What is Gold Bullion: Definition and Types

Gold bullion is a popular choice for investing in precious metals. Discover what it is and how it can offer you valuable benefits.
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14 November 2024
Gold bullion has long been regarded as a symbol of wealth and a reliable investment asset. In the Indian context, it serves as a hedge against inflation, economic instability, and currency fluctuations. Understanding the fundamentals of gold bullion and its investment avenues helps individuals make informed choices about securing their wealth. Here, we explore gold bullion's various aspects, including investment methods, quality, types, and differences from traditional gold. Additionally, a brief look at the Loan-to-Value (LTV) ratio for gold loans provides insights into using gold bullion as collateral.

What is gold bullion?

Gold bullion refers to gold in its purest form, typically cast as bars or minted as coins. Recognised globally, gold bullion maintains a high level of purity and value. Generally, gold bullion is sought by investors due to its intrinsic value and liquidity. In India, it serves as a store of wealth, offering financial security and resilience against market volatility. The standard for bullion quality is its gold content, often marked with purity indicators like 24 karats or 99.99% fineness.

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How to invest in gold bullion?

Investing in gold bullion offers Indians a tangible asset with intrinsic value. Gold bullion investment can be approached through physical ownership or digital options.

  1. Direct purchase: Buying gold bullion bars or coins from authorised dealers ensures purity and certification.
  2. Gold Exchange-Traded Funds (ETFs): Digital investments in gold ETFs allow flexibility and eliminate storage needs.
  3. Sovereign Gold Bonds (SGBs): Issued by the Indian government, these bonds offer interest along with gold returns.
  4. Digital gold: Available through mobile apps, digital gold lets investors buy gold in small amounts and store it virtually.
  5. Jewellers’ investment plans: Select jewellers offer plans for small-scale, periodic investments in gold bullion.

Main types of gold bullion

Gold bullion is available in various forms, each serving different purposes and investment needs. Below are the main types:

  1. Gold bars: Known for their high purity, gold bars come in various weights, providing large-scale investment options.
  2. Gold coins: Easily tradable and widely available, gold coins offer flexibility for investors.
  3. Gold rounds: Similar to coins but without a face value, gold rounds appeal to collectors and investors.
  4. Gold ingots: These are rectangular bars, often heavier and cost-effective for bulk investments.
  5. Gold biscuits: Smaller than bars, gold biscuits are ideal for personal investment and gifting purposes.

Quality and purity of gold bullion

Gold purity is essential when investing in gold bullion. Below are quality and purity indicators for gold bullion:

  1. Karat rating: The standard measure of purity, with 24-karat representing pure gold.
  2. Fineness: Represented as a decimal, such as 0.999, indicating 99.9% pure gold.
  3. Hallmark certification: Assures the bullion meets regulatory standards of purity and authenticity.
  4. Refinery stamp: Indicates that reputable refineries certified the gold.
  5. Weight and shape consistency: Ensures no added impurities, preserving its value for investment and resale.

Difference between gold and gold bullion

AspectGoldGold Bullion
DefinitionGold in various forms, including jewellery.Gold in its purest form, such as bars and coins.
PurityVariable, depending on its form.High purity, often 24-karat or above.
PurposeJewellery, industrial use, and investment.Primarily for investment and wealth preservation.
Market ValueLower resale value due to impurities.Higher resale value due to purity and liquidity.
CertificationNot always certified for purity.Certified for purity and authenticity.


Understanding the loan-to-value ratio in gold loans

The Loan-to-Value (LTV) ratio determines the maximum loan amount a borrower can avail against gold bullion. In the context of gold loans, Bajaj Finance offers gold loans only against 18-22 karat gold jewellery. The LTV ratio is set as per the guidelines set by the RBI. You can get up to 75% of your gold’s value as loan at competitive interest rates. For example, if your gold jewellery is valued at Rs.1,00,000, an LTV ratio of 75% would mean you could secure a gold loan of up to Rs.75,000.

Frequently asked questions

Why is gold bullion so expensive?
Gold bullion is expensive due to its high purity, typically 99.99%, and its intrinsic value. Unlike other forms of gold, such as jewellery, bullion is valued solely on gold content without added design or manufacturing costs. Gold's rarity, global demand, and role as a safe-haven asset during economic uncertainties also drive up its price. Its durability and limited supply further enhance its value, making gold bullion a premium investment choice.

Is it worth buying gold bullion?
Buying gold bullion is often worthwhile due to its reliability as a long-term investment. Unlike stocks or bonds, gold maintains intrinsic value, providing a hedge against inflation and currency fluctuations. Gold bullion’s liquidity and global recognition make it easier to buy or sell in times of financial need. Additionally, its value has historically appreciated over time, making it a solid choice for those seeking stability in their investment portfolio.

Does gold bullion lose value?
Gold bullion may fluctuate in value due to market conditions but tends to retain long-term worth. While daily prices might vary with economic trends, global demand, and currency rates, gold’s intrinsic value and limited supply mean it generally appreciates over time. Unlike some investments, gold doesn’t face the same depreciation risks, providing a durable asset for preserving wealth, especially during economic downturns or inflationary periods.

Is buying gold bullion safe?
Buying gold bullion is a secure investment, especially when purchased from reputable dealers. Its high purity and value make it ideal for long-term wealth preservation. However, safety involves storing it properly in secure facilities, like a bank locker, to protect against theft. Additionally, unlike digital assets, gold bullion provides a tangible asset, offering financial security and a hedge against market volatility. As a recognised investment, it is a reliable addition to portfolios.

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