Gold Bullion

Investors who see gold as a form of investment should buy gold bars. These products have a relatively low price compared to coins. Most gold bars have low production costs, and therefore the prices of the major gold bars are significantly lower than the prices of bullion coins. Lower production costs usually apply to bullion products that are over 1oz. Small bars can certainly have higher premiums than the respective gold coin. So gold bullion is optimally suitable for all investors who want to protect their assets against inflation or other crises.

Producing Bullion

In general there are two different methods of producing gold bars. The first method would be casting and the second is the minting of gold bars. Traditionally gold bars had higher weights than coins and were cast. Nowadays gold bars are produced with a weight of 1 gram. For these small bars and bullion up to about 100 grams the minting process is more efficient.

Cast Gold Bars

The casting of gold bars can be done in two ways. In the first method gold granulate with a fineness of 99.9% is placed in a crucible at over 1064°C and then poured into the ingot mould. In the second method, the granules are added directly to an ingot mould and heated in a special furnace, so that the gold must not be recast again. The fineness, the fine weight and the manufacturer is then stamped by a hydraulic press into each bar regardless of the production method.

Minting of Gold Bars

The minting of gold bars is similar to the minting of coins. First blanks are produced that have the exact weight of gold bullion. The production of the blanks is done by rolling of plates, sheets and strips in a particular strength. The blanks are then punched out. With lighter weight deviation upwards, the blank will be brought to the exact fine weight needed manually. Subsequently, the blank is then shaped in a press, so that it is given its final shape of a gold ingot, and the caption.

Weights of Gold Bars

Nowadays there is a wide range of different weights of gold bars available. The weights of gold bars start at 1 g and go up to 1 kg for the private investor. All sizes have their place, but it should nevertheless be pointed out again that investors purchase large bars because of the lower premium (surcharge). Depending on the supplier premiums can range from 1% - 3% for larger bars.

Weight                 Production (usually)

1 g                                 minting

5 g                                 minting

20 g                         minting

50 g                         minting

100 g                         minting

250 g                         cast

500 g                         cast

1000 g                         cast

Manufacturer 

There are a number of reputable bullion producers who sell their products in Germany, they include mainly German and Swiss precious metal companies. The largest refinery in the world is the South African Rand Refinery, their most popular product is the Krugerrand.

Manufacturer                     Country

Argor-Heraeus                     Switzerland

Degussa                             Germany

ESG                                             Germany/Switzerland

Geiger Edelmetalle/LEV     Germany

Heimerle + Meule                     Germany/Switzerland

Heraeus                                     Germany/Switzerland

Pamp                                     Switzerland

Rand Refinery                     South Africa

Perth Mint                             Australia

Umicore                                     Belgium

Valcambi                             Switzerland

Gold Bar Price 

The price of gold bullion is directly linked to the official price of gold. In addition, the price of gold bullion carries an added or extra cost. This includes the cost plus margin of the manufacturer and the seller. This "extra“ is called premium. The buyer of gold bullion should therefore take into account the official price of gold plus the premium.

Gold Price 

The price of gold is now freely traded on the various exchanges in the world. One of the major stock exchanges is the "London Bullion Market", here the world market price of gold has been fixed twice a day since 1919. The fixing of the five participating banks has two aims: firstly, a balance needs to be created at a particular price between sellers and buyers of gold; secondly, a lot of transactions can be carried out by setting the price. During the gold fixing process the big gold owners in the world are involved by phone with the five fixing banks. They include, among others, mining companies, refineries and banks. National banks used to set the price to determine the value of their gold reserves.

Premium 

In addition to the price of gold the gold bar trades with an extra cost. This depends on the size of the bar, the method of preparation, the respective manufacturers and not least by the seller. The premium is determined by the size of the bar. This is quite logical, because the processing of a cast gold 1000 g bar is less expensive compared to the casting of 100 gold bars of 10 grams each that must be marked, packaged, stored and transported. It can be seen that in general, larger gold bars have a lower premium. Also the seller’s margin is included in the premium, because they also have costs and margin on bullion. Seller costs also include items such as transport, storage and general overheads.

Advantages of Gold Bars 

Large gold bars of 1 kg are the ideal gold investment for investors who want to get the maximum gold for their money. These types of bars are obtained at a very low premium of approximately 1%. In comparison the premiums on gold coins such as the 1 oz Maple Leaf, Krugerrand and  Vienna Philharmonic start at about 3% depending on demand and availability. But smaller gold bars of 500 g, 250 g and 100 g may have surcharges of approximately 1-3%.

One advantage of cast gold bars is their surface. Due to the manufacturing process the surface is already rough, so scratches or slight dents usually do not attract attention. The gold content is thus unaffected so the gold product can be resold easily and immediately by the new buyer. 

The next advantage is indeed relevant only to owners of large quantities of gold, but should be enumerated. Gold bullion can be stacked very well, so can be accommodated in small lockers with high values.

Gold bars of the renowned manufacturers of the world are recognised by almost all bullion companies and banks so that they can be bought and sold anywhere.

Disadvantages of Gold Bars 

A disadvantage of gold bullion is the risk of forgery. Gold coins can also be faked, but with coins it is much more difficult because the fine contours and motives are not easily minted. For example since 2013 Maple Leaf 1 oz gold coins have had a safety feature called the laser engram, and this increases protection against forgery.

Minted gold bars are easily scratched due to their smooth surface, since the high purity of 999.9/1000 does not allow any other alloying constituents. It is different with 22 karat gold coins as a copper alloy is used that makes the product more scratch resistant. 22 karat gold coins are the Krugerrand and the American Eagle.

Advantages of Gold as an Investment 

Should one compare gold and silver as capital protection, gold clearly has the most advantages on its side. First, recognised gold bullion and gold coins in Germany are exempt from VAT. In contrast, for silver the full VAT of 19% must be paid to the state. 

A relatively stable price of gold lets Gold investors also sleep much more soundly. Silver however has to contend with major price fluctuations, although it is therefore quite possible to make a lot of money with silver investments. 

One of the main advantages of gold is the high demand in jewellery production. Gold also has uses in industry and for crafts. It's especially important to mention the conductivity properties of gold. In addition, demand is also controlled by Central Banks and investors during times of economic uncertainty and gold is sought after as a safe investment.

Another advantage of gold is its high density value. For this reason, a high value can easily be stored in a very small space. 

Gold can not completely lose all of its value as may be the case for currencies. Since our entire monetary system is based on trust, but actually does not have any underlying physical value backing any currency. Furthermore, it is not possible to print gold, while currency can be increased arbitrarily. Thus, in times of crisis (inflation and deflation) gold acts as a medium of exchange, as has been the case again and again for centuries.

 

Bullion Buying Tips 

• Major gold investors should buy bigger sized gold bullion because they have a lower premium. Gold bars with a weight of 1000 g, 500 g, 250 g and 100 g have the lowest cost.
• Before purchasing bullion it is recommended to compare prices at reputable precious metal dealers and banks. 
• Cast gold bars have the advantage that small scratches or dents do not have an effect on the future sale price as long as the fine weight is correct. Minted bars, just like gold coins have a very smooth surface. Gold bars are exempt from VAT only if they have a minimum purity of 995/1000.
• Gold bars serve as a capital assurance! Those who want to have a high return in the short to medium term, should invest in other assets. Gold is to be considered a long term investment and a store of value. 
• Gold should be bought only from reputable dealers and banks.

VAT 

Gold bars are exempt from VAT if it has a purity of at least 995/1000. In Germany, the taxation of investment gold is regulated in the Value Added Tax Act (UStG) § 25c.