While I personally prefer coin bullion as an investment (especially when you’re just beginning to invest in gold), I also recognize the value of the gold bullion bar as a financial weapon. You see, if you’re investing in gold, it’s always a good idea to be able to speak softly and carry a great big golden stick.
Apologies to Teddy Roosevelt, but hey — the truth is, a gold bar makes for an excellent “big stick” in financial matters, and it can take you far. Simply put, unlike most commodities, gold is both an excellent investment and a hedge against inflation.
A hugely valuable commodity
On the investment front, gold is a must for several reasons. For one thing, its volatility can be lower than other investments: price fluctuations certainly do occur, especially in the short run, but usually while still trending upward.
Also, gold has steadily outperformed the standard investment indices, including the Dow and NASDAQ, since 1971.
All forms of gold make valuable investments — but if you really want to throw your financial weight around, choose gold bars. They’re simply more effective than coin bullion, nuggets, or securities, if for no other reason than that you can get more for your dollar when you buy in bulk.
So, the biggest advantage of gold bars is that the commissions on them are typically lower than on gold coins. A second advantage is that gold bars are easier to physically store.
Due to economy of scale and fixed production costs, large bars and even ingots tend to cost very little over the spot price, which means you don’t have to pay as much of a premium as you do for other forms of bullion. Typically, the bigger the bar, the cheaper the commission is a percentage.
Therefore, you will save money if you buy your “weapons-grade” gold bullion in chunks as large as you can afford. However, realize that it may be harder to sell larger gold bars in an emergency.
You should also purchase from a highly-regarded dealer, so you’re less likely to have to pay assay fees when you decide to sell. That way, you have a larger financial stick to wield.
The ultimate hedge fund
All investment has risk. With most commodities, you could lose your shirt if the market goes south. But this can be less true for gold bullion than for stocks, bonds, or Forex securities.
The value of gold has trended upward consistently and rapidly since it loosed the last surly bonds of the U.S. gold standard back in the ’70s. Its value rarely drops very far, and it almost always recovers — which makes it an excellent hedge against inflation as well as a great investment. However, it is volatile, so you need to look at gold as a long-term investment.
Gold bullion even holds its value during cases of currency hyperinflation, like those that have occurred in recent years in Zimbabwe and Argentina. If worse comes to worst and a banking collapse or global hyperinflation occurs, gold will still hold its value well — much more so than paper securities.
A few bars here, a few bars there
In light of its investment and hedge value, it’s a good idea to keep a few bars of gold bullion stashed away. But its value as a financial weapon goes beyond that. Gold bullion also tends to be very liquid, in that you can convert it into cash quickly.
Do keep in mind, however, that bar bullion can be slightly less liquid than coin bullion, since a prospective buyer may want to assay it before purchasing. Although again, if you work with a trusted dealer — especially if you bought the gold from them in the first place — this will be less of a problem.
In any case, many experts recommend that you maintain a mix of at least 5-10% gold in physical form in any well-balanced investment portfolio. If your portfolio is large, then the gold bullion bar can be a good choice of format for such holdings.
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