold bars.
Conclusion
Having decided on your investment amount, you need to find a reputable precious metals dealer. Local is best if you’re looking for competitive prices or want to buy from a showroom store. But you can also buy online or over the phone from esteemed bullion dealers.