Investing in Bullion

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Investing in gold is a sensible thing to do. It is the right thing to protect your money during turbulent times. It ensures a better future for you and your family. In the last decade, the gold industry has experienced a surge in the number of individual or private buyers. This is because more people are becoming aware of the opportunities to make more money. There is a lot of information about the gold industry and investing in gold. If you are a first-time buyer, some of the information can be confusing. For instance, why gold?

  1. Gold is a physical asset you can see and touch. Gold is a finite and scarce commodity. It cannot be created or debased Gold is scarce and costs a lot of money to mine, this gives it an inherent value that does not diminish. The many uses of gold also serve to drive its market value even higher.
  2. Gold bullion coins are fungible, this means you can substitute a coin with another coin that might have a different deign, but have the same size, weight and value.
  3. This precious metal also has a higher value-to-weight ratio. It is portable and easy to transport across borders.
  4. Gold does not have counterparty risk since it is not issued by any central bank or governments with any guarantees. Likewise, it does not have default risk.

Other properties that make gold valuable include :

  • Conductivity – it conducts electricity easily
  • Ductility – It can be stretched into thin wires
  • Malleability – it can easily be moulded or rolled into sheets

These properties make gold an ideal metal to use in electronic, industrial, medical and other technological applications.

  1. What is the spot price?

When you buy gold Bullion Brisbane you will come across the term “spot price”. It is the basis of what a gold dealer would offer to sell or buy gold from you. This price is the current market value at which gold is traded in the wholesale market.  It is quoted in US dollars regardless of where in the world you would be sourcing your gold from. The precious metals’ market is open 24 hours a day around the world so the spot price will fluctuate throughout each day.

  1. What is the Spread?

In addition to keeping an eye on the spot price, you should also keep an eye on the spread. This is merely the difference between the “bid” and the “ask” price. It is the price a dealer would quote to buy gold versus the price that dealer would sell the gold for expressed as a percentage.

  1. What is the Price Premium

When buying gold coins or bars one would have to look at the amount that is in excess of the spot price. The price premium on a gold bullion coin or bar will reflect other factors like the cost of designing, refining, fabricating and minting that product.  It also reflects the other costs incurred through the entire value chain like transportation, marketing, insurance and other costs.  Premiums are also affected by supply and demand for that particular bullion coin or bar. When you buy gold bullion Brisbane the dealer will also have to consider the premium and not base his price on the spot price.

Small gold bars have a higher premium because they cost more to produce. The same can be said about gold bullion coins. Coins will have a higher premium than bars because there are more steps involved in fabrication.

 

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