Look up the performance of different popular assets over the past few decades and you’ll quickly realize the safety of precious metal bullion. Buying physical coins, bars, and ingots of these metals is a timeless choice that we wholeheartedly recommend to anyone looking for a way to protect their wealth from inflation and unforeseen economic crises.
That said, purchasing physical precious metals can seem a bit intimidating for investors considering it for the first time. Which is why we’ve crafted this handy guide to help you take your first steps. Let’s get started!
Understanding Bullion: Types and Forms
Before we go into further detail, what even is bullion?
In simple terms, bullion is the term used to describe highly pure forms of precious metals (typically gold and silver) in the financial sector. Retail investors use these precious metal bullions to store their wealth in a tangible asset that’s known for its incredible stability over years and even decades.
There are two main properties of precious metal bullions that you need to know about:
Types of bullion
The type of bullion refers to the precious metal used in its creation. While there are eight precious metals in total, the three that we’ll be discussing in this guide are:
Forms of bullion
The form of a bullion is the physical shape it’s given to make it easier to store, authenticate, and trade. These include:
Bullion coins are similar to the penny, dime, or quarter you use as currency. But instead of metals like zinc or copper, these bullion coins are minted from gold, silver, and platinum.
Bars are small rectangular bullions of precious metals. While they come in many sizes, the most common weights for these bullion bars are between 1 gram and 1 kilogram.
Technically, the ingot and bar terms can be used interchangeably. That said, ingots usually refer to larger bars that weigh several kilograms.
The Benefits of Bullion Investment
We already mentioned the biggest advantages of investing in precious metal bullion at the start of this guide. Let’s take a closer look at what these benefits offer with examples.
Hedge against inflation and currency devaluation
From what we’ve seen, this is one of the biggest reasons people invest in precious metal bullion and we understand why.
Take the US dollar, for example. According to the Bureau of Labor Statistics, a dollar from the year 2000 is worth about 55 cents in today’s economy. In other words, your cash savings are worth almost half of what they used to be.
But, this inflation won’t be an issue if you invested that money in gold bullion, as the price of gold increased from ~280 USD to nearly 2,000 USD between the year 2000 and today.
Portfolio diversification benefits
We recommend every investor to diversify their portfolio to reduce risk and bullions provide one of the most effective means of diversification. Their value is often independent of traditional financial markets like stocks — giving them stability during times of economic uncertainty.
Long-term value retention
Gold, silver, and platinum bullions are extremely resilient against degradation unlike other physical assets such as real estate that lose their value over time just from wear and tear.
Gold Bullion: The Timeless Investment
Gold is by far the most popular of the precious metals and for good reasons. Let us explain.
The allure and history of gold as an investment
Gold has been a symbol of wealth and prosperity within human civilization for thousands of years now.
Unsurprisingly, the same sentiment is true today as the vast majority of people see gold as a safe haven asset, with intrinsic value. This, combined with the ability of gold to endure harsh economic conditions gives it a level of trust that no other form of investment can match.
Analyzing market trends and price factors
When analyzing the past century of price trends, we discover a very fundamental truth about gold bullion. During times of high inflation and economic uncertainty, more investors flock to gold bullion due to its status as a safe haven asset.
This almost always boosts gold prices, as it did after the 9/11, the 2008 recession, and recently after the COVID pandemic in 2020.
Tips for investing in gold bullion
If you’re interested in purchasing gold bullion, here are a few tips we’ve learned over the years to help you get the best deal:
Research purity and authenticity
Verify the purity and authenticity of gold bullion before purchase to ensure that you’re getting your money’s worth.
Incorporate gold bullion strategically within a diversified portfolio to enhance stability and minimize risk. Don’t go all in on gold, no matter how tempting it may be. You should carefully consider the amount of gold you own compared to the amount of silver; see this guide on how much to allocate for each metal.
Regularly update yourself on market trends and global economic indicators to make informed investment choices.
Silver Bullion: The Affordable Option
Silver provides similar stability and resilience against inflation as gold but at a much lower starting price. This affordability is also silver’s biggest strength as it lowers the barrier of entry to precious metal bullion investments.
The growing popularity of silver in the investment community
Over the past few years, we’ve noticed an increasing interest in silver as the price of gold increases beyond the reach of many low-volume investors.
Take the r/silverbugs community, for example, which pertains to silver bullion investors. Over the past three years, that community grew from just 50,000 members to over 130,000 at the time of writing.
Market analysis and factors affecting silver prices
A significant portion of silver’s demand comes from industrial uses in the electric and electronic industries. Any drop in this industrial demand can have a negative impact on silver’s price.
That said, silver has shown a similar resilience against rough economic patches as gold so far — making it just as much of a safe haven asset as its more expensive counterpart.
Investment strategies for silver bullion
These are the three factors we suggest looking out for when investing in silver:
Incorporate silver bullion alongside other precious metals to reduce the overall risk. For example, own a significant amount of gold alongside your silver. See this article to see how much you should invest in each.
Recognize silver's dual role as an investment and an industrial metal, to get a better idea of its future valuation.
Stay informed about economic trends and industrial breakthroughs to identify the right moments for silver investment.
Platinum and Other Precious Metals
At first glance, platinum looks like just as good of an investment as gold or silver. After all, it is also a relatively popular precious metal with a mix of good reputation and plenty of industrial demand. But, we see a completely different story as soon as we dig a bit deeper.
The thing is, a large portion of platinum’s — as well as palladium’s — demand comes from their use in catalytic converter manufacturing. So, as the world moves towards electric cars that don’t need these converters, the demand for these metals will fall as well.
Comparison with gold and silver investments
Both gold and silver are widely considered safe haven assets that shield investors from inflation. Platinum and palladium, however, don’t have any such reputation, which is why we're seeing their prices go down as industrial demands decrease.
Strategies for Bullion Investment
Here are a few strategies we use to maximize profit when investing in precious metal bullion:
Diversification strategies within bullion investment
Don’t invest all of your money into one metal. At least invest in both gold and silver, as well as some non-bullion assets like stocks and crypto with higher growth potential.
Timing the market: when to buy and sell
Stay on the lookout for dips in the market and buy whenever the bullion prices drop below normal volatility. Conversely, any sharp surge in the value of your precious metals is a sign to sell them for a profit.
Long-term vs short-term investment approaches
We recommend the long-term bullion investment approach if you’re looking to build a retirement fund. This involves buying a diverse array of bullion, keeping them secure, and ignoring the short-term market movement until it’s time to liquidate.
On the other hand, the short-term approach is all about timing the market and trying to turn a profit as quickly as possible.
Risks and Considerations
In our experience, these are the most significant risks you can face as a bullion investor:
Make sure to keep an eye on the market and the economy as a whole to ensure that you don’t invest before a major dip caused by something like global geopolitics.
Storage and insurance considerations
You need a secure storage location and the right insurance for your bullion to minimize the risk of losing your investment to theft and robbery.
Authenticity, purity, and liquidity concerns
Only buy guaranteed high-purity bullion (at least 99.5%) from reputable dealers. Also make sure you have a way to reliably liquidate/sell your precious metals whenever the need arrives.
To summarize, precious metal bullion — especially gold and silver — are excellent investments to protect your money from inflation and recessions. They’re also some of the easiest assets to liquidate in a pinch. See this article on the best precious metals to invest in 2024.
We heavily recommend you to do your own research and consult a financial advisor before making any major bullion investments. If you would like to use your retirement fund to invest in precious metal, you may want to read about the pros and cons, and see our investment guide. You can also find a list of the best precious metal IRA companies here. Our top picks for 2024 are Goldco and Augusta Precious Metals, as they have longstanding reputations and excellent customer service to guide you through the process.