Remember the Bond movie Goldfinger’? Its villain’s name was Auric Goldfinger. Considering Auric’ itself would mean ‘of gold’, the name sounds redundant, right? But when were Bond films ever concerned about redundancy when style and charm were all that mattered? Coming to the point now: Goldfinger had an evil plan which was to contaminate Fort Knox itself! Fort Knox, the famed, US army post located in Kentucky, which houses gold bullions in massive quantities.
It was fitting that Fort Knox would feature in a film about gold and espionage and gold smuggling. After all, it’s the world’s largest gold bullion depository, right?
Many assume Fort Knox is the place which has the world’s largest gold hoard, but in fact, it’s the New York Federal Reserve. Over 93% of the gold bullion there actually belong to foreign governments. But what exactly is gold bullion?
Gold Bullion are gold bars or ingots and coins. Although, bullion can be made of any precious metal when we talk about bullion we normally are talking about gold.
Bullion are used for trading purposes and are a highly sought-after investment, especially used by wealthy industrialists and governments.
Gold is first mined in the form of gold ore. It’s then separated by heat or other chemical processes and converted into parted bullion. The resulting bullion is of at least 99.5% purity.
Bullion are a tangible asset which can be used for trading and can also be invested in. Since Bullion can be legal tender, it can be used as currency. However, governments stamp the currency a lot less than the bullion value in itself.
In recent times, bullion trading has been on the rise, depending on the price of gold and silver in the market.
Bullion, or gold ingots, is often held by banks in their reserves. So much so, that about 20% of mined gold worldwide is in possession of banks. Why, you may ask? Well, it protects against inflation, so it doesn’t look bad on their portfolio.
How to buy bullion?
Bullion can be directly purchased, either physically, or on paper. There are reputable gold dealers which can provide gold and silver ingots. The bullion can then be kept at home in a deposit box, in a bank, or with a third-party. There are also bullion banks who borrow actual gold from central banks in exchange for currency. The amount of money which the central bank leases the gold for becomes the Gold Forward Offer Rates or GOFO. This rate is published on a daily basis by London Bullion Market Association.
There is often a hazy difference between owning actual gold and investing in gold through ETFs (Exchange-traded funds). If you work with ETFs it might actually mean that you’re owning a gold or a silver-certificate, not the actual metal. Since it’s a fast-paced and a volatile market, it operates on futures contracts, in which the seller is contracted to deliver the gold to the buyer at the expiry date. This, in turn, means that the buyer can’t actually own’ the physical gold.
If you have a hefty capital and are looking to invest, it’s often advised to keep at least 30% of it in gold bullion. You should only purchase gold or silver from sources you trust. Also, keep a track of how you can sell the gold your already own.