Sunday, October 08, 2006

Gold Coins and Bars Series - Part 3

Part 3 of a 3 part series

Gold can be bought and accumulated in coin, bar and ingot form as well as Exchange Traded Funds where one holds a certificate or a piece of paper that represents ones holdings in gold stored in a bank or mint.

Gold is measured in carats. Carat or karat, both spellings are used, is a measure of the purity of gold. In the United States and Canada, the spelling karat is usually used for the measure of purity, while carat refers to the measure of mass (see Carat). As a measure of purity, one carat is one twenty-fourth purity by weight:

X = 24 \frac{M_g}{M_m}


X is the carat rating of the material,
Mg is the mass of pure gold in the material, and
Mm is the total mass of the material.

Therefore 24-carat gold is pure gold (actually 99.99 percent as one cannot guarantee an absolute purity), 12-carat gold is 50% purity, 18-carat gold is 75% purity etc. The balance is made up of other metals such as copper, silver, platinum, zinc etc to increase the hardness of the overall alloy and sometimes to change the color of the gold, Platinum, for example, is added to produce white gold.

The carat system is increasingly being complemented or superseded by the millesimal fineness system in which the purity of precious metals is denoted by parts per thousand of pure metal in the alloy.

The most common carats used for gold in bullion, jewellery making and goldsmithing are:

24 carat (millesimal fineness 999)
22 carat (millesimal fineness 916)
20 carat (millesimal fineness 833)
18 carat (millesimal fineness 750)
16 carat (millesimal fineness 625)
14 carat (millesimal fineness 585)
10 carat (millesimal fineness 417)
9 carat (millesimal fineness 375)

Gold coins and bars, however, should be 24 carat but sometimes will be found to be less. In all cases the carat or fineness of the gold should be clearly marked or indicated.

With a gold coin, not only the gold content, but many other factors may determine the value of the coin, such as its rarity, age, condition and the number originally minted.

In July 2002, a very rare $20 1933 Double Eagle gold coin sold for a record $7,590,020 at Sotheby's, making it by far the most valuable coin ever sold to date. In early 1933, more than 445,000 Double Eagle coins had been struck by the U.S. Mint, but most of these were surrendered and melted down following Executive Order 6102. Only a few coins managed to survive. This has given them a rarity and an increase in value well above the gold content of the coins themselves.

It is important when looking to buy gold coins and bars to understand as much about gold as possible. Not just about coins and bars but about the metal itself. Get a feel or an affinity for the metal and you will be able to buy gold coins and bars satisfactorily. Real study, due diligence and perhaps a bit of common sense will go along way to improving your ability to accumulate gold coins and bars satisfactorily and profitably.

Final part of a 3 part series - Gold Coins and Bars

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