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A common way to invest in gold and silver is by purchasing bullion. In this blog, we share everything you need to know, including how bullion markets work, ways to invest in gold and silver bullion, how to buy gold and silver bullion, and the differences between gold and silver investments.
What is bullion?
Bullion refers to high-purity physical gold or silver that’s refined to standardized levels (99.5% for gold and 99.99% for silver) and traded in the form of bars, ingots, or coins. It’s valued based on its precious metal content rather than design or collectibility.
Governments and central banks hold bullion as part of their reserves, and it’s often used as a hedge against inflation, currency weakness, or economic instability. For individual investors, bullion is a tangible asset that exists outside the financial system. When you buy physical bullion, you own the metal directly and don’t have to rely on a third party to meet its obligations.
Types of gold and silver bullion
Gold and silver bars and ingots
Bullion bars are refined metal products stamped with their weight, purity, and often the mint that produced them (typically private mints although can also be a government mint). To be qualified as bullion, gold bars must be 99.5% pure while silver bars are usually 99.9% pure.
Bullion bars come in a wide range of sizes, from small one gram bars to large institutional bars weighing up to 400 ounces. They can be either cast or minted:
- Minted bars are machine-made, giving them a smooth, polished finish and uniform shape. Smaller bars are often minted.
- Cast bars are made by pouring molten metal into molds, giving them a more raw and uneven appearance. Larger bars are typically cast (e.g. 10 oz, 100 oz, 1 kg).
Bullion bars tend to have lower premiums compared to coins, meaning they trade closer to the precious metal’s spot price. This makes them more cost-efficient for bigger investments – the larger the bar, the lower the premiums tend to be. That said, larger bars offer less flexibility when it comes to selling.
Bullion coins
Bullion coins, also called investment coins or specie, are typically issued by government mints and widely recognized, making them easier to trade than larger bars.
Most government-minted bullion coins carry a nominal face value but are worth much more in terms of their metal content. For example, 1 oz American Eagle gold coins have a face value of $50, but their price depends on the current spot price of gold, which is currently around $4,753 (StoneXBullion.com, , 04.24.26).
Most bullion coins are produced in a standard 1 oz size, though you can also find them in smaller fractional sizes as small as 1/10 oz, or larger sizes like 2 oz or 5 oz. Some of the most popular bullion coins include the:
- American Eagle
- South African Krugerrand
- Canadian Maple Leaf
- Austrian Philharmonic
- British Britannia.
Because of their intricate designs, gold and silver bullion coins have a more complex manufacturing process that means higher premiums compared to bullion bars. However, they have strong global recognition and can be easier to resell due to their smaller sizes.
How bullion markets and bullion trading work
Bullion trading and pricing
Physical gold and silver are traded globally in the bullion market, which spans from Asia to London and New York. Because it spans so many timezones, the bullion market operates nearly 24 hours a day, five days a week, with most trading conducted over-the-counter (OTC).
Precious metals prices are constantly changing based on supply and demand, but the ‘spot price’ is the current market price for immediate delivery of gold and silver. When you buy bullion, however, you’ll often pay above the spot price (a premium) to account for things like manufacturing, distribution, and dealer fees.
The role of banks and institutions
Most of the trading in the bullion market is driven by institutional investors and central banks, rather than retail customers. Central banks are amongst the largest purchasers of gold, with significant amounts held as part of their reserves. These reserves can be used to support currencies, provide stability during economic stress, settle international debt, or hedge against inflationary effects.
Central banks can also boost their economy by lending bullion to bullion banks withfinancial institutions . Banks act as market makers, dealers, and custodians in the wholesale precious metals market, engaging in activities like:
- Trading gold and silver
- Providing liquidity to the market
- Managing risk and hedging
- Storing bullion in secure vaults
- Acting as intermediaries between buyers and sellers.
Nearly all bullion banks are members of the London Bullion Market Association (LBMA), which helps set global standards for bullion trading and quality.
Bullion trading and lending
Central banks that lend gold to bullion banks receive cash equal to the gold’s value in return, with the cost of borrowing determined by the Gold Lease Rate (GLR).
Bullion banks often use this borrowed gold to lend to mining companies, who may use it to finance mining projects or cover forward contracts (when companies have already pre-sold unmined gold). In these cases, miners often sell the gold to buyers then repay the loan later using newly mined metal.
The London bullion market & OTC trading
The London bullion market is an over-the-counter (OTC) market, which means trades are conducted directly between participants rather than through a central exchange. This allows for greater flexibility and large-scale transactions between institutions.
Most of this activity is coordinated by the London Bullion Market Association (LBMA), which also sets quality standards for bullion products and sets the pricing benchmarks used around the world. However trading OTC involves counter party risk.
Ways to invest in gold and silver bullion
Two ways to invest in gold and silver bullion: by buying physical bars and coins or through exchange-traded funds (ETFs).
Physical bullion (bars and coins)
The most direct way to invest in gold and silver is by buying physical bullion bars or coins from a reputable dealer. This gives you full ownership of the asset, meaning you don’t have to rely on any bank, fund, or financial institution.
However, there are some things to consider:
- Storage: You can store bullion in a home safe, a bank safety deposit box, or in a professional vault.
- Insurance: You may also want to consider insurance, which can add costs to your investment.
- Cost: You’ll likely be paying a premium over the gold or silver spot price, particularly if you plan to buy gold or silver coins.
- Resale: Although you can sell gold or silver bullion anywhere in the world, it may take some time to have your assets valued, authenticated, and sold.
Exchange-traded funds (ETFs)
ETFs can be a more convenient way to invest in gold and silver bullion, especially if you don’t want to deal with storage. Gold and silver ETFs track the price of the underlying metal and can be bought and sold through a standard brokerage account, just like stocks.
The main drawback with ETFs is that you won’t have ownership over the physical metal, meaning you’ll miss out on the tangibility and lack of counterparty risk that bullion offers. Your returns may also be slightly affected by fees or tracking differences.
How to buy gold and silver bullion
If you’d like to invest in physical gold and silver, here are the steps to buy bullion:
1. Choose a trustworthy dealer
It’s essential you choose a reputable dealer with a proven track record of authenticity and secure delivery. Take the time to research the dealer’s reputation and read reviews on third-party websites.
Here are some things to look for when choosing a bullion dealer:
- LBMA-approved bullion: Ideally, they would only sell bullion from LBMA-approved refiners or sovereign mints (like the Royal Mint or United States Mint).
- Buy-back guarantee: They should also offer a clear and reliable buy-back process for when you're ready to sell your holdings.
- Insured delivery: Make sure the delivery is 100% insured until the moment you sign for it.
- Clear pricing: Look for transparent pricing with competitive spreads, but avoid prices that seem too cheap.
2. Compare prices
Gold and silver bullion will be sold at slightly higher than the spot price to account for things like manufacturing, distribution, logistics, and dealer margins. Smaller bars and coins usually have higher premiums, while larger bars tend to be more cost-efficient (and therefore better suited for bulk purchases).
3. Consider storage and security
It’s worth considering storage and security before you purchase your bullion. Your options are:
- Home storage: Convenient, low-cost, but requires strong security (i.e. bolted down, fireproof, ideally insured).
- Bank storage: More secure but less accessible than home storage.
- Vault storage: Professional, insured, but more costly (best for large investments).
Gold vs silver investment differences
As investments, gold and silver differ in terms of volatility, affordability, storage, and industrial demand.
Volatility
Silver is typically much more volatile than gold. Its price tends to fluctuate more sharply in both directions, partly because the silver market is smaller and more sensitive to changes in demand. Gold prices can still be volatile, but it’s generally more stable and has a longer track record of maintaining its value over time.
Silver generally offers higher return potential with higher risk. Gold offers more stability and predictability.
Affordability
Silver is more affordable per ounce compared to gold. This makes it more accessible for smaller investors or those who are just starting to build their bullion collection.
Despite the lower price point, silver still offers many of the same benefits as gold: it’s a tangible, globally recognized asset that offers portfolio diversification benefits with no counterparty risk (when held as bullion not as an ETF).
Storage
Gold’s density makes it much easier to store than silver. You can store a high value in a relatively small space, while silver takes up significantly more room for the same dollar value.
For example, let’s say you had $47,000 to invest in gold or silver bullion today. With that money, you could purchase 10 ounces of gold, which would be about the size of a single deck of playing cards. Or you could purchase about 580 ounces of silver, which would be the size of 12 thick hardcover books and quite heavy to carry.
Industrial demand
One of the biggest differences between gold and silver is how they’re used, or what drives their prices. Gold prices are mainly driven by investment and jewelry demand, while silver is heavily used in industries like electronics, green energy, and healthcare.
This means silver prices are more tied to the global economy. When economic activity is strong, industrial demand for silver tends to rise, increasing its price. During slowdowns, silver demand can fall and put pressure on prices.
Advantages and risks of investing in bullion
Benefits of investing in gold and silver bullion
Gold and silver bullion can diversify portfolios, act as a hedge against inflation, and provide protection during market uncertainty.
Portfolio diversification
Precious metals are often used to diversify investment portfolios. Gold, especially, has historically shown a low or negative correlation with stocks and bonds, helping offset losses when traditional markets struggle.
Silver can also provide diversification, but its stronger link to industrial demand makes it behave more like a hybrid between a commodity and a financial asset.
Inflation hedge
Gold is often used as a hedge against inflation. When the purchasing power of fiat currencies decline, gold has historically tended to hold its value over time. Silver can also act as a hedge against inflation, but its performance is less consistent due to its high industrial demand. However past performance is not indicative of future performance.
Protection during market uncertainty
Gold is widely considered a safe-haven asset, which means investors often shift their capital into it during periods of geopolitical tension or market volatility. This helps provide protection during economic uncertainty. Silver can also benefit during these periods, but it typically experiences larger price swings.
Risks associated with bullion investments
Some of the risks of investing in gold and silver include:
- Price volatility: Gold can be volatile, while silver tends to experience larger and more frequent price swings.
- No income generation: Unlike stocks or bonds, bullion doesn’t produce dividends or interest
- Storage & security costs: Physical metals require secure storage and, in some cases, insurance, which can reduce overall returns.
