What is bullion?
Bullion is a mass of any one of the known precious metals. By strict definition, precious metals are metallic elements that are rare or uncommon. Bullion is usually made of either gold or silver. Its value is determined by the worth of the metal rather than by its face value as money. To say it simply, bullion is valued based on the mass and purity of the metal used, instead of its artificial currency value.
Three factors
There are three factors - metal, purity, and weight - that affect the value of bullion. The overall value of bullion is determined by the type of metal used. Most people know that platinum is worth more than gold, which, in turn, is worth more than silver. It is understandable then, that silver bullion coins are popular with collectors because of their relative affordability.
Ingots & Coins
Bullion is traded on commodity markets in two forms: bulk ingots or coins. The coins are minted by governments. At least ten countries; Australia, Austria, Canada, China, Mexico, Poland, South Africa, Switzerland, the United Kingdom, and the United States, are known to mint gold and silver bullion coins.
Here, in alphabetical order, is a list of just some of the government-issued gold and silver bullion coins:
1. Australian Gold Nugget, Lunar Series I, and Lunar Series II
2. American Buffalo, American Eagle, and Double Eagle
3. Austrian Philharmoniker
4. British Britannia and Sovereign
5. Canadian Maple Leaf
6. Chinese Gold Panda
7. Mexican Centenario, Libertad, and Onza
8. Polish Orzel Bielik
9. South African Krugerrand
10. Swiss Vreneli
The Australian Gold Nugget
The 10,000-dollar Australian Gold Nugget is one of the largest bullion coins in the world. Minted by the government of Australia , this bullion coin is composed of 1 kilogram of 99.9% pure gold. Other bullion coins even larger than the Australian Gold Nugget are available.
However,since these are not produced in mass quantities they are not practical to handle. Two examples are : the 100,000-euro Vienna Philharmonic,( minted in 2004), which contains 31 kilograms of gold; and the 1 million-dollar Canadian Maple Leaf,( minted in 2007), which contains 100 kilograms of gold.
Legal Tender
While bullion coins are issued as legal tender, with nominal values assigned to them on minting, face values are far below the commodity value of the metals themselves. For example: most of the gold coins issued by national governments, especially those with currency values of between 10 and 100 U.S. dollars, typically contain no less than 31 grams of gold. On average (taking into consideration the consistent rise in the exchange rate of gold), the value of gold is about USD12 per gram. It is clear then that the currency value assigned by the government to a gold bullion coin has little meaning.
New Developments
While sources of ore have been discovered, there also have been improvements in the mining and refining processes. These two factors may cause the values of gold, silver, and other precious metals to diminish. As you buy and collect, it is also important to keep in mind that the "precious" qualification of a metal is always determined by the market value or high demand.
