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What Is a Bullion?

The term bullion refers to precious metals that are in bulk form. A metal is considered precious if it is naturally occurring, rare, and of high value, economically speaking. The value of the bullion comes from the metal itself, not from the assigned currency value. Looking back in time, these precious metals were used as a form of currency. Today, the metals are mainly used as investment tools. Precious metals that come in bullion form and that are used as investment tools are gold, palladium, platinum, and silver.

Bullion is also minted to make coins. When this is done, a currency value is assigned to the coin. This is called the nominal value. However, since the coin is made from a precious metal - usually gold or silver, its actual value is actually much higher and takes precedence over the nominal value. For example, if a gold coin is assigned a USD10 value and it contains one troy ounce of gold, the actual value will be USD1,400. This is because, as of November 2010, one troy ounce of gold is worth that much. In essence, the nominal value does not really mean much for bullion that is minted into coin.

What is a troy ounce? It is a measurement that roughly equals 31 grams. The weight is important in determining the value of a bullion. Another factor that determines the value of a bullion is the purity of the metal. Obviously, the purer, the higher the value. Lastly, the metal in itself gives value to the bullion. Platinum is the most valuable of the metals, followed by gold, and then by silver.

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