What Is Gold Bullion?

Author: Connor Campbell - Bullion & Economics Editor

Published: 21 Jun 2023

Last Updated: 5 Apr 2024


Discover the power of gold bullion during economic turmoil! Learn why investing in this timeless asset is essential. From battling inflation to interest rate hikes, gold remains a safe-haven choice. With its enduring value, protection against financial market fluctuations, gold bullion is your shield against uncertainty.

Key Takeaways

  • Gold bullion serves as a safe-haven investment, protecting against inflation and economic turmoil.
  • Gold bullion coins manufactured by The Royal Mint, such as Britannias and sovereigns, are UK legal tender and exempt from capital gains tax.
  • The gold standard, where paper money corresponded to gold, was followed by the British currency from 1717 to 1931.
  • Large reserves of gold are held in locations like Fort Knox and the Bank of England.
  • Storage services for gold bullion are available in the UK and overseas, with low cost and full insurance options.
  • Chards Coin and Bullion dealer offers various gold investment options, including bullion bars, coins, and digital allocated gold.
  • An allocated gold account allows buying, selling, and pre-funding future purchases with low premiums and storage fees.

Definition of Gold Bullion

Gold bullion is composed of a minimum purity of 99.9% (24 carat) and is presented in the form of gold bars or ingots.

Bullion, a term used to describe precious metals that are valued for their weight and purity rather than for any collectible or numismatic value. Understanding the definition of bullion, its types, and how it is traded is essential for anyone interested in investing in precious metals.

The Process of Gold Before Bullion

Gold deposition occurs when specific geologic conditions are met. These conditions include the presence of hot fluids, which are often enriched with gold and other minerals. The fluids move through the rock, creating cracks and veins where the gold is deposited. Some of the most common host rocks for gold deposition include shale, sandstone, and granite.

Gold ore is then mined through techniques like tunnel excavation, shafts, or open pits, followed by an intricate extraction process involving activities such as blasting, digging, and processing. Chemicals like cyanide may be used to dissolve the gold and separate it from other minerals in the ore during the crushing and processing stage.

Investing in Gold

Have you recently acquired a substantial amount of money, or has your interest in gold bullion been affected by multiple UK interest rate hikes or global increases, as well as the the rise in inflation? These economic factors, influenced by the conflict in Ukraine causing record-high energy prices and the disruptions to global supply chains caused by COVID-19, have impacted the investment landscape. An essential starting point for novice gold investors is to educate themselves about the concept of bullion. Understanding what bullion is forms a crucial foundation for all beginners in the gold investment journey.

Gold bullion bars were introduced long before modern fiat currency, and their origins can be traced back as early as 2500 BCE during Egyptian times. Amid economic uncertainty, gold emerges as the tried-and-true safe-haven, making physical ownership a favored choice. It serves as an effective safeguard against inflation and shields against economic turmoil. With its enduring value, gold remains a valuable commodity, especially as our trajectory leads toward a cashless society driven by banks and governments. Diversifying one's assets to include gold asset detached from the fluctuations of financial markets.

What is Capital Gains Tax?

Capital Gains Tax (CGT) is a form of levies imposed on the profit garnered from the sale of assets, such as real estate, investments, and collectibles. In the United Kingdom, the present CGT allowance is £3,000 per annum per individual, which implies that one can earn up to £3,000 from the sale of assets prior to being subject to CGT. 

When considering an investment in gold bullion coins, it is important to be aware that those manufactured by The Royal Mint, such as Britannias and sovereigns, hold the status of UK legal tender. This designation exempts them from capital gains tax. For UK residents, bullion coins which are UK legal tender pound sterling coins are exempt from capital gains tax (CGT).

What Was the Gold Standard? (1717-1931)

In 1717 the British currency followed the gold standard, this meant that the value of paper money corresponded to gold. During this period British citizens could exchange fiat currency banknotes for the equivalent amount of gold at the Bank of England. However, during World War I, the exchange of money from gold was halted to bolster the British war effort and was reinstated in 1925. Subsequently, the government once again abandoned the gold standard in 1931 as a result of the Great Depression. However, this time, we would not revert to the gold standard.

Gold Bullion Reserves

Large reserves of gold are typically kept in various locations including world banks, and is a form of currency that is a hedge against inflation. One of the most renowned locations for holding gold reserves is Fort Knox, a military base in the state of Kentucky, United States. As of 31 July 2020, it housed around 147.3 million ounces. However, as per the US Mint's report in January 2023, the quantity had increased to over 248+ million troy ounces of gold. In contrast, the Bank of England possesses over 400,000 gold bars, valued at over £200 billion pounds, making it a substantial reserve of wealth.

Where Can You Store Gold Bullion?

We offer storage services in the United Kingdom and overseas that are low cost and fully insured. This service offers customers an allocated and segregated metal account with discrete, allocated coins and bars. Customers can choose our dedicated world class storage facilities right here in Blackpool or store bullion overseas in bonded warehouses. For added peace of mind, customer stock held at our storage facilities has been independently checked by Azets.

Gold as an Investment

Chards Coin and Bullion dealer offers a wide selection of gold investment options, including gold bullion bars, gold coins, and digital allocated gold.

Our allocated gold account can be used to buy precious metals.

Invest in gold at a low premium of 1% without incurring the costs of delivery. Use the balance on your account to pre-fund a future purchase or sell the balance back to us. The buy premium is 1% over spot and we offer to buy back at the live rate on any given day (please note storage fees apply for allocated gold and silver). If you opt to make a purchase of physical metal we will add 1% back onto your balance. To learn more about Allocated Digital Accounts we recommend that you read our article.

Gold as Hedge Against Inflation

Gold investing offers an advantage by serving as a hedge against inflation, as its price tends to rise when the cost of living increases. Inflation denotes the overall rise in the prices of goods and services, resulting in a reduction in the purchasing power of currency.

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