Bullion refers to precious metals that are considered rare enough to be valuable. These metals are actually metallic chemical elements and tend to be less reactive than other elements. These precious metals, most notably gold, silver, palladium and platinum, are very lustrous, ductile and malleable.
Bullion refers to the “rough” metal or the pure metal in quantity form, not the metal that is chosen for rings or special jewelry.
Bullion coins or bars are priced according to the content of their precious metal. For example, one troy ounce of gold is currently worth about $1,200. Therefore, if you had a bullion bar that weighed precisely one troy ounce, you could get the full amount for it. If you had a coin that weighed one troy ounce, you have a choice: you could convert it for bullion cash value (the price of the gold used in the coin) or you could save the coin itself and see if it appreciates in value based on its market significance.
What determines the price of bullion?
Usually, it’s a combination of the general market and the general scope of the mining industry. For example, if new sources of ore are discovered, or if improvements in mining are made, then the price goes down. However, if there is a great deal of difficulty in production, then the metal has become even rarer. Therefore, its price drastically increases. Precious metals like silver and platinum tend to be affected by the general direction that the market takes. This is because these metals are so commonly used in industry, that any recession directly affects their production and demand. Gold is an exception, however. Gold is primarily used as a hedge and as a commodity, and even more during recession and depression times. Therefore, it actually increases when the market goes down. When people panic, investing in gold bullion is the first thing on their minds.
Remember that the physical condition of a coin partly determines its market value. A coin or bar that is not in good condition will not have much collectable worth. It may still have bullion worth, and as long as it can be melted down, it will maintain that worth. However, if precious metals are widely circulated, then they may lose some pure metal content. The bulk form of precious metal pieces are often traded on commodity markets.
There are two types of processes when it comes to creating these bars: casting and minting. Casting involves using special molds to create solid objects, while minting involves thin sheets and hand cutting. Remember, bullion is valued by its mass and purity level. Though some coins may be labeled as having a certain face value, these denominations are for symbolic use only. In actuality, bullion price is much greater than currency price. For example, a $50 coin made of gold might actually be worth $1,200 on the market—the price of a troy ounce of gold.