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Pros and Cons of Investing in Physical Gold Ingots

Editorial Staff

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investing in Gold

The value of gold endures in a good or bad economy. Before buying gold bullion bars or ingots, learn the advantages and disadvantages of investing in physical gold.

Gold buyers eager to invest in physical gold bullion may choose to purchase bars and ingots from gold bullion brokers when the price of gold rises or falls significantly. During an economic depression or recession, the value of gold can get a bit more volatile than usual. This can tempt investors looking for moderate, reliable returns into deciding to buy gold ingots, sit on them a bit, and sell them to Gold buyers Melbourne when the value of gold rises. Conservative investors, for their part, may find that the pros of investing in physical gold outweigh the cons and opt for the security of long-term rewards over short-term gains.

Gold Bullion Bars and Ingots Defined

According to the U.S. Geological Survey, gold bullion sold as an investment commodity on the market is defined as gold with a fineness of at least .995 gold (99.5%) and at most, 999.99 purity. Technically only gold bars and ingots qualify as physical gold bullion, while the gold “bullion” coins sold by the U.S. Mint have value related to the coin’s composition and denomination, both.

Gold Bullion Units of Measurement

Buy gold bullion in units as small as 1 gram gold bars and as large as ingots of 400 troy ounces – also known as a London good delivery bar. For those needing conversion, 1 troy ounce is about 32 grams, and 1 gram is .032 troy ounces. A troy ounce is equivalent to approximately 1.1 standard ounce.

The most popular weights, as well as the terms, for physical gold bullion vary in different countries. Chinese buyers trade 5 and 10 tael bars, while in much of Europe, the Middle East, and Southeast Asia, trading the 32.15 troy ounce gold kilobar is popular. 5 and 10 tola bars are standard in India.

Pros of Investing in Gold Bullion

During a depressed or slow economy, investing in physical gold is still fairly safe – relative to other investment commodities, that is. This is because through the centuries, gold has shown itself to have enduring value, due to its beauty, versatility, and most recently its physical properties which make gold, an inert metal, perfect for use in electronics. Other advantages include:

  • Investing in gold bullion is cheap in terms of broker costs – less expensive than investing in stocks and bonds or gold ETFs.
  • Gold is well known as an inflation hedge.
  • The minimum fineness requirements for gold bullion (.995) means that the gold will not tarnish.
  • Investors can buy or sell gold bullion at all hours, as the market for physical gold is global.
  • As an asset diversifier, gold can lower the overall risk of an investment portfolio.
  • Unlike other assets, gold’s value can increase even as the dollar’s value decreases.

Cons of Investing in Gold Bullion

While considered a good investment for the long-term, physical gold does have its limitations as an investment asset.

  • As a physical asset, gold is vulnerable to being lost or even damaged in the event of a major catastrophe – which is what it took to destroy the gold bullion in the vaults below the World Trade Center towers.
  • Gold bullion doesn’t earn interest for investors. As an investment, its monetary value lies only in the opportunities for selling and trading.
  • Because the price of gold is so stable, gold bullion is likely to yield lower returns than other more volatile assets.

Physical Gold Bullion Market

Though London is considered the main center of physical gold trading by precious metal investors, gold is traded all over the world, mainly in Hong Kong, New York, Frankfurt, Singapore, Zurich, and Tokyo, according to the U.S. Geological Survey. Gold sellers who trade in bullion include:

  • Gold bullion brokers and dealers
  • Gold mining companies
  • Gold refiners
  • Banks

Investing in Gold Bullion During an Economic Depression

Gold prices have historically tended toward stability. The National Mining Association’s chart of historical gold prices shows there was little fluctuation during most of the 20th century in the price of gold until the two-tier pricing system was implemented in 1968. Since then, the gold price fluctuates daily, but less so than with other more volatile commodities.

Storage of Physical Gold Bullion

Gold buyers do not need to immediately transport the bars and ingots and arrange for storage and security. The buyer may opt to let the gold bullion seller retain all or a portion of the gold in the vault for some time, with the bullion being gradually shipped to the gold bullion buyer.

Buy Gold Bullion Bars With an Eye to the Future

Gold bullion as ingots and bars represents a relatively safe investment opportunity during a bull market and a modest opportunity for profit in a bear market. Due to its physical properties, aesthetic appeal, and usefulness in circuitry and other electronics applications, gold has a value that endures. That value can make physical gold bullion a very reasonable investment option for investors looking to diversify their portfolios and profit in a down economy.

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