Bullion refers to precious metals such as gold and silver in the form of bars, ingots, or coins that are typically at least 99.5% pure. These metals are valued by their weight and purity rather than any face value as currency.
People invest in bullion for several reasons:
Store of Value: Precious metals have been recognized as a store of value for thousands of years. They are tangible assets that are not subject to the same kinds of risks as stocks, bonds, or digital assets, which makes them appealing to investors looking to preserve wealth.
Hedge Against Inflation: Bullion, particularly gold, is often seen as a hedge against inflation. When the value of currency decreases due to rising prices, the value of gold and silver often increases, which can protect purchasing power.
Safe Haven: In times of economic uncertainty or political turmoil, investors often flock to gold and silver as "safe haven" assets. These assets are perceived to be less volatile and hold their value better than other forms of investment during such times.
Diversification: Including bullion in an investment portfolio can help diversify assets, which may reduce overall risk. The price movements of precious metals often have a low correlation with those of other asset classes like stocks or bonds.
Liquidity: Bullion can be bought and sold relatively easily on the global market. Gold and silver are recognized commodities with continuous demand, providing liquidity to investors who need to convert their holdings into cash.
No Credit Risk: Investing in bullion means owning a physical asset outright. Unlike stocks or bonds, there is no counterparty risk involved; the value is not dependent on a corporation's performance or a government's ability to repay debt.
Potential Capital Gains: While not always the primary reason for investment, precious metals can sometimes appreciate in value, providing the opportunity for capital gains.
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