Gold bars – a long-term, crisis-proof investment
The standard format has a lot to offer both beginners and experienced investors, and has many advantages over coins.
Opting for a gold investment means investors are choosing a stable asset which offers a host of opportunities. Just like the classic gold coins, gold bars especially are a standard, widely recognised format which is available in numerous denominations, and are thus suitable for almost any investment budget. Financial experts consider this yellow precious metal to be a safe currency which has proven its reliability time after time. If you’re looking for evidence to back this claim, look no further than the market price of gold, which is the decisive barometer of the value of this commodity. In times of crisis, the gold price always rises – most recently for example during the euro crisis of 2011/2012, and again during the coronavirus pandemic of 2020.
Gold bars are commercially available in many attractive sizes from one gram up to 12.5 kilograms. Though they all vary in weight and dimensions, each has a gold content of at least 99.5 percent. Many investment bars have an even higher fineness rating of 999.9/1000. Due to this high proportion of gold content, the price of such bars is primarily based on the current gold price. This is determined on a daily basis at all major international financial trading venues and stock exchanges, and quoted in US dollars. The London Bullion Market, which has been setting the market price for gold since the 17th century, is responsible for what is termed the London Gold Fix – i.e. monitoring supply and demand in order to establish a common transaction price, a task which is carried out twice every business day.
Gold bullion history and production
A number of ancient archaeological sites have yielded finds which indicate that gold bars were produced as early as 4500 BC. Most of these were crafted to represent religious figures or shapes with textures reminiscent of animal skins. It is also well documented that gold bars in various formats have been used as a means of exchange and payment for more than 4000 years – which is around 1400 years before the first coins were minted. In Europe, gold bars gradually lost their importance as a means of payment with the introduction of paper money systems at the end of the 13th century. However, even up to the Second World War, gold bullion bars served as a physical insurance for paper assets. Since then, they have been kept in strong rooms, stored mainly in high denominations to act as an asset which can be relied upon to hold its value.
Today, gold bars are mostly produced for the needs of the investment market. They are created in more easily managed sizes, and many of these are also suitable for collectors. A distinction is made between cast and pressed (minted) gold bars. The manufacturing process depends upon the actual weight of the investment product. Bars weighing up to around 100 grams are usually minted. This process, which is the same as that used in the production of coins, results in a finer and more-glossy surface, which makes for a more aesthetically attractive look. For larger bar sizes of around 250 grams upwards, the casting technique is more common. This often results in a product with rounded edges and a matt surface.
The LBMA standard guarantees quality and authenticity
It is not always easy for would-be investors to distinguish between serious offers and worthless counterfeit goods. Gold remains a valued commodity and is therefore often at risk of being copied – and modern counterfeiting methods can produce quite convincing fake bullion bars. Therefore, gold investors should always check the quality and authenticity of their investment artefacts before agreeing a purchase. Serious precious metal traders can always prove the origin of the gold in their possession, whether that be through certificates of authenticity from accredited sources, or via data and specifications imprinted on the product.
The gold standard is the so-called “good delivery” (GD) guidelines. These are defined and recognised by the London Bullion Market Association (LBMA) alongside a fineness requirement of at least 995.0/1000, which governs the weight and mass of all gold bars. The LBMA standard applies to bars weighing between 10.9 kg (which corresponds to 350 troy ounces) and 13.4 kg (430 ounces). Good delivery bars may only deviate from this set standard by a matter of millimetres. The specification also demands that individual gold bars are marked with a serial number, the manufacturer’s hallmark, a statement of the fineness to four digits, and the year of manufacture. This gold bullion data can be embossed or punched. Gold bars produced in accordance with the GD standard are regarded as suitable for unlimited international trading.
Manufacturers who meet their strict production requirements receive a corresponding trade certificate from the LBMA and are then placed on the Good Delivery List (GDL). They are checked again at regular intervals and can lose their certification in the event of any deviation from these strict standards.
The following overview lists some of the numerous gold bar refiners who have been granted LBMA certification:
|Boliden Commercial AB||Skelleftehamn||Sweden|
|Heimerle + Meule GmbH||Pforzheim||Germany|
|Heraeus Ltd.||Fanling||Hong Kong|
|Kennecott Utah Copper LLC||Magna||USA|
|Metalor Technologies SA||Marin||Switzerland|
|Pamp SA||Castel San Pietro||Switzerland|
|Rand Refinery Ltd.||Germiston||South Africa|
|Royal Canadian Mint||Ottawa||Canada|
|Schöne Edelmetaal BV||Amsterdam||Netherlands|
|Umicore Sa Refining||Hoboken||Belgium|
|WesternAustralia / Perth Mint||Perth||Australia|
Popular gold bars and special shapes
Even beyond the larger kilo bars, certified gold bars are available in many convenient and manageable units from 0.5g to 1 kg and from 1/10 up to to 10 ounces. Popular investment sizes tend to be gold bars marked at 100 grams or one troy ounce because these offer the best price/performance ratio. And as a useful rule of thumb, the higher the weight of the bar, the lower the surcharge. This is because there are trading premiums to factor into a sale price beyond the actual value of the pure precious metal. So basically, the production of smaller units is always associated with higher costs.
In addition to classic gold bars, there is also another common format – known as the coin bar. These products have an embossed face value and, just like coins, are therefore considered legal tender in the country of issue. The “Dragon Rectangular”, for example, is a popular gold coin bar which is issued by Perth Mint, an Australian mint based in Perth, Western Australia. And due to its elaborately designed face motif, this coin bar is also very popular among numismatists.
Another popular gold bar trend is now being seen in Germany. These new units are composite, rectangular gold plated bullion bars which have predetermined breaking points – much like we see on many popular chocolate bars. They effectively combine the advantages of small coins within a standard bar format. The gold plate consists of 0.5 or 1 gram and 1/10 ounce pieces, and there can be between 5 to 100 small bar segments. Whenever necessary, individual segments can be snapped out of the main bar and then sold separately.
Advantages and disadvantages of gold bars:
Compared to gold coins and silver bars, gold bars have many advantages which are readily apparent when you buy them. For instance, gold bars are far less expensive to manufacture than coins. The reason for this is that coin designs have to be custom produced and also involve a lengthy embossing process. Gold bars for investment purposes do not generally carry elaborately designed motifs. Instead, they usually show the necessary technical data and, of course, the hallmark of the producer. As a result of this cost advantage, these bars can be offered at a lower comparative price than investment coinage. Another potential advantage is that investment gold can be purchased free of VAT in many countries. However, when buying silver coins and bars, it remains the norm to charge value added tax on each transaction. This means that purchasing investors get less precious metal for their investment outlay.
Gold bars are a much sought-after commodity on worldwide markets, especially when it comes to standardised good delivery bars. They can be turned back into money assets almost anywhere, and are widely tradable via all major banks and accredited precious metal traders. And because they bear a punched or embossed manufacturer’s serial number, gold bars can be clearly identified at any time and are, of course, very traceable indeed.
Certificates of authenticity and forgery-proof holograms
Gold bars offered for sale often have a certificate of authenticity, which can provide precise information about the origin of the piece and quality of its gold content. Although, unlike many coins, these certificates demand a little more storage space to accommodate this documentation, experienced investors appreciate the attached certificates because they can make it easier to resell the bars. Furthermore, they also serve as one more way to deter any would-be counterfeiters.
Another investment alternative now available is what are known as “kinebars”. These are a type of gold bar which bears a security hologram on the back. This technology was invented by the Swiss precious metal refiners Argor-Heraeus SA, who also manufacture hologram bars on behalf of its customers. For example, the Austrian Mint now offers the “Kinebar Lipizzaner” gold bar which is manufactured in Switzerland. The so-called ‘kinegram’ security is particularly forgery-proof and also absolutely guarantees the authenticity of the bar. Kinebars are offered in many different denominations from 1 to 20 grams, or one ounce. And because of their particularly striking and attractive appearance, they are also popular with collectors.
- Gold bars represent a long-term investment which has already proven itself to be crisis-proof in many instances.
- Thanks to LBMA standardisation, good delivery bars enjoy worldwide acceptance.
- Thanks to their stamped serial numbers, gold bars can be readily identified and tracked at any time.
- The purchase of gold bars is VAT-exempt in many countries.
- Certificates of authenticity or Swiss kinegrams guarantee a high level of security against counterfeiting.