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We often hear from first-time gold buyers: "I
want to buy gold, but I don’t want to pay the expense of buying
gold coins. How do I buy just plain gold bullion?
Basically, this is a misunderstanding of what gold
bullion is. The common perception is that rectangular bits of gold ("bars") are
the most cost effective, and perhaps the only available, form of gold
bullion. The same thinking has it that round bits of gold ("coins")
are not really gold bullion. There’s a common misperception that
"coins" are limited in supply, expensive, and perhaps, to some extent,
collectors' items.
When you go to buy gold for gold's sake, what you
are looking for is a practical and tradable form of gold - gold
bullion. Gold bullion is a recognized weight and fineness of gold that you can
purchase for the current price of gold, plus the small percentage
costs incurred in refining, fabricating, and shipping that bullion to
you.
The word 'bullion' has
a very simple definition: a refined and stamped weight of precious metal. Of course, what most
of us think of as gold bullion is the large gold 'bricks' that we
imagine are stored in Fort Knox.
You may remember seeing these large gold bullion
bars in movies such as "Three Kings," and the old James Bond movie
"Goldfinger." Bars like these make up most of the world's gold bullion
owned by governments and central banks. These are the "London good
delivery" gold bullion bars of approximately 400 troy ounce size,
refined and cast by the various private refiners worldwide, and
accepted for 'delivery' into London and other major gold bullion
markets.
These large bars are
an efficient way to buy physical gold, particularly if you are going to store your larger gold bullion
holding in a recognized insured precious metals storage facility.
Also, if you have a working use for the gold, such as in electronics,
manufacturing, or the arts, these large gold bullion bars are the most
cost-efficient way to buy it.
But if you don't actually make use of them, these
bars can be costly to liquidate once removed from storage. You may encounter assay, refining, or just handling fees in trying
to liquidate that size gold bullion bar. It's much more difficult
and time-consuming to liquidate gold bullion in a single chunk that
is worth over $100,000 than it is to sell the same amount of gold
bullion in more convenient and tradable sizes.
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