Investing in physical gold has become an increasingly common activity for specialized investors and people starting out in this activity. For which we have selected basic terms with which those who take their first steps in this type of investment should be familiarized:
Investment physical gold. The regulations grant the category of physical investment gold to ingots or bars of 2 or more grams with a purity equal to or greater than 995 thousandths and coins with a purity greater than 900 thousandths, minted after 1800. They are usually traded for a price not exceeding 80% of the market value of the gold contained therein.
- Popularly, gold bullion is any piece of this material that has been melted and molded. They come in a wide variety of weights and shapes. However, adhering to a strict definition, the term ingot refers to pieces with specific dimensions and weight, 12.4 kilograms (400 standard troy ounces, although they can range between 350 and 430 ounces), and a triangle shape without a tip.
- Bar. Gold pieces of different weights and sizes smaller than standard bars are called a bar, making them more affordable for different types of investors. In addition, their divisibility gives them greater liquidity when making exchanges.
Currency. Physical investment gold coins, apart from the characteristics outlined above, are minted by the mints of each country, have a different face value than their weight in gold, and, among other data, are usually engraved with their weight in ounces, and the year they were minted.
- Law of purity. The law of purity refers to the amount of pure gold that each piece of this metal contains. For physical investment gold, it is usually measured in thousandths and for jewels in carats.
- Good Delivery. It is the standardization of the large bars so that they have to be verified every time a transaction is made. It is the de facto standard of trust throughout the world, it is a reliable gold investment.
- Certified. It is advisable that whoever invests in physical gold do so in a reputable company. The acquired bars must be engraved with five stamps or marks: name of the manufacturer or distributor, type of metal, purity, weight, and stamp of the minter. Depending on the manufacturers, some also carry the serial number.
- Numismatics. The term numismatics refers to the study and collecting of coins. Physical investment gold coins, those minted after 1800 that meet the characteristics detailed above, have a higher value for their weight in gold than for their numismatic characteristics, except in some instances or with certain coins due to their rarity or unique characteristics.
Fungibility
What is fungibility (you can read the definition here: https://www.merriam-webster.com/dictionary/fungible)? Well, it is an adjective of the word fungible. Fungible means that a good one part or quantity of which can be substituted for another of equal value in satisfying an obligation. In plain English it means that one thing is exactly the same, and worth the same as the other.
Money has to be fungible. One single ounce bar of pure gold, is the exact same as another single ounce bar of pure gold. They are also worth the same amount of money. And you could switch one for the other and no one would care because they are the same.
This is one of the beautiful things about gold. This why gold is one of the best forms of money. A gold bar is the same as another gold bar, and because of this sameness, they can not be tracked, because they are the same and there is nothing to track because there is nothing to differentiate one bar from another.
Cash is almost fungible. Technically there are serial numbers on every dollar bill. I am not sure how the government keeps track of all those numbers as there are trillions of dollar bills in circulation, but I am assuming because it is the government that they can track those serial numbers somehow.
Aside from the serial number issue on cash, it is pretty much fungible. As long as a dollar bill is not counterfeit, one dollar bill is the same as another dollar bill. A cash dollar bill meets the definition of fungible because it “can be substituted for another of equal value in satisfying an obligation”.
Cash, like gold, is also private. If you go to your friend’s house and hand them a $100 bill, no one will know, and the transaction will not be recorded.
The same is true of gold. If you go to your friend’s house and hand him an ounce of gold for painting your garage or whatever, it is a private transaction. There is no recording of the transaction, your friend simply accepts your ounce of gold, because it is fungible, and a trusted store of value.
Gold is one of the very few things that has value that does not need to be verified by a third party like a dollar bill, a check, a credit card, etc. If you posses an ounce of gold, then you posses the value and you can trade it as you like.
There are many benefits to gold and to investing in gold. In times of trouble people will always turn to gold. Humanity has used gold as money for 5,000 years, and is likely to keep using gold as money for many more years to come.