Sunday, October 08, 2006

Gold Coins and Bars Series - Part 1

Part 1 of a 3 part series.

Gold has been an alluring attraction for man throughout the ages. Wars have been fought over it, love has been won by the use of it and merchants have been made wealthy because of it.

It has always been regarded as a precious metal and the first recorded use of it is in Varna, Bulgaria around 5000 BC. Gold has been in use as a form of money, in one form or another from at least 560 BC until the end of the Bretton Woods system in 1971. It has also been used as a store of value both by individuals and countries for much of that period right up to the present day.

With a melting point of 1063°C, it is a bright shiny, soft and malleable metal primarily used in coatings for electrical connections. Pure fine gold is 24 Karat (abbreviated K). Alloys of gold are calculated on a basis of 24 parts. 14K is 14 parts gold and 10 parts other metals. various gold colors are created by alloying other metals that impart their color characteristics to the gold.

Gold, and some other precious metals such as silver, platinum and palladium for example, are assets that are both tangible and liquid (i.e. easily traded), unlike real estate which is tangible but not liquid, or company shares and bonds which are liquid but not tangible.

Considering its high density and high value per unit mass, storing and transporting gold is very easy. Gold does not corrode and, in small amounts, is not particularly heavy. Historically, it has also been very easy to verify that an offered coin had the density of gold through the use of Archimedes' principle. Today, however, some metals are denser than gold yet cheaper.

Some of the reasons people buy and accumulate gold in coin and bar form include, as a hedge against financial and economic instability or to hide money or assets from, family, governments or others. Also as a hobby (usually confined to coin collecting but there are some who collect gold bars also)

Some people buy gold through a gold exchange-traded fund, or in the form of a gold certificate. In this case it is more like an investment and these people are more prone to trade or buy and sell the gold representations. In this case the gold is deposited in a bank and the owner has a certificate or account to represent their holding.

It is not difficult to see why gold is such a favorite choice of currency over the years. It does not tarnish or rust. It keeps its value relative to the value of other goods and services. With the advent of the internet the transfer of funds by the use of gold has become big business. These days, millions of dollars are moved around the planet literally at the speed of light.

End of part 1 of a 3 part series on Gold Coins and Bars.

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