What Is Gold Bullion?

The price of gold hit a record high in April 2024, and many people who haven’t invested in this metal are considering it. Long valued as a hedge against inflation, gold is a popular precious metal among investors.

If you’re new to gold investing, it might be unclear what gold bullion is and how it differs from gold coins and bars. In this guide, we’ll cut through the jargon so you understand whether you should invest in bullion and where you can buy it.

How to define gold bullion

Gold bullion is physical gold that is intended as an investment. Its value comes from the weight of its gold content, and bullion must be at least 99.5% pure. You can buy gold bullion in three forms:

1. Coins
2. Rounds
3. Bars

Gold dealers may sell bars weighing anywhere from one gram to 500 grams, although a variety of sizes are available. Credit Suisse, PAMP Suisse, and Valcambi are three reputable manufacturers of gold bars.

Rounds and coins have a similar appearance but shouldn’t be confused. Bullion coins are made by national mints and may be considered legal tender. Some rounds may have designs that look similar to coins, but they’re manufactured by private mints and are not marked with a face value. Other rounds may only have mint and purity markings on them.

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Tip

Numismatic—or collectible—coins are different from gold bullion. They may have a lower purity level, and their value may come more from their rarity than from their gold content. This is an important distinction if you open a gold IRA because you can’t hold collectibles in these retirement accounts.

How much is gold bullion worth?

The value of gold bullion is constantly changing and depends on factors such as supply and demand. At the start of April, gold spot prices were at record highs and hit $2,288.09 on April 3, 2024.

Some believe the spot price will keep rising throughout the year. With the Federal Reserve expected to cut interest rates in 2024, many investors are looking to gold as a hedge against an inflation increase that could follow.

The spot price reflects the value of one troy ounce of gold. But don’t expect to pay that price when you make a purchase. Gold dealers add a premium, or markup, to their prices. This is how they earn their profit and stay in business.

Premiums may be a percentage, such as 4% to 6% of the spot price, or a flat rate. The latter seems to be more common with bars, and you may pay anywhere from $35 to $75 per ounce when the premium is charged this way. Typically, the more gold you buy, the lower the premium.

How to invest in gold bullion

When it comes to investing in gold bullion, the three most accessible options are to buy gold from a dealer and store it at home, open a gold IRA, or purchase shares in a gold exchange-traded fund (ETF). Each has unique pros and cons, and the strategy you choose depends on personal preference and your investment goals.

Investing option	Best for
Buy from a dealer	Storing bullion at home
Open a gold IRA	Retirement savings and a tax break
Purchase gold ETFs	Investing in gold without physically storing it

Buy from a dealer

Buying gold from a dealer and storing it at home is the most straightforward way to invest in bullion. But be sure you buy from a reputable dealer, and compare prices because markups can vary. Ensure your gold is stored in a secure location and that your home insurance policy will cover your investment in the event of theft or another loss.

Pros

• Simple transactions in which you can buy whatever gold you’d like.

• Tangible asset you can access whenever you need it.

Cons

• Untrustworthy dealers may charge excessive markups or deliver inferior gold.

• May require additional costs for secure storage and insurance coverage.

Open a gold IRA

A gold IRA may be the right investment choice if you’re looking toward the future and want to boost your retirement savings. You’ll need a self-directed IRA, and you must store your gold in a depository. In exchange, depending on how the account is set up, you might get an immediate tax deduction for contributions or tax-free withdrawals in retirement.

Pros

• Offers valuable tax benefits not available with other gold investments.

• Diversifies retirement portfolio with a hedge against inflation.

Cons

• Requires an IRA custodian, which comes with additional costs.

• Gold must be stored in a depository and cannot be kept at your home.

Purchase gold ETFs

Not everyone wants to store physical gold at home or in a depository. Gold ETFs offer a way to benefit from the value of gold without maintaining coins, bars, or rounds. 

An ETF is an exchange-traded fund, and gold ETFs hold physical gold. Shareholders don’t own the gold themselves, but the value of their shares is based on the value of the gold.

Pros

• Easy to buy and sell shares through a brokerage account.

• No additional costs for storage or insurance.

Cons

• Does not provide owners with physical gold.

• No control over the gold purchased and held by the fund.

Pros and cons of investing in gold bullion

Each type of gold investment has its own pros and cons, but it’s important to consider the drawbacks and benefits of investing in gold bullion in general before you decide to invest your money in it.

Pros

• Tangible asset

  With gold bullion, you have a physical asset with a value that isn’t tied to any country’s currency.

• Inflation hedge

  One main reason investors like gold is that it’s a hedge against inflation, meaning it typically holds its value or even increases in value during times of high inflation.

• Diversification

  Gold has often performed well as an investment when the stock market has faltered, making it a good option for diversifying assets.

Cons

• Additional costs

  Because gold is a physical asset, additional costs are involved with storing and insuring it.

• Converting to cash can take time

  Gold is sought after, but converting it to cash is a more involved process than making a withdrawal from the bank. For this reason, gold is not a suitable choice for an emergency fund.

• Price volatility

  Gold tends to hold or increase in value over the long run, but it can be prone to price swings in the short term.

Our expert’s advice

Erin Kinkade

CFP®

It’s important to note that this should be a portion of an individual’s investment portfolio. Ideally, no more than 10% of your investable assets should be allocated to one stock or investment, such as gold or other coins.

Is it worth buying gold bullion?

Investing in gold bullion isn’t for everyone. Other assets or investing strategies might be best depending on your investment goals and personal preferences. The table below provides guidance regarding when it might make sense to buy gold.

Consider investing if…	Reconsider investing if…
✅ You want a hedge against inflation.	❌ You need short-term gains.
✅ You are comfortable storing gold at home or paying for gold storage elsewhere.	❌ You worry about gold being stolen and don’t want to pay to store it.
✅ You want a tangible asset that may be a safe haven in times of economic and geopolitical uncertainty.	❌ You are comfortable keeping your money in paper assets, such as stocks and bonds.
✅ You can invest enough to meet dealer minimum purchase requirements.	❌ You have only a small amount to invest right now.

Who should buy gold bullion?

Many consider gold bullion a wise investment for anyone who is worried about inflation and political or economic unrest. Some people keep physical gold out of concern that should a country’s currency collapse, physical metals will retain their value.

But even if these aren’t concerns, gold can be a terrific way to diversify a portfolio. You never want to tie your wealth to be tied to any single asset. Instead, owning a variety of investments, such as precious metals, real estate, and stocks, ensures that your wealth won’t be put in jeopardy should one asset class lose value.

Given that the spot price of gold is in excess of $2,000 at the time of writing, buying bullion makes the most sense for someone with a significant amount to invest. Dealers may have minimum purchase requirements of $10,000 or more, and the more you buy, the lower the markup you may pay. If you have a small amount to invest, a gold ETF may be a better option than purchasing bullion yourself.

Who should not buy gold bullion?

If you have a low tolerance for risk and want an investment you can expect to safely appreciate in the short term, gold bullion may not be for you. Gold and other precious metals tend to have volatile prices, meaning their value can rise or drop quickly.

Gold bullion also isn’t a suitable option for anyone concerned about theft or the cost of storage or insurance. If you keep the bullion in your home, you will likely need additional insurance beyond what your homeowners policy covers. You can also keep bullion in an insured depository—which is required for gold IRAs— but that comes with an annual fee.

Gold is considered a hedge against inflation, but it hasn’t always appreciated in value at the same rate as the stock market. This is why it’s best to diversify your investments and keep different types of assets. Many experts recommend that people invest no more than 10% of their portfolio in precious metals.

Where to buy gold bullion

If you’re ready to buy gold bullion, choose your dealer wisely. Beware of scammers who try to take advantage of new investors.

The Commodity Futures Trading Commission says the following are red flags that could indicate an offer is fraudulent:

• Claims of guaranteed returns.
• Offers to let you pay only a small percentage of the gold’s alleged worth.
• Businesses that cannot provide any license or registration information.
• Agreements that are vague about where and how gold will be stored.
• High-pressure sales tactics that include convincing you a friend or neighbor is investing or that the salesperson is doing you a favor.

Be wary of any unsolicited calls about gold bullion. Instead, look for reputable companies with extensive online reviews. These include dealers such as American Hartford Gold, Lear Capital, and Goldco.

To learn more about where to safely buy gold bullion, read our reviews of the best gold dealers and the best companies for gold IRAs.