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Bullion traditionally stands for gold bars, silver bars, other precious metals bars or ingots. The word bullion reportedly originates from Claude de Bullion (13 October 1569 – 22 December 1640), who was a French aristocrat and politician who served as a Minister of Finance under Louis XIII from 1632 to 1640. An alternate theory suggests that it comes from the old French word bouillon, which meant "boiling" and was the term for a mint or melting house.
Bullion refers to precious metals in bulk form which are regularly traded on commodity markets. The value of bullion is typically determined by the value of its precious metals content, which is defined by its purity and mass.
The specifications of bullion are often regulated by market bodies or legislation. In the European Union, the minimum purity for gold bullion, which is treated as investment gold with regards to taxation, is 99.5% for gold bullion bars and 90% for bullion coins.
The London bullion market is an over-the-counter market for wholesale trading of gold and silver. The London Bullion Market Association (LBMA) coordinates activities of its members and other participants in the London Bullion Market.
The London Bullion Market Association sets and promotes quality standards for gold and silver bullion bars. The minimum acceptable fineness of the Good Delivery Bars is 99.5% for gold bars and 99.9% for silver bars.
Bullion coins describe contemporary precious metal coins minted by official agencies for investment purposes in unlimited numbers. Historically, most currency were in the form of bullion coins, silver and gold being the most common metals. Some bullion coins have been used as currency throughout the 20th century, like the Maria Theresa thaler and the Krugerrand. However, modern bullion coins generally do not enter common circulation.
A range of professional market participants is active in the bullion markets: banks, fabricators, refiners and vault operators or transport companies as well as brokers. They provide facilities for the refining, melting, assaying, transporting, trading and vaulting of gold and silver bullion.
Besides the direct bullion market participants, other professional parties like investment companies and jewelers use bullion in the context of products or services which they produce or offer to customers. For example, shares of the world’s largest Gold exchange-traded fund, the SPDR Gold Shares represent ownership in vaulted gold bullion.
Private individuals use bullion primarily as an investment or potential store of value. Gold bullion and silver bullion are the most important forms of physical precious metals investments. Bullion investments can be considered as insurance against inflation or economic turmoil and may not entail direct counterparty risk.
Compared to numismatic coins, bullion bars or bullion coins can typically be purchased and traded at lower margins and their trading prices are closer to the values of the contained precious metals.
Occasionally, consumers who are unaware of the numismatic value of a coin will use it as normal currency. If a coin is taken to a bank, the bank can only pay the face value of the coin. However, if it has numismatic value, it is worth much more.