The most efficient way to buy gold bullion is undoubtedly the method that banks and government agencies use: they acquire refined bars in weights of approximately 400 troy ounces (12.4 kg). These are the big, heavy bars you see in movies or at places like Fort Knox.
Now, at somewhere north of $600,000 each at today’s gold values, these bars are probably out of reach of most of you reading this… for now. However, I feel that it’s a good idea to let you know that they exist, especially if you ever come into a lot of cash.
What’s With the London Thing?
The London Bullion Market Association is the premiere precious metals market in the world, and has been for decades. As such they have the ability to set standards, and so they have. They’ve quite literally set the “gold standard” for both silver and gold bullion around the world.
Basically, London Good Delivery (LGD) status derives from a list of smelters and refiners whose gold or silver bullion the LBMA will accept without reservation. Their assay and quality standards are very stringent, and undergo periodic checks.
The LBMA confers LGD status only when a refiner:
- Has a track record of at least three years of producing refined metal
- Produces at least 10 tonnes of gold or 30 tonnes of silver
- Has a net worth of at least £10 million
- Can furnish evidence of ownership structure and directors
- Can provide (if necessary), a letter of endorsement from the central bank or an acceptable commercial bank in their country of operation
LGD bars are always 99.5% fine or better, guaranteed, and represent the most heavily-traded gold bars in the world. Currently, about 55 refineries have an LGD rating, producing about 150,000 bars per year.
Basically, if a gold bar is provably LGD, you can trust that it’s genuinely worth what someone’s asking for it, since no reputable organization has more stringent rules than the LBMA. And if it’s LGD quality, then any major gold bullion market will accept it as well.
These huge bars are an excellent way to purchase gold if you need it in quantity, because the premium is low given their large size, and the LGD status assures their quality, content, and purity. They’re also efficient to transport and store. Ultimately, they’re cheaper than gold coin bullion or smaller bars.
And depending on where you live, the government may demand less of a sales tax cut.
All this makes them an excellent choice if you’re using the gold for medicinal reasons, manufacturing, the arts, or electronics, which has become increasingly the case in recent years. LGD bars do, however, have their drawbacks, especially if your intention is investment or hedging against inflation.
Aside from the high cost, these large gold bars can be difficult to liquidate — as any piece of gold worth over $100,000 tends to be. Furthermore, if the buyer doesn’t trust the information stamped on the bars and forces you to pay assaying or refining fees, that can wipe out any profit you’ve realized.
My advice is to be aware of these LGD bars as an option, especially if you’ve got a lot of money to spend and aren’t in a hurry to liquidate, but to focus primarily on smaller quantities that are easier to liquidate; smaller bars, for example, or coin bullion.
LGD bars are impressive, but there are plenty of options for buying gold bullion that’s easier to deal with in the long run.