With so many different types, shapes, and sizes of precious metal on the market, it can be challenging to keep up with what you’re buying (much less being ready to store it if you’re not renting space in a vault). To help you decide what to buy, let’s go over some of the most popular terminology and what it means in the marketplace.
Bullion is a specific term used to refer to precious metals measured in mass (not value) and processed to be at least 99% pure. It’s almost impossible to get metal that’s 100% pure, regardless of how much processing it goes through, so up to one percent of ‘bad’ stuff is tolerated.
The nature of bullion is by far one of the most important things to understand when you’re buying precious metals. There’s a big difference between buying $1200 of gold and buying an ounce of gold for $1200. The price changes, but the physical amount of gold remains the same. This is where most of the potential profit in buying and selling precious metal lies.
That said, it’s important to pay attention to the actual amount of precious metal in each piece of bullion you purchase. There can be a difference in price between 99.3% and 99.9% pure metal, even if it’s being sold as one ounce, coin, or other measure. If you don’t pay attention to these numbers, you may end up losing more than you expected.
Some providers are more exacting than the limits of this term. For example, the London Bullion Market Association has a set of rules for “Good Delivery,” and any bullion that does not meet these standards cannot go on their market. The LMBA requires gold bullion bars to be at least 99.5% pure, and silver bullion bars to be at least 99.9% pure.
Different providers may also have other guidelines, such as size and shape, which help to standardize the bullion that’s put up for sale.
Shapes Of Bullion
While most bullion is sold in the two basic shapes – coins and bars – those aren’t the only shapes on the market. Bullion may also be sold in squares, diamonds, arrows, or other decorative forms. These are most common for smaller amounts of bullion (less than 10 oz.), simply because coins and bars are easier to move and store in large amounts.
Bars are easily the most iconic form of bullion – but they’re not just rectangular chunks of metal processed to be a similar size. Instead, when buying ingots or bars of precious metals, it’s better to think of them as a specific type of bullion that has several pieces of information stamped into it.
Most bars include:
- Provider: This is whoever minted and/or sold the bars. Different sellers may have different regulations about which name gets put on the bar, but either way, the point is to provide a buyer with information about the history of the bullion. Some recently-made ingots even have websites stamped onto them.
- Weight: This details how heavy the bar is supposed to be. Bullion isn’t circulated or moved very often, so most bars will be extremely close to their original weight. More importantly, this serves as a safety measure. Most major sellers have their own controls to ensure anything they sell weighs what it should, but you should always weigh bullion you get elsewhere.
- Substance: This tells you what the bar is supposed to be. Most bullion is sold as ‘fine,’ a specific term meaning the metal is pure enough that impurities can only be measured in parts per thousand. It’s worth noting that lack of the word ‘fine’ isn’t necessarily a problem since the next category covers that.
- Purity: This denotes the purity of the bar. In most cases, this value is expressed as a decimal of some kind. Thus, “.9999 fine gold” and “999.9 fine gold” mean the same thing – that 99.99% of the bar is verified to be pure gold. Incidentally, that’s the purest you can reasonably expect.
- Unique Identifier: Many bars include a unique identifier that helps track movement and ownership of that specific bar. After all, if you’re storing hundreds of near-identical bars in a vault, it can be hard to keep track of which one is owned by each buyer. Unique identifiers are usually 6-7 numbers (or, occasionally, letters).
- Production Date: This is a rarer piece of information, and not considered necessary for most bullion. That said, some manufacturers do like to print the year that the bar was made so people can get a sense for its production without having to look up the unique identifier.
Are There Any Problems With Bars?
There’s only one problem to be wary of – forgeries. There are some things like 100 oz. lead-filled silver bars on the market and forgeries are more common when the price of bullion shoots up much faster than usual.
Other than this, however, bars are a safe investment. They have so much information printed on them that it’s easy to track the history and movement of any given bar, and due diligence will help ensure that you don’t get ripped off. If you’re especially worried, investing in a precious metals bullion trust – where someone else physically holds them – can reduce your risks.
Coins are lighter, more affordable, and easier to store than most bars. Most precious metal coins fall into one of two categories.
These coins are valued not just for the content of their metal, but for their rarity and general appearance. Limited runs, proof sets, and individually-numbered coins can all be a source of value, especially to collectors. These are ‘condition-based’ because their overall appearance is a critical factor in their value. Wears, scrapes, and blemishes drastically reduce their value.
These coins usually have a particularly high level of purity.
Coins that aren’t mainly for collectors tend to be valued only by their metal content, rather than their appearance. In these cases, it’s fine if they’re a little tarnished since that doesn’t affect the value in any meaningful way.
Content-based coins may have a relatively low amount of precious metal in them. For example, a coin that’s only 90% silver may be referred to as “junk silver,” and automatically gets sorted into this category by buyers.
Handling Your Coins
Most coins are easy to damage, even if you’re just taking them out for a few moments to look at them. If you want to handle your coins at all, follow these guidelines.
- Only hold the coins by the edges. Under no circumstances should you hold a coin by either of its faces. Doing so can result in oil, dirt, acids, or other unwelcome substances tarnishing the face of the coin.
- Wash your hands first. This will get rid of most of the chemicals that can cause your coins to decay. Be sure you use hand sanitizer, not just soap. Be careful when drying your hands and use a clean, dry towel. Otherwise, you may just get dirt on your hands all over again.
- Put a thick cloth or towel below the area where you’re handling the coins. Small pieces of metal can and do get dropped when people are working with them, and having a cushion can stop the damage that might otherwise occur.
- Do not breathe on your coins. This can quickly tarnish them and reduce their value.
- Do not use saliva to clean your coins. It is not a safe cleaning agent. If your coins need cleaning – and when stored properly, they don’t – you should only use a cleaner specifically intended for that metal.
- Minimize contact with your coins. The single best way to protect them is to keep them securely stored.
- Regulate the atmosphere. Coins of precious metal should be kept in a dry, cool location at all times. Even if the coins themselves aren’t affected – gold, for example, is famously non-reactive – their containers can be damaged by heat or moisture.
Storing Precious Metals
Ideally, you’ll be able to store all of your precious metals in an airtight vault. Some people go for several layers of protection, such as individual containers put inside a well-secured vault.
Different metals need to be stored in different ways, so research options for what you are getting. If you’re buying a rare shape, you may need to custom-order containers instead of buying them off the shelf.
Finally, there’s one last thing to consider – the resale. If you plan to sell back to a market, you probably don’t need a fancy container. On the other hand, if you want to sell directly to other people, a well-made container may impress them enough to get you a better price. It’s not guaranteed to provide a good return on your investment, but it’s a detail worth considering.
Disclaimer: The content of this page is for informational purposes only and should not be treated as investment advice. If you plan to invest in precious metals, you should talk with an experienced investor and research the market prior to your first purchase. Precious metals have a long history of relatively stable value, but past performance never guarantees future performance.