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Mar
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Bullion is a term that tends to be a bit misunderstood. If one is holding a silver dollar of contemporary origin, for instance, they are holding a coin whose face value probably exceeds the value of its component metals. The value is determined by the Treasury. This type of currency is called “fiat currency” because its value is simply agreed upon, though the materials of which it is made may be very common and, essentially, without real worth. Bullion, on the other hand, is a quantity of a precious metal that is of a specific and verified purity, and therein lays its worth.
The value of bullion is determined by its mass. This means that the weight of the coin or bar, calculated against the purity—or fineness—of the metal, determines how much one can demand in the market for their gold or silver or other precious metals. Of course, very few investors actually see or possess the gold they own, if they happen to own large amounts. For individuals, however, bullion is one of the easiest ways to save wealth. No matter what happens to currency, precious metal seems to retain its value and is an excellent hedge against inflationary forces.
Bullion can be purchased in small quantities. There are two basic ways to go about this, aside from purchasing fashioned gold such as jewelry. One can purchase ingots, whose value is solely a function of their purity and mass. One can also purchase coins, which have a third determining factor where worth is concerned. While the bullion in a coin may be far more valuable than the face value—and, most often, this is the case—the value of the coin design may be far in excess of even the material of its manufacture.
The Morgan silver dollar is a good example of this. The rarest types of these coins are among the priciest collectable coinage on the market. These coins are cast of .900 fineness silver. They are one troy ounce in weight. At current market values, this places the value of their bullion at around $20, with some significant fluctuation. The value of some of these coins, however, extends into the six-figure range. This is a good example of how a coin can be worth more than both the face value and the value of the actual metal used to produce it.