A financial instrument is any asset or asset class that can be traded or exchanged. Financial instruments include assets like company stocks, ETFs (Exchange-Traded Funds), mutual funds, bonds, GICs (Guaranteed Investment Certificates) or CDs (Certificates of Deposit), derivatives, loans, and more. These are the assets that investors use to exchange, save, and grow their capital. They keep the global economy running.

Not all financial instruments are made the same. Growth-seeking investors tend to gravitate more toward stocks and higher-risk loans. They seek out growth companies, i.e., companies that invest their profits in future growth rather than paying dividends. Others, especially institutional investors like pension funds, seek steady, long-term returns. Many individuals need to adjust their portfolios to include assets of multiple types over the course of their lives.

Bullion is an alternative financial instrument that can be extremely useful for institutional and individual investors alike.

What Is Bullion?

Bullion refers to non-ferrous metals that have been refined to a high state of purity. There are many non-ferrous metals, but for investment purposes, the term is usually limited to precious metals including gold, silver, platinum, and occasionally others.

Individual investors can purchase bullion in the form of bars and coins available in various measurements. The most common weights of both bars and coins tend to be 1 troy ounce, but you can also find fractional ounces, gram gold, and multi-ounce or even kilogram-sized bars. They can be purchased directly from bullion dealers like Global Bullion Suppliers either in-person or online.

What Role Does Bullion Play in the Markets?

Precious metals typically play the role of a hedge against global markets. Bullion displays several unique qualities and trends that make it a valuable hedge against the broader global economy:

  • Gold prices have little correlation with stock markets. It is seen as a safe haven from stock market crashes.
  • Gold prices are also a hedge against currency market volatility. Prices have historically risen when the U.S. dollar has shown weakness against foreign currencies.
  • Gold has historically preserved its purchasing power over the decades, making it an effective hedge against inflation.

Because of these qualities, gold plays an important role for the very wealthy and institutional investors. Central banks are among the world’s largest gold owners. When banks use gold as a hedge against their own monetary policies, you can see the value of protecting your savings with gold.

How Can Bullion Benefit Your Portfolio?

How can individuals leverage bullion for their own benefit? Largely the same way that institutional investors do: by taking advantage of bullion’s unique qualities and using it as a hedge against other investments.

A healthy allocation of bullion in your personal portfolio might be anywhere from 5 to 20 percent of your savings. The rest can sensibly be invested in other financial instruments like stocks, ETFs, and mutual funds. These assets can help grow your savings, while bullion provides a counterbalance to protect your wealth, no matter what happens.

Bullion is a uniquely useful tool for investors. Use it to hedge against broader economic growth and carry your savings through recessions and inflation.