Wednesday, December 05, 2007

Dollar Backed by Gold

When people buy gold, many seem to have the misconception that the US dollar is backed by gold. Well ... it used to be. The US currency, like many other currencies at the time, was backed by physical gold kept in Fort Knox and other places.

In 1933 the US abandoned the Gold standard along with many other nations, such as Italy in '34, Belgium in '35 and others during the 1930s. Switzerland was one of the last countries to drop the gold standard and this was done in 1999 by the approval of a new constitution that eliminated the traditional requirement for the country's currency to be backed by gold.

The gold standard monetary system is a system in which the standard economic unit of account is a fixed weight of gold. Under such a gold standard, currency issuers guaranteed to redeem notes, upon demand, for that amount of gold. Also governments that employed such a fixed unit of account, were able to redeem their notes to other governments in gold and share a fixed-currency relationship.

However, these days, the gold standard is not currently used by any government or central bank, having been replaced completely by fiat currency. Money is NOT, therefore backed by gold, or any other precious metal but, instead, is backed by faith. The money is, in other words, as good as people believe it is good. People are generally educated to regard money as a precious commodity in itself by virtue of the amount needed to purchase desirable and needed items.

By controlling the interest rate and the amount of money in circulation together with the use of a tax monitoring system, makes it easier to manipulate the economy.

Since the abandonment of the gold standard, economies around the globe have shown the apparency of a healthy economy, but in reality what has happened is that there has been little or no check on inflation resulting in a decreasing value of the currency, such as the US dollar so that it now requires many more dollars to purchase the same items as it did many years ago.

The value of gold has remain the same however with one ounce of gold still purchasing the same as it did 20 or 50 years ago.

What we use today is a system of fiat money. One glossary defines money as "money that is intrinsically useless; and suitable only as a medium of exchange. A more accurate definition perhaps is that money is, "an idea backed by confidence."

The main benefit of a gold standard is that it insures a relatively low level of inflation. In articles such as "What is the Demand for Money?" , we see that inflation is caused by a combination of four factors:

1. The supply of money goes up.
2. The supply of goods goes down.
3. Demand for money goes down.
4. Demand for goods goes up.

So long as the supply of gold does not change too quickly, then the supply of money will stay relatively stable. The gold standard prevents a country from printing too much money. If the supply of money rises too fast, then people will exchange money (which has become less scarce) for gold (which has not). If this goes on too long, then the treasury will eventually run out of gold.

A gold standard restricts the Federal Reserve from enacting policies which significantly alter the growth of the money supply which in turn limits the inflation rate of a country. This may give an inkling of the reasoning behind the removal of the gold standard.

So it would appear that the major benefit to the gold standard is that it can prevent long-term inflation in a country. However, as Brad DeLong points out, "if you do not trust a central bank to keep inflation low, why should you trust it to remain on the gold standard for generations?" It does not look like the gold standard will make a return to the United States anytime in the foreseeable future with the dollar being back by gold.

None of this should make any difference when it comes to buying gold of course. In fact, to buy gold is probably a better idea than to buy currency!


An Ounce of Gold

When you search around looking to buy gold, you might wonder, why there can be a different price for the same coin or gold bullion from one dealer to the next.

Firstly the spot price of gold is the value of gold per ounce at any given time. This is generally fixed by the market and you can see the current spot price of gold in the charts show at the top of this page.

Yet there is not only a variation in the price of gold from one dealer to another but the price always seems to be somewhat above the spot price. How can this be?

Lets say, for example, that the spot price for gold today is $787.50 per ounce. Various dealers will give you a selling price of around $830.80 for a one-ounce American Gold Eagle, $819.00 for the one-ounce South African Gold Krugerrand or even $826.90 for a one-ounce Canadian Gold Maple Leaf.

Since each contains exactly one ounce of fine gold, why should there be such a variation?

Well there are other factors to take into account when a dealer sells gold coins regardless of what they are.

Dealers will traditionally mark up what is called the "coin premium." If a dealer bought and sold gold coins at spot price there would be no covering the cost of the manufacture, the shipping the insurance, not to mention the dealers expenses and profit margin. All these need to be taken into account also. And they can vary too!

The mint will have marked up an additional price to the price of the spot gold to cover their costs and profit and this will be further increased by dealers as they acquire the coins and then resell them on. This is, in reality, no different to any other industry from food to car parts etc. Each person or company in the chain has to cover their costs and a profit margin.

Happily for us, the margins can be different between dealers depending on their costs, how much they acquired the coins for originally, as well as other factors such as the available supply of the coins, the rarity as well as market interest in particular types of coins. All this makes it well worth while shopping around.

So when you are scouting around to buy gold coins, do remember to do a little browsing before shopping, you never know what bargains you might pick up buying gold!

Thursday, November 15, 2007

Gold Price Dropping

Sometimes you will see the gold price dropping. There has been a substantial rise and then, suddenly,it turns around and drops. Many people then frantically sell gold but in fact it is those that buy gold (from those selling of course) who benefit the most. They get the gold at a reduced price because, sure as eggs are eggs, the gold price will rise again.

Gold price has traditionally risen, in the long term, and with small dips occasionally, has enabled the astute to make a tidy profit here and there. Anyone who has purchased gold over the past 10 years and not sold it, will be sitting back congratulating themselves with a proverbial pat on the back and a somewhat healthier asset balance.

More importantly perhaps, the value of gold has not changed over the past 50 -100 years. How could this be? You ask. It is simple. The value of gold does not change. But the value of the currency you use to buy and sell gold does. An ounce of gold will still purchase the same goods now as it did fifty or one hundred years ago. But you need an awful lot more dollars to make the same purchase with currency.

Keeping one ounce of gold for 10 years say and the cost of one ounce of gold in dollars at the time of purchase will quickly show the disparity in the value. One ounce of gold 10 years ago was around 300 dollars per ounce. These days it is running at around 750 to 850 dollars an ounce. but whereas the purchasing power of 300dollars has reduced over 10 years, the purchasing power of an ounce of gold has remained stable, in fact increased slightly.

Examples of inflation and the drop in the US dollar over the years are demonstrated below:

A postage stamp in the 1950s cost 3 cents; today's cost is 41 cents - 1,266% inflation;
A gallon of 90 Octane full-service gasoline cost 18 cents before; today it is $3.05 for self-service - 1,870 % inflation;
A house in 1959 cost $14,100; today's median price is $213,000 - 1,400% inflation;
A dental crown used to cost $40; today it's $1,100 - 2,750% inflation;
An ice cream cone in 1950 cost 5 cents; today its $2.50 - 4,900% inflation;
Monthly government Medicare insurance premiums paid by seniors was $5.30 in 1970; its now $93.50 - 1,664% inflation; (and up 70% past 5 years)

However one ounce of gold continues to purchase the same regardless of inflation since it is not the cost if living that has risen but the value of the dollar than has dropped.

In this way it can be seen that it pays to retain at least some assets in gold, regardless of any day to day or week to week fluctuations. In fact when the price of gold drops slightly, that is a good time to increase ones holdings in gold by taking advantage of a temporary lower price.

So, even with the gold price dropping, to buy gold can still be seen as an astute and successful action!

Finding Gold

Finding gold is usually an activity reserved for mining companies and prospectors, but finding gold for us ordinary folk usually means we have to find out the best place to buy gold at a good price.

This is easier than it seems.

Many places sell gold. Usually in the form of gold coins or gold bars as well as jewelry. Gold coins are bars generally make the best buy. Jewelry is virtually never pure gold (except for some Asian manufactured jewelry such as rings) and has a high retail premium or mark up.

Some of the best places to buy gold are, dealers, mints auction sites, coin collecting and numismatics clubs. These places will usually offer the best deals and with a little browsing and some due diligence, some great bargains in gold can be had.

What sort of gold you buy will depend also on what sort of gold you would like to have. Some people specialize in collecting certain gold coins, such as Krugerrands, Gold Eagles, or Maple Leafs and Sovereigns.. Some specialize even more and collect particular types of one of those coins. Other like to collect gold bars. Some collect gold through exchange traded funds or a gold provider such as Others just collect whatever gold they can lay their hands on and are not fussed about the type.

The important thing is to have some knowledge about gold, and how it is fabricated and presented, how much it is going to cost to acquire and how much you can afford to spend on a regular basis.

There is a wealth of information on this site specifically aimed at helping you to find out what the best buys are when it comes to gold and what to look for. How to ensure you are getting the real McCoy and how to ensure you do not pay more than you should.

If you have more money than you can throw a stick at, then acquiring gold is not a problem. You simply buy gold in large bars and have them stored for you by a bank. This would be done, of course, in conjunction with advice from your financial planners. The small buyer of gold can simply buy a few well chosen coins or small bars from a dealer or mint or scour the auction sites for a good deal.

Best of all, finding gold can be a fun experience and there is a great deal of satisfaction and pleasure to be had when you buy gold, and it is delivered into your hot little hands!

Wednesday, November 14, 2007

Properties of Gold

The properties of gold have always been a fascinating subject for man and gold seems to have had an innate attractiveness and allure for man throughout the ages hence the desire to buy gold and keep it either for investment or simply through a desire to have and hold gold.

Gold is a precious metal or chemical element. It has the symbol Au which comes from the Latin aurum which originally came from the ancient Latin word ausom or "yellow". This word compares to the ancient roman word, aurora or ausoso, The "morning glow, the Eastern country, the east". The word is derived from an even more ancient word. The Sanskrit word "hari" meaning yellow.

Apart from its attractiveness for man gold has some very useful properties making it extremely versatile for use as well as simply ownership.

Gold has an atomic number of 79. It is a soft metal, yellow in appearance and does not react to most chemicals, with the exception of chlorine, fluorine, aqua regia and cyanide. Gold will dissolve in mercury to form an amalgam (hence the use of gold in gold teeth) but does not react with it. Gold is the most malleable and ductile of metals which means one gram can be hammered or beaten out to cover a square meter or one ounce will cover 300 square feet and will then appear translucent. The transmitted light through the gold appears greenish blue, as gold strongly reflects yellow and red. It can also be drawn out to a wire thinner than a human hair.

This malleability makes it ideal for jewelry where very intricate and ornate shapes such as filigree can be created.

Gold does not corrode and as it is unaffected by air and is a good conductor of electricity, makes ideal electrical contacts. It is used extensively in electronic components, particularly circuit boards and computers, cell phones and similar products. It is highly reflective and has been used in Space Projects by NASA as well as in medial research.

Gold can even be eaten in minute amounts! Gold leaf is often used as a food decoration and it can also be found in alcoholic drinks such as Goldschläger, Gold Strike, and Goldwasser. Of course, like any precious metal, if taken to excess an individual can suffer from heavy metal poisoning.

Gold is one of the more useful metals as well as being considered one of the most decorative. It also holds its value against just about any currency you care to name and makes a great investment for the future for the person who wants to buy gold.

It could be said that the properties of gold include not just its physical characteristics but also its ability to attract such an enormous interest to itself!

Monday, November 12, 2007

Uses of Gold

The uses of gold are many and varied. So to buy gold for investment purposes is not the only use to which it is put.

Gold has a number of unique properties which make it ideal in industry and perhaps contributes to its value thereby.

Gold is resistant to corrosion, has excellent electrical conductivity, is ductile (which means it can be drawn out to a thin wire) and malleable (able to be flattened out extremely thin), reflects infra red and has excellent thermal conductivity properties.

It is used extensively therefore in a wide range of manufacturing such as in electronic products like computers, telephones, cellular phones and home appliances. Even wheelchairs make use of gold. Gold is used very much in electrical contacts and almost all circuit boards contain a quantity of gold in the form of smaller that the thickness of a hair wires and other components.

Golds reflective powers are used successfully in the space industry such as satellites and spacecrafts where it is used for protection against solar radiation. For example, to protect the onboard computers in the Galileo space probe from short circuiting as a result of heavy bombardment, NASA developed a Heavy Ion Counter (HIC). This counter contains silicon wafers with gold electrodes that detect the heavy ions as they penetrate the wafers. Use of the HIC allows NASA engineers to monitor the functioning of onboard computers and make adjustments when necessary.

It continues to be used in medicine due to being biologically inactive and is a vital tool in medical research.

This means that the demand for gold is ever increasing, not only for gold rings and other jewelry accessories but also for coins bars and industry.

This makes it an excellent hedge against inflation as well as recessions (a time when gold traditionally increases in value compared to the dollar). The result being that gold continues to be in demand and the value continues to rise.

These prolific uses of gold, therefore, contribute in no small way to the stead increase in the value of gold and are an extra boon for the gold investor who is keen to buy gold.

Gold Investment

Gold investment is very much in the news today and to buy gold as an investment is easy to do provided a few important factors are taken into account.

It might sound obvious but the first rule would be buy the cheapest gold you can. This means shopping around and a lot of browsing and comparing notes to find the best deals. There is a difference between dealers when it comes to coins and small bars and also take into account the shipping and handling charges which can also vary between dealers and mints.

Gold Bars, Krugerrands and sovereigns are perhaps the best buy with gold bars having the lowest percentage premium over the spot gold price. When comparing dealers and mints, compare the percentage over the premium and look at what is the bottom line. What is the total you would have to pay from each dealer for the same coin or bar delivered.

Buying regularly is another little secret to building up a healthy gold investment portfolio. Even if it is only a small amount each month it is surprising how quickly that small amount can become a substantial gold investment.

A good and thorough understanding of rare gold coins can also reap some spectacular rewards. Scouring the auctions and coin clubs can net one a good deal, particular if someone is in a tearing great rush to sell during a time of economic turmoil.

It is often said that one should buy low and sell high. But for the serious investor of gold who does not sell this is not the best way to go about it. In fact to continue to buy on a regular basis is more likely to conserve ones gold assets as the average price one pays for gold will even out over time.

If one wishes to trade in gold, then this is a different matter. It is more likely that one would speculate in stocks in gold companies or exchange traded funds and then different rules would likely apply. Such as, for example, understanding the dynamics of the gold market and its relationship to inflation, a bear or bull market in stocks, financial instability and so forth. Regular week to week or even day to day trading is subject to more variables and market forces and requires a different way of thinking, not for the novice or those of a conservative inclination.

For the saver, rather than the speculator, coins and bars are a more conservative way of saving and, when done on a regular basis, can reward the investor with a very nice and healthy gold investment.

Wednesday, November 07, 2007

Gold Information

Gold information is very important when it comes to buying gold. Knowledge is power and the more you understand and know about gold the more likely it is you will get a good deal when you buy gold. The more knowledgeable you are the more money you are likely to make and the more likely it is you will be able to increase your asset base. Even if you simply enjoy collecting gold coins and bars you can have a lot more fun collecting those elusive and wonderful gold coins you have been seeking for ages.

Information about gold includes:

Knowing just what gold is, what you can do with it and just how versatile it can be.
Knowing something about the gold price and its movements
Understanding the various types of gold available, such as gold coins, gold bars, medallions etc.
Knowing where to buy gold, and
Importantly, knowing how much to pay for various gold items.

This website is a veritable gold mine of information and an excellent place to start,. There are many hundreds of articles on a multitude of aspects about gold from selling scrap gold all the way through to strange shaped gold coins to investing in gold exchange traded funds and IRAs.

Getting the basics on what gold is, is an important start. What IS gold? What can you do with it? How much is it really worth? Which gold coins are the best to buy? When should you sell gold. Why buy gold? What about gold treasure and how to invest in gold IRAs are just a few of the questions you can get answered just from this website alone.

It is a good idea to scour the net for information about gold also. Find out what prices there are for different gold products. Do lots of browsing and, basically, look at everything to do with gold.

The more knowledge you have the more you will be empowered in your handling of gold.

Knowledge is indeed power and gold information can be worth its weight in gold!

Best Way to Buy Gold

What is the best way to buy gold I am often asked. There is no big secret to this but probably the best way to buy gold is summed up in the word consistency. This means that, regardless of the price of gold at any one time, one continues to buy gold on a regular basis month after month, week after week, regardless of the price.

The cost of your gold is spread out evenly over time this way and, if the price of gold dropped say, at one time for a period, it would not matter particularly as eventually it will rise again and the average value of your gold holdings will remain the same, if not increase. Share investors understand this principle of consistency in buying regular packets of shares and the value and cost of the shares tends to even out.

One aspect that is not understood well is the idea that the value of gold can be too high. In actuality the value of gold remains fairly steady and it is the decreasing value of the currency that gives the illusion of gold being more expensive. The currency is not linked to gold and rides a roller coaster of its own when it comes to inflation and recession. The chart shown gives some understanding of the inflation linked gold price.

So the consistent buying of gold on a regular basis month after month, week after week, will even out the peaks and troughs and the asset value would not be affected by inflation.

In short, saving ones assets in gold is a far better deal than sticking money in the bank.

With gold then, it becomes a matter of choosing what gold one buys, keeping in mind the mark up or premium placed on various gold products.

Some gold coins for example, especially newly minted ones, attract a premium, such as the cost of packaging, shipping, insurance etc, which can be quite costly. Small gold bars can suffer the same costs also.

As in many other products, the more gold you buy in one purchase the smaller the premium you pay. The mark up and costs associated with buying gold in the form of a one kilo bar are far less, per ounce, than buying one ounce bars. Of course you have to pay the price for one kilo of gold and not very many people can afford to do so. How much gold you can buy at one time will depend on how much you wish to salt away for a rainy day on a consistent basis.

There are many places one can buy gold coins and small bars without incurring some of the heavy mark up you have with newly minted gold coins and bars. There is no investment opportunity in buying gold coins in a wooden box which one has had to pay for so provided the coins are sealed in their original plastic containers, a presentation box, although it 'looks ' nice, is really superfluous to an investor.

Coin dealers selling proof coins, auctions and private sales are good look places to look. Join or belong to a coin club or association is a worth while activity since many club members sell coins to each other and there is usually plenty to buy. Scouring the auctions, such as eBay and the like can be time well spent. Spending some time studying the various gold coins and the value is time well spent also. Understanding the values of rare gold coins can net you some good deals also

Basically, applying just a bit of due diligence and some consistency in buying gold coins and bars on a regular basis is really the best way to buy gold!

Saturday, November 03, 2007

Gold Price and the US Dollar

When we talk about how to buy gold, some people might be wondering what is happening with the gold price and the US dollar.

The gold price is rising steadily and has now hit the 800 dollars an ounce mark as predicted by various gold analysts.

This is due in part, of course, to the depreciating dollar but also the appreciation of gold as a safety net and possible future investment.

Put simply the value of the dollar is decreasing. Removing gold as a backing for the US dollar was thought to be an excellent move by the Federal reserve in the early seventies, as it gave them more manipulative control over the dollar. However this is now coming back to bite them as the excessive printing of more money to shore up the dwindling value only serves to decrease the value even further. The US government may not mind too much as it means they can pay their debts with a depreciated dollar from the time those debts were incurred. In addition exporters, farmers and the like, are enjoying the bonus that comes with a depressed dollar against foreign currency

But what about the person in the street? The drop in dollar value means less value for the salary or wage earner with higher prices and less savings. It means higher costs for imported goods and less value for the dollar.

This is where gold comes in. while the dollar is busy ferreting its way to the bowls of the earth, gold is soaring to spectacular heights.

Actually, the value of gold has never really changed much. In terms of purchase you can still buy the same value of goods with an ounce of gold now as you could 50 years ago, although the perceived value of gold in dollar terms has risen tremendously. It still is an ounce of gold. 50 years ago one could purchase a man's suit for an ounce of gold. These days it would take somewhat less than an ounce of gold to purchase the same men's suit. Gold in fact has increased in purchasing power over the years and looks set to continue.

It seems that, by investing in gold such as coins, bars and even exchange traded funds, one can improve ones asset base or at the very least, retain ones value for future use.
So when it comes down to how to buy gold and the gold price vs the US dollar is concerned, gold, it seems, is winning hands down.

Sunday, October 21, 2007

Gold Coin Investments & Investing

Gold coin investments and investing are another way of investing in gold.

If you intend investing in gold coins, it is important to have some knowledge of the various types of gold coins, how much they cost and their market value and even what their value is expected to be in the coming months and years.

First thing to know is that there are different types of gold coins. These include the rare and antique coins as well as the newly minted of which you have Brilliant Uncirculated and Proof coins.

Rare and antique coins demand the most knowledge. Some can be worthless almost while others can fetch a very impressive price at auction. In the thousands and even up to the millions in very rare cases.

Brilliant uncirculated and proof coins can be obtained from dealers and mints. The best time to purchase is when the coins are first issued. There is usually a limited supply which can be anywhere from a few thousand down to just a few hundred. The coin dealers are very quick to snap up the smaller strikes so you have to be quick. Usually there is a limited of one or two sets per person also. Some people get their families to purchase for them also in order to build up their stocks.

Newly minted gold coins usually take a while to build up in value. The initial purchase also includes the shipping, packaging and, of course, the profit of the mint and dealer so the cost of that has to be made up too. Once you have gotten past that point in the value of your coins it is just a matter of time. The value of gold has demonstrated that it continues to rise against the value of the dollar and other currency so it is extremely unlikely you will lose any value.

In fact the value of gold has never dropped. An ounce of gold continues to purchase exactly what it did 50 years ago. The same cannot be said for the value of the dollar or other currency in fact.

With the rare coins , these of course have a value that can far outweigh the value of the cold content. The rarity value increases with the degree of rarity which often increases over time and in line with the demand created for the coins.

The best place to find these are at dealer auctions and auctions such as Sotheby's as well as in coin associations and groups. Private sales are a good place to look.

So gold coin investments and investing continues to be an excellent hedge against inflation and recession and can provide an excellent back up of assets for the future.

Monday, July 23, 2007

Precious Metals

Precious metals are defined as those metallic chemical elements considered of high value compared to other metallic chemical elements by virtue of their comparative rarity. Examples include gold, platinum, silver and palladium among others. They are also chemically less reactive and have a higher luster. They tend to be softer metals yet have higher melting points.

Precious metals, such as gold and silver, has been historically used mainly for currency, but these days precious metal investing is much more prevalent. In fact gold, silver, platinum and palladium, each have their own ISO 4217 currency code (ISO 4217 is the international standard describing three letter codes, also known as the currency code, to define the names of currencies established by the International Organization for Standardization (ISO).

So the demand for precious metals is driven not just by their industrial, practical or decorative use but also by their investment potential and the stability of stored value. Some of the advantages, people see, of buying and selling precious metals include them holding their value even in times of economic uncertainty, as well as they also do not deteriorate and are relatively easy to store and transport

Precious metal prices vary of course and this is dependent on a number of factors including, the demand both industrial and commercial, the possibility of manipulation and the discovery of new sources of the metal affecting its supply and perhaps even rarity.

You can buy and even sell, precious metals in a number of ways.

Actual metal such as gold, silver, palladium in the form of coins and bars. Investments in the form of precious metal funds such as EFTs, certificates and direct investment in stocks or shares of metal producers and processors. Also just trading in precious metals on a daily or regular basis.

How you do so will depend upon your circumstances and your needs and wants in this area.

It is an excellent idea to 'know before you go'. This means deciding what you want in terms of precious metals. Do you just want to be a collector? Or are you interesting in preserving your assets or just making money trading precious metals on a daily or even hourly basis? Your purpose, when dealing with precious metals, needs to be clearly defined.

Then you will find it easy to decide what you want to do in the precious metals market.

You would then need to find for yourself a reliable and secure precious metals dealer. This could be a dealer who sells precious metals in the form of bullion or jewelry, or a market dealer who specializes in investment vehicles such as precious metal funds or EFTs for example. The usual rules of due diligence would apply here. Who is the dealer? Are they a member of the better business bureau in the country in which they are situate, etc.

In short, you will need to make a serious study of the area you want to participate in and understand how that area works and how it can help you achieve your goals with these rare metallic elements. Doing that will go a long way to you satisfying your desire with regard to precious metals.

Sunday, July 22, 2007

Selling Gold on eBay

Selling gold on eBay is now subject to some new rules and it is wise to take note of them, especially for a power seller.

Nothing can be more devastating to a power seller than to have your products removed or, worse, be removed yourself, from selling on eBay for violating eBay's rules.

The new rules cover the terms "gold-plated," "gold-filled," "gold-electroplated," "gold overlay," and "rolled-gold". These may be used provided the alloy used for the plating is greater than or equal to 10kt gold.

From now on sellers must spell out the qualifier - such as "plated" -- throughout the body of the description wherever the word "gold" is used.

According to eBay, "The term "gold vermeil" may be used as long as the item consists of a base of sterling silver coated or plated on all significant surfaces with gold, or a gold alloy of at least 10kt fineness, and substantial thickness and minimum thickness throughout equivalent to two and one half (2 ½) microns (or approx. 100/1,000,000ths of an inch) of fine gold. Sellers must spell out the qualifier "vermeil" throughout the body of the description wherever the word "gold" is used."

Sellers are still permitted to describe an item that is gold or silver in color as “gold-tone” or “silver-tone” in the item title (with or without hyphen is permitted) and throughout the description but sellers may not use the word “golden”.

Items that are not solid gold must not be listed in categories for solid gold, but should be listed in the "Gold, Plate/Fill" categories. This was actually effective from January the 4, 2005.

In addition all sellers are required to use industry-standard abbreviations in the item title, such as "gf", "gp", or "gep," when listing these items.

So when selling gold on eBay it pays to take note of these new changes and ensure that descriptions of gold products and gold related products have a proper and accurate description for buyers.

Gold Treasure Trove

A treasure trove is commonly accepted to be an amount of gold, silver, jewelry, gemstones, artifacts and even money found either in the ground, under the sea or even in an attic or cellar perhaps. A gold treasure trove would likely be gold coins or bars or even gold jewelry.

It is usually very old and the original owner unknown and any heirs are considered undiscoverable.

If you find treasure trove, how you deal with it will depend largely on the laws of the country in which it is found. These can vary so much so that in the USA for example, the law that is applied seems to be dependent on the state in which the treasure trove is found.

In the USA, treasure trove, regardless of what it is, is considered by the IRS as gross income and therefore taxable.

Who gets the treasure when it is found? This can vary too. In Idaho the Supreme Court heard a dispute over treasure trove found on the property of Jann Wenner by a construction worker. The worker found a cache of gold coins on Wenner's land and claimed the treasure under the common law rule of treasure trove which awards title of any artifact to the finder. The claim was rejected in favor of Wenner upon who's land the gold coins were found. The issue is made complex in that some states still accept the common law rule while others do not but instead place the title of such finds in the hands of the landowner.

In fact if one finds treasure trove on the land of someone else and simply removes it, that can be considered by the courts as theft.

Most of the US courts do follow the rule for buried objects, which states that items purposely deposited should be protected until the original depositor can return. The preferred way to protect them is to allow the items to remain in the custody of the landowner on whose property they were discovered. When it comes to old artifacts, however, this effectively delivers title to the landowner as there is no differentiation as to the type of treasure trove and what should happen to it. This principle presumes a living owner who may come back one day despite the obvious fact that the more time passes, the less likely the original owner will return. So how this is treated is very much dependent upon the whims of the court.

In Great Britain the law is more clearly defined. Under the common law of England, Wales and Scotland, if a person dies without passing their property through a will, and has no relatives, then their property passes to The Crown as final owner of all property in the UK. But, if property is established as lost, and remains unclaimed, then that property will go to the person who found it.

Since 1996, the ownership of such finds is determined in England and Wales by the Treasure Act of 1996. Prior to this Act, the local Coroner was responsible for determining whether the property was lost (e.g. dropped on an ancient battlefield) or just buried intentionally (e.g. at a burial, or simply to keep it safe).

Such finds must be declared to the local coroner within fourteen days of discovery. After which a there is a lengthy process where the treasure is offered to national or local museums. If they decide to take the treasure they must compensate the finder with the value of treasure as determined by an independent valuation panel. Interestingly, since 1996 the number of items declared treasure has risen significantly in the UK.

In Australia the law applied is closer to the British law in that treasure trove is considered belonging to the Crown regardless of who found it and where. Police work to enforce that in Australia. This is different to the US where the tendency is to drop the common law and vest the title in the landowner on the basis that the owner of the treasure may return and claim it.

So you can see there are variations in how treasure trove is treated depending on where you live.

If you find gold treasure trove where you are, it is very important then, that you know what the law is in your country and or state and it is probably better to report the find to the authorities. Of course, always ensure, when you do, that you get a receipt that itemizes the find and is signed by a person in authority. In many cases compensation is paid, eventually as it is likely a long process, to the finder but of course there is no guarantee of this or of the value of the compensation.

But the excitement of finding gold treasure trove can be enough for many people and an experience to remember long afterwards.

Wednesday, July 11, 2007

Gold Purity

How do you test for gold purity? How do you know the gold you have is actually pure gold?

24 Karat gold is the purest gold you can get in gold bullion, coins, bars or gold jewelry.

Coins should originate from a Mint. Smaller items such as rings and other gold jewelry should have an assay mark, or hallmark to show the purity of the gold.

Bars and ingots should originate from a foundry. Since 1994 all SMALL bars coming out of modern foundries are100% pure and at the exact weight they are prescribed to be at, due to various recent advancements in production and accurate weighing. New bars, especially ones that are polished and are 1kg or less, and are considered jewelry quality, are weighed and formed while the gold is in a semi-liquid state. Gold at a certain temperature, will flow down a special ramp at a prescribed speed and can then be cut into exact sizes and weights.

Bars that were made before mid 1994, however, or are above 1 kilo weight (above 5 kilos after 1997) or are graded pure raw gold are almost never 100% pure gold nor are they the exact weight.

Hence the Asian foundries always tend to make their bars slightly heavier, adding up to one gram after the traditional weighing, to make up for any discrepancy in purity. This means that a kilo bar of 999.9 percent will have more than 1000grams of 100 percent pure gold in it..

But as a result of the .999 purity standard adopted in the 80s, to replace the 24 ct norm, non-Asian bars had to be made to meet the stencil marks as closely at possible. Prior to that, and even continued by smaller foundries until the early 90s, in Asia a kilo bar always weighed more and was stenciled as 24ct pure.
The carat (abbrev ct or K) is a measure of the purity of gold. In the US and Canada the spelling karat has been adopted solely for the measure of purity and carat referring to the mass weight. These are two different things. As a measure of weight,

1 carat is one 24th purity by weight. 10 carats are ten 24ths. 24 carat gold is pure gold or 999.999% gold with some possible impurities. 18-carat gold is 75% gold, 12-carat gold is 50% gold, and so forth. There is actually no such thing as absolute pure gold. In the refining process it is possible and even likely that a tiny amount of copper will be alloyed as part of the refining process.

However, moves are being made to change the current karat system to the millesimal fineness system by which the purity of precious metals is noted more accurately by parts per thousand of pure metal in the alloy. The most common carats used for gold in bullion, jewellery making and by goldsmiths, for example, are:
24 karat (millesimal fineness 999)
22 karat (millesimal fineness 916)
20 karat (millesimal fineness 833)
18 karat (millesimal fineness 750)
15 karat (millesimal fineness 625)
14 karat (millesimal fineness 585)
10 karat (millesimal fineness 417)
9 karat (millesimal fineness 375)

But this system of calculation gives only the weight of pure gold contained in an alloy.
18-karat gold means that the alloy's weight consists of 75% of gold and 25% of alloy(s). The quantity of gold by volume in a less than 24-karat gold alloy will be different according to the alloys used. We know that standard 10 karat yellow gold that standard 18-karat yellow gold consists of 75% gold, 12.5% silver and the remaining 12.5% of copper by weight. The volume of gold in this alloy will be 60 percent. As gold is more dense than the silver or copper.

But for most people it is a matter of, how much gold is in the ring or gold jewelry or even gold bar. And how do you know that the figure given to you is correct?

In addition the various colors of gold also have different mixes of other metals.
Yellow Gold
50% silver and 50% copper

White Gold
Nickel, zinc, copper, tin and manganese

Pink (rose) Gold
90% copper and 10% silver

Green Gold
High proportion of silver or cadmium

Blue Gold
Some iron

Grey Gold
15-20% iron

You can test the purity of gold yourself with the right test equipment. Mostly this consists of acids which you can purchase for that purpose although electronic testing is now becoming popular and electronic testers can be found with a little investigation and research and purchased. The cost of the test equipment means that you would want to test a lot of gold to warrant the cost of the equipment and along with the other factors such as safety measures, time involved etc, you would likely be better off just getting an independent jeweler or laboratory or even a Mint to test the gold for you.

Bear in mind however that any testing of gold with chemicals will mean a loss of some small amount of gold. For a kilo or more gold bar this may not amount to much but for a ring, it could be significant.

Many a person has been surprised to find that their bar, coin or ring has somewhat less gold than they were given to understand. By the same token it is quite possible to buy a ring and find it has a lot more gold than originally thought.

Gold purity is an important factor when it comes to owning gold!

Friday, July 06, 2007

Gold Futures vs Gold Coins and Bars

In a contest between gold futures vs gold coins and bars, which is it best to hold?

Although there has been, over the past few years, an introduction of new vehicles for gold investment such as EFTs, gold futures and the like, the feel and attraction of owning and having physical gold is still an important factor in the gold investment field. These activities require a lot of work, for example with gold futures trading one needs to keep well up with the gold futures news and be really up to date with the gold futures prices.

"There are "paper" representations of gold available, including futures contracts, certificates, pool accounts and exchange-traded funds," said James Turk, founder of "They provide investors with exposure to the gold and silver price but have "counterparty risk". You only own someone's promise to give you the metal if you ask for it, and even a cursory look at monetary history clearly shows that promises are frequently broken." He continued. "On the other hand, the physical metal does not have any counterparty risk when you own and store it safely,"" he said.

And Jon Nadler, an analyst at Kitco Bullion Dealers also stated, "Gold has been a physical asset for 5,700 years, The very tangible nature and high 'fondle factor' that is associated with gold has traditionally made it an investment that people tend to actually hold in coin or bar form."

In the east the physical ownership of gold has been the norm for centuries, but in the west, in recent years, the apparent 'easy route out' to the physical issues of storage, security, insurance etc, and the costs associated with them, has been to let someone else handle the gold and just play with the money side. This has been more attractive for the trader perhaps than the investor but even so the larger range of products available for gold investment has made such choice items as gold futures, for example, more attractive.

"The physical sector tends to be one of the unique quirks limited to the precious metals complex, as the metals offer not fixed returns -- as you would expect with treasuries or equities -- and cost you money, as you have to pay insurance and storage costs," commented James Moore, an analyst at

Physical gold is usually sold in the form of newly minted proof and uncirculated coins, bars and biscuits, bullion coins and rare coins as well as the larger bars and ingots. The larger the gold parcel sold the more such cost items come into the pictures, such as transport, insurance, storage etc. These can add to the cost and so it is the larger companies that buy gold in bulk with collectors tending to be content with the smaller easily transportable coins and small bars.

Nadler recently observed that U.S. and Canadian mints sold about 3 million one-ounce Eagle and Maple Leaf gold coins to global investors from 2001 to 2005. "Modern bullion coins retail for between 2% and 4.5% over the live market spot rate for gold, so they "track the actual gold price," he said. Most small and medium investors opt for these types of coins." he said. "They are highly liquid, but they are not meant for traders -- rather buy and hold investors and savers," he continued.

The reasons for collecting coins vary of course. Investors may collect for future income or asset retention and growth whereas collectors collect mainly to be the only one or, at least, one of the few to own that coin.

But now, despite the issues of costs associated with handling physical gold in bulk, in gold futures vs gold coins and bars, the trend is definitely moving back towards investors, as well as collectors, preferring to own and have physical gold in their hot little hands, come what may.

Thursday, July 05, 2007

Gold Futures Trading

One aspect of gold that is getting a considerable amount of attention lately is Gold Futures Trading.

Investing in gold through gold futures trading is very different to any other forms of gold investment, such as gold coins and bars, gold bullion, shares, exchange traded funds and other investment type strategies. Here you are not investing in gold directly or in those that produce gold and at the current value, but instead are speculating on what the value of gold will be at sometime in the future and betting on that.

Gold Futures Trading is not for the faint hearted. About 90 percent of new people that venture into this precarious area loose their money. Some even loose the shirt off their backs. But by the same token, some people become millionaires as well.

So how do they do it?

Futures trading is the basic action of entering into a legal contractual agreement with another (known or usually not known) individual to exchange money or assets of some value at some time in the future and with the pre-determined price (called a futures price) based on the underlying asset. Such an asset could be stock, an interest rate even or, in this case gold.

It is an agreement to exchange the underlying asset, or equivalent cash flows, at a future date.

This is all done through a Futures Exchange. A futures exchange is an exchange which provides a marketplace where one can buy and sell specific quantities of a commodity or a financial instrument, such as a futures contract, at a specified price with the delivery set at a specified time in the future. The preset price is called the futures price and the delivery date is called the settlement price.

In other words if you enter into such a contract you are betting that the value or price of that asset or stock or gold is going to be at a certain value at a predetermined time in the future. At that time, when the contact is completed and 'settlement date' arrives, you, or the other party, cough up with the difference between what was originally paid and what the settlement price is.

Both parties of a "futures contract" must fulfill the contract on the settlement date. The seller delivers the commodity to the buyer, or, if it is a cash-settled future, then cash is transferred from the futures trader who sustained a loss to the one who made a profit. Incidentally, you can bet both ways of course, that the price will go up or down.

Now there are only three main things required to trade in gold futures. Lots of knowledge, lots of discipline and lots of cash!

A thorough knowledge of how gold futures trading works, how the gold market is faring and what it can be expected to do is absolutely essential. A thorough understanding of investment finance, some well knowledgeable and well equipt financial advisors are also advised. Also keeping up with the gold future news and gold future prices is important.

Knowing when to trade in gold futures and actually doing so can place a heavy demand on an individual. When the price of gold is plummeting, that can be the best time to buy but it takes great discipline and determination to time it right and take the plunge. It takes some discipline to sleep at nights knowing your few thousand dollars is doing some peculiar things and you are not quite sure where it will be in the morning.

Lots of cash. Although one can make vast sums of money with a relatively small outlay, it is quite possible, and at least initially, very probably, that a first time gold futures trader will lose much more than he will make. When you go to a gambling table to play Texas Hold 'em Poker, you go with a lot of cash. Here it is just the same. You go only with money you can afford to lose. If you cannot afford to lose money, don't play the game

It may be slower, it may be not quite so interesting, but the mere collection of gold coins, new and rare, and gold bullion in it's various types, is a much safer and even rewarding activity.

In the long term actually holding physical gold has, over the past 200 years, been the best way of retaining the value of one's assets, and even increasing them compared to the value of the dollar.

In short, gold futures trading is fine if you have a heap of knowledge, a cast iron discipline and oodles of money to throw away, otherwise it is safer to stick to the tried and true methods of accumulating beautiful clinking gold coins and bars!

Tuesday, June 05, 2007

Tibetan Gold Coins

Tibetan gold coins are available although very hard to come by.An example is His Holiness The 14th Dalai Lama's 60th Anniversary Commemorative Gold Coin Project

The profits from the sale of the gold coins are used towards the development of small scale industries in the Tibetan settlements in India and help to become economically self-sufficient in the long run.

As per The Executive Committee of His Holiness the Dalai Lama's 60th Anniversary
Commemorative Gold Coin Project:
The aim of this project was to commemorate the 60th Anniversary of His Holiness the 14th Dalai Lama . The Gold Coin has the official guarantee of by the Tibetan Government-in-Exile and is approved by His Holiness the Dalai Lama.

Also to further strengthen the unity of the Tibetan people and to realize the future vision of Tibet and Tibetans and to promote the economic self-sufficiency of the exiled Tibetan community

To appeal to the world that the Tibetan Government in exile is actively functioning and that it is carrying out efforts to make the exiled Tibetan community self-sufficient.
Approved by : His Holiness the Dalai Lama
Sponsored by : Department of Finance, Tibetan Government in Exile, India
Quality of Commemorative Gold Coin
Purity of gold : 999.9/1000
Weight : 31.103 grams (1 troy ounce)
Selling Price : £660
Number of coins : 10,000

The gold coins were minted at POBJOY MINT LTD, an internationally known company based in the United Kingdom with over 300 years of experience.

It is still possible to get these Tibetan gold coins but it will mean plenty of patience and searching around.

Wednesday, May 30, 2007

Gold vs the Dollar Investments

In a competition of gold vs the dollar investments, gold would quite likely win hands down.

There are a number of reasons for this. Where you see the price of gold changing it is invariably the value of the dollar against the value of gold that is actually changing. Not the value of the gold.

The value of gold has not materially changed for the past 50 years or so. You can still purchase the same material goods and services with an ounce of gold as you could 50 years ago. This does not apply to the value of the dollar of course. It takes a lot more dollars these days to buy the same goods you bought 50 years ago.

The question, for investment purposes then, is what do you invest in? Dollars or gold?

Investing in dollars leaves one open to the manipulative fluctuations resulting in the dramatic variations of value in the dollar and the devaluation caused by the continual printing of more dollars (we are talking US dollars here but the same principle applies to many currencies around the world) to fund debts such as the federal government debts as well as public and private debts.

Gold however, remains consistent and in fact does not increase in value in terms of purchasing power. Rather the value of the dollar decreases, in the long term, against the value of the dollar. Once upon a time 20 dollars would have bought one ounce of gold. Now it takes between 600 and 700 dollars and this is quite likely to go higher as the manipulation of the dollar continues.

However what you could buy for 20 dollars 50 years ago will now cost around 600 to 700 dollars. Interesting! This tells one immediately where to put one's money if you want to retain the purchasing power of your assets.

Gold coins, bars, or ingots, all are suitable instruments of investment for the long term haul. Gold is interchangeable for goods and services. It can be used as a currency and often is. Gold is not dependent upon any promise. One simply hands over the gold or receives the gold.

The value of gold is determined by its usefulness rather than by any manipulation (extremely difficult with a sold metal which may explain why the gold standard was removed in 1971 enabling the dollar to be subjected to more manipulation.

According to James Turk in his article "8 Things Everyone Should Know About Gold", James Turk,
"Though central banks do not control the gold market, they can influence gold’s price. Importantly, their influence is diminishing. Central banks have been dishoarding much of the gold in their vaults, so they now hold a relatively small part of the aboveground gold stock. After the Second World War, about 68% of the aboveground gold stock was in the vaults of central banks. It’s now about 10%.

Less gold within their control means that central banks have less influence on its price, which is one of the reasons central banks are no longer the factor they once were."
It seems therefore that the more divorced gold is from the dollar, the better it fairs and the more stable and therefore attractive it will become.

In a competition of gold vs the dollar investments it seems that gold indeed wins hands down!

Saturday, April 28, 2007

Origin of gold ETFs

It is a good idea to know the origin of gold ETFs (Exchange traded Funds) as that helps to understand what they are and their place in the gold world.

Gold EFTs are a way of purchasing gold for investment purposes and have some advantages over other forms of gold ownership.

Gold exchange-traded funds (or GETFs) are special types of exchange-traded funds (ETFs) tracking the price of gold. Gold exchange-traded funds are traded on the major stock exchanges including London, Paris and New York.

According to Wikipedia, "exchange-traded funds (or ETFs) are what you might call open ended mutual funds that can be traded at any time throughout the course of the day. Typically, ETFs try to replicate a stock market index such as the S&P 500 (IVV) or the Hang Seng Index, a market sector such as energy or technology, or a commodity such as gold or petroleum; However, as ETFs proliferated in 2006 from under one hundred in number to almost four hundred by the end of the year, the trend has been away from these simpler index-tracking funds to intellidexes and other proprietary groupings of stocks."

The legal structure of EFTs tends to vary around the world but the common features such as being an exchange listing with the ability to trade continually and being are index-linked rather than actively managed continue to exist.

The idea of a gold ETF was first officially launched by a company called Benchmark Asset Management in India. They filed a proposal with the Securities & Exchange board of India (SEBI) in May 2002. It was not launched at that time however, since it did not receive regulatory approval.

The first gold exchange-traded fund was actually launched in March 2003 on the Australian Stock Exchange under Gold Bullion Securities (ticker symbol "GOLD"). Gold Bullion Securities (GBS) are fully backed by gold which is both deposited and insured. GBS was launched to give financial institutions and private investors the ability to own gold and gain exposure to the price, without the inconvenience of storing physical bars.

Gold ETFs are backed by physical gold stored in a vault. Investors can buy a share that says they own an interest in the gold to the value purchased. The EFT's custodians create or redeem blocks of shares based on market demand for the ETF. When demand for the ETF shares is high and exceeds the current stocks of gold, more gold needs to be put in the vault to back the newly created shares so under this scenario, the ETF would take gold off the open market. With the volume of gold now traded as EFT this can contribute to the value of gold increasing as less of it becomes mobile.

Experts and traders alike promote the ease of trading in gold ETFs and electronic forms of owning gold. It has become the lazy gold investors tool. No requirements for delivery, storage or resale. No security risks as the gold remains safely deposited in bank vaults around the world and even when the ownership of any portion of that gold changes, the gold itself does not physically move.

"These funds do not have to hold gold-mining shares, but gold itself," Julian Phillips, an analyst at once explained. That impacts the gold price directly, "whereas the gold-mining shares never did," he said.

The original idea of gold EFTs may have came out of India, one of the leading users of gold. But it was the west that took it up with a vengeance!

Tuesday, April 24, 2007

Perth Mint Certificate Program

The Perth Mint in Australia, runs a highly successful Gold Certificate Program called The Perth Mint Certificate Program (PMCP).

This gold certificate program is designed for the individual to buy and keep gold and other precious metals without the inconvenience associated with transportation and storage of large quantities of gold. This is done by The Perth Mint issuing a Certificate confirming your purchase and which is then stored at the Mint on your behalf.

According to the Mints' website, "The Perth Mint Certificate gives you legal title to precious metals held by The Perth Mint on either a segregated (allocated) or unsegregated (unallocated) basis. The Certificate is in your name and identified by a Certificate number. The PMCP is also the only Government Guaranteed certificate program in the world, making it one of the safest ways to own precious metals."

There are two main aspects to the program. An investor can select either Allocated (segregated) or Unallocated (unsegregated) storage. Both allocated or unallocated storage accounts are covered by a Western Australian Government Guarantee so the main difference, as far as the investor is concerned is that there are NO storage fees on the unallocated option.

With the Unallocated (unsegregated) Bullion You have title to unspecified precious metal deposited in a metal account. You pay only the precious metal cost at the time of your purchase. You pay NO storage fees on this option. This is a pool of precious metal such as gold or silver and one simply 'shares' in that pool.

With the Allocated (segregated) Coins or Bars (Gold and Silver only) however, you own title to specific coins and/or bars, which are placed in a physical form in the PMCP storage facility. You pay the quoted precious metal cost, fabrication charges and storage fees at the time of your purchase. Storage fees are based on the purchase value of your precious metal at the time of purchase, so your storage costs will not rise if precious metal prices increase. Annual storage fees are collected every three years in arrears, with one year's storage payable at time of purchase.

The minimum account opening amount is USD 10,000 (AUD 5,000 for Australian/New Zealand residents) And further minimum subsequent purchases or sales are USD 5,000 (AUD 5,000).

Products included are Perth Mint allocated coins and bars and unallocated bullion. All certificates are purchased through a reputable international Approved Dealer network and are transferable, non-negotiable, and have no fixed size.

The PMCP is especially suitable for investors seeking confidentiality, flexibility and low cost secure storage for their precious metal assets. As far as Australians are concerned, no sales tax is levied on purchases and sales of precious metals in Australia and there are no restrictions on the movement of precious metal in and out of Australia. Consult your own financial adviser with regard to taxes in your own country.

With regard to security. As per the Perth Mint, "All precious metal held by the Perth Mint Depository in both allocated or unallocated storage accounts is covered by a Western Australian Government Guarantee. The Perth Mint is wholly owned by the Government of Western Australia and has been providing investors with precious metal storage and trading facilities since 1899. Western Australia is rated AAA by Standard and Poor's. The bullion bar products of the Gold Corporation group enjoy accreditation from the London Bullion Market Association (LBMA), the New York Commodities Exchange (COMEX) and the Tokyo Commodities Exchange (TOCOM). And all precious metal owned or controlled by the group, including PMCP metal, is insured (at The Perth Mint's cost) by reputable international insurers."

The Perth Mint Certificate Program is the only Government Guaranteed precious metal accumulation program in the world. It is owned by the Gold Corporation, a unique diversified Australian precious metals group created by statute in 1987, and wholly owned by the Government of Western Australia.

Transaction confidentiality is provided for under the Gold Corporation Act 1987 and the Perth Mint Certificate Program's administrative procedures.

The following coins and bars are available under allocated storage:
Australian Nugget gold coins in eight sizes: 1 kilo, 10oz, 2oz, 1oz, 1/2oz, 1/4oz, 1/10oz, 1/20oz
Australian Lunar gold coins in seven sizes: 1 kilo, 10oz, 2oz, 1oz, 1/4oz, 1/10oz,1/20oz
Australian Kookaburra silver coins in four sizes: 1 kilo, 10oz, 2oz,1oz
Australian Lunar silver coins in five sizes: 1 kilo, 10oz, 2oz, 1oz, 1/2oz
Perth Mint gold bars in eight sizes: 50oz, Kilo, 20oz, 10oz, 5oz, 2.5oz, 1oz, 1/2oz
Perth Mint silver bars in five sizes: 100oz, 50oz, Kilo, 20oz, 10oz
AGR Matthey 400oz gold bar and 1,000oz silver bar

The Perth Mint Certificate can easily be liquidated if required. The owner simply sells the Certificate back to an Approved Dealer. Alternatively, the owner can take physical delivery at the Perth Mint or arrange for physical delivery at a variety of locations worldwide of their gold.

One can also surrender any portion of the Certificate, provided you continue to meet the account minimum. A new Certificate will be issued for the remainder of your precious metals.

In addition to the purchase of the precious metals and payment of fabrication charges, there is a USD $50.00 (AUD $10.00 for Australian/New Zealand residents) certificate fee regardless of the size of the certificate. The only other fee is the Approved Dealer's commission.

Lastly, if you lose or have stolen your certificate(s) a replacement is available by filing a Lost Certificate Declaration Form and paying a re-issuance fee.

The Perth Mint Certificate is made available to individual investors through an approved dealer much like the purchase of physical precious metals for delivery.

For those who want to own gold without the inconvenience of transport, storage, the security risks of having and owning gold on your property and the additional cost of insurance, a Gold Certificate Program from the Perth Mint is a useful alternative.

Sunday, April 08, 2007

Should I Invest in Gold Funds?

If you are asking, should I invest in gold funds, then the first thing to understand is what gold funds are.

What are Gold Funds?
There are basically two types of gold funds. Mutual Funds and Exchange Traded Funds. Each have their own advantages and benefits. Each are quite different and may not suit everyone. In all matters of finance and investment always consult with your own personal finance advisor before embarking on any investment.

Mutual Funds
A mutual fund is a organized management group where a number of people pool their investment money and the managers of the fund invest those funds in various investment instruments such as stocks, bonds, short-term money market instruments, and/or other securities and by adroit management of those investments, attains a capital gains and collects the dividend or interest income. If the management is good the investment will realize a profit. If the investment is poor then the investment will record a loss.

The investor 'buys' units' at a set price and the profit/loss of the investment is reflected in the movement of the unit price. The value of a share of the mutual fund, known as the net asset value per share (NAV), is calculated daily based on the total value of the fund divided by the number of shares currently issued and outstanding.

In the US, this is legally known as an "open-end company" under the Investment Company Act of 1940 (the primary regulatory statute governing investment companies), a mutual fund is one of three basic types of investment companies available in the United States. Outside of the United States (with the exception of Canada, which follows the U.S. model), mutual fund is a generic term for various types of collective investment vehicle. In the United Kingdom and western Europe (including offshore jurisdictions), other forms of collective investment vehicle are prevalent, including unit trusts, open-ended investment companies and unitized insurance funds.

A good example of this type of fund is the

According to their web page:
"The world's first and only open-end mutual fund trust that invests exclusively in equal proportions of unencumbered, fully allocated gold, silver and platinum bullion."

"The Millennium BullionFund's investment objective is to provide a secure, convenient, low-cost, low-risk alternative for investors seeking the benefits of capital preservation, appreciation, portfolio diversification and hedging that only bullion ownership can offer."

"The Fund has a fixed investment policy of purchasing equal amounts of each metal, and does not employ derivatives, futures contracts, options or leasing. Since the Fund is priced daily at Net Asset Value, there are no premiums, discounts or liquidity constraints. In this way the Fund’s assets are not dependent on anyone’s promise, representation or ability to perform. The Fund’s assets are not someone else’s liability."
In Australia the term "mutual fund" is generally not used, instead the name "managed fund" is used. But this is more generic as the definition of a managed fund in Australia is any vehicle in which investors' money is managed by a third party (NB: usually an investment professional or organization).

Exchange Traded Funds
The other type of fund is the Exchange Traded Fund (ETF). This is quite different in a number of aspects.

The basic idea of a gold ETF was first officially thought of by a investment company, the "Benchmark Asset Management Company" in India. In 2002 they filed a proposal for the basic concept with the Securities and Exchange Board of India. They received regulatory approval for this some time later and the first gold exchange-traded fund actually launched was in March 2003 on the Australian Stock Exchange under Gold Bullion Securities (ticker symbol "GOLD").

Gold Bullion Securities (GBS) are fully backed by gold which is both deposited and insured. GBS was launched to give financial institutions and private investors the ability to own gold and gain exposure to the price, without the inconvenience of storing physical bars. So here an individual invests in gold, not in a pooled activity as in a mutual fund but as an individual. Whereas the mutual fund might invest in stocks, shares and bonds, the EFT investor is buying an amount of gold which is represented by an account .

After the launch of Bullion Securities on 28 March 2003 in Australia, a number of associated gold ETFs were launched on other stock exchanges. These gold ETFs are grouped under the name Exchange Traded Gold (ETG).

Examples of Gold Funds
Here are some examples of various funds by country in alphabetical order.

Exchange Traded Gold is listed under:
Gold Bullion Securities (ASX: GOLD)
Lyxor Gold Bullion Securities (LSE: GBS and Euronext: GBS)
Streettracks Gold Shares (NYSE: GLD)
New Gold Issuer (JSE: GLD)
Exchange Traded Gold is run in association with the World Gold Council, and as of January 2007 it held 560.49 tonnes of gold in storage.

The iShares COMEX Gold Trust was launched by iShares on 21 January 2005 and is listed on the New York Stock Exchange (NYSE: IAU). As of January 2007 the fund held 44.45 tonnes of gold in storage.

The ZKB Gold ETF was launched on 15 March 2006 by Zürcher Kantonalbank and is listed in Switzerland (SWX). Shares are sold in 1 kg gold units, with a minimum purchase of one unit. As of January 2007, ZKB Gold ETF held 1.53 tonnes of gold in storage.

The Central Fund of Canada (TSX: CEF.A and NYSE: CEF) are a public corporation headquartered in Calgary, Alberta, Canada, mandated to keep the bulk of their net assets in a mixture of gold and silver with a small percentage of cash. The custodian of the gold and silver assets is the main Calgary branch of CIBC. As of January 2007, the Central Fund of Canada held 22.79 tonnes of gold and 990.59 tonnes of silver in storage.

United Kingdom

In September 2006 ETF Securities launched ETFS Gold (LSE: BULL), which tracks the DJ-AIG Gold Sub-Index. Unlike other GETFs, ETFS Gold is not backed by physical gold bullion.

Should I Invest in Gold Funds?
So when asking the question, should I invest in gold funds, the answer is yes. In terms of what to invest in? well, for those new or unacquainted with the financial and gold markets as well as those with little time to devote to long hours of analysis and trying to figure out the markets movements, the mutual fund, such as Bullion Fund listed above are probably the safest and easiest way to invest in precious metals.

ASX Australian Stock Exchange
EFT Exchange Traded Funds
SWX Switzerland Stock Exchange
GETF Gold Exchange Traded Funds
TSX Toronto Stock Exchange
CEF Central Fund of Canada
NYSE New York Stock Exchange
CEF.A Central Fund of Canada Limited
IAU Ishares Comex Gold Trust
GLD streetTRACKS Gold Trust
LSE London Stock Exchange
JSE Jamaica Stock Exchange
Euronext European stock exchange
GBS Lyxor Gold Bullion Securities

Gold IRA

IRA is an acronym for Individual Retirement Account. An Individual Retirement Account (or IRA) is a retirement plan account or in real basic terms, investment accumulation for retirement and which provides some specific tax advantages for retirement savings in the United States. In some other countries, such as Australia for example, it is called superannuation.

An IRA can consist of various investments including stocks, shares, bonds, securities and other vehicles. Once an IRA could only be funded with cash or cash equivalents. Attempting to transfer any other type of asset into the IRA was a prohibited transaction and disqualified the fund from its beneficial tax treatment.

However, have recently introduced an IRA facility specifically for their US customers so they can now hold gold & silver in their Individual Retirement Account

James Turk, founder and chairman of GoldMoney explained: "We know that our customers like the ease with which they can purchase and hold gold and silver at low cost, which we then store for them in secure, allocated storage. Now our customers in the US can take advantage of these features in their IRA."

More information on this is available at:

Nowadays, gold bars and some coins with a purity of 24 karat (0.995+ fineness) are allowed into an IRA. They must be hallmarked by a NYMEX- or COMEX-approved refiner/assayer. So one can, these days have a Gold IRA where gold is used as the investment in the IRA including gold coins and bars

Bars such as the one ounce, ten ounce, one kilo (32.15 ounces), 100 ounces, and 400 ounces are allowed. But only gold coins having a purity of 24 karat (0.9999 fineness) are allowed in an IRA, with the exception of the 22 karat US Gold Eagle. Other gold coins allowed are some from Australia, Austria and Canada. But the South African Krugerrand is not permitted to be included in an IRA as it is a 22 karat bullion coin.

So why should one have a gold IRA?

An IRA is a long term investment. This makes it ideal for an investment as stable as gold. Where as currency is volatile and fluctuates due to influences outside of peoples control and stock and shares, bonds and even securities suffer from the same vagaries, gold has demonstrated itself to be stable over the past 200 years or so in terms of its purchasing power. While the purchasing power of currency has diminished steadily over the years one ounce of gold will still purchase the same value as it did 50 years ago. This drop in the value of currency is demonstrated by how much more is needed to buy an ounce of gold than was required many years ago.

This is shown by the following.

One ounce of gold from 2000 to 2005 rose from 280 dollars to over 530 dollars an ounce. The US Consumer Price Index during that same time showed the US dollar purchasing value went from $10 dollars to $8.82. Which means that in 2000 it only required $8.82 to purchase what then required $10 to make the same purchase in 2005.

So while the value of gold was increasing the value of the US dollar was going down. It makes sense therefore to have gold in one's IRA rather than currency as the gap between them widens on a yearly basis.

50 years ago the price of gold was 20 dollars an ounce. Now it is between 600 and 700 dollars an ounce. It now takes about 600-700 dollars to purchase what could have been bought for 20 dollars 50 years ago. Yet the quantity of gold remains the same. One ounce.

It seems evident therefore, that a Gold IRA is likely to ensure that there is a safe and secure comfortable future down the track provided one invests in gold.

Some useful links.
USA Gold
Austin Coins

Gold Markets

There are basically five major gold markets around the world. These are New York, London, Zürich, Hong Kong and Sydney.

It should be noted here that the London Bullion Market is sometimes confused with the London Metal Exchange which is quite different. Only gold is traded at the London Bullion Market while other metals, other than gold, are traded at the London Metal Exchange. So gold is considered as a metal by itself in these terms.

The price of gold is actually determined twice a day in London. Here a group of bankers get together and 'fix' the price of gold or in other words, decide what the price of gold is going to be at those particular moments when they decide the price. Of course the price then changes by the hour and moves up and down depending on various influences and perceptions of the value of gold. The reason for the fix is more to add stability and as a stable price twice a day for the banks to work on. A sort of guidepost for the day you might say. The price fix is actually determined in Pounds Stirling and is then converted, by various markets, into the currency of their country. Commonly, around the world, the price of gold is perceived in US dollars and Euros.

Each market have their own operating times depending on the time zones and this means that gold can be traded more or less around the clock. There is much trading between the markets as a result.

The value and price of gold varies depending on various factors. Some of these factors are, The value of various currencies, particularly the US dollar. The price of other commodities, The oil price, the economic situations and changes in those situations around the world. World events, such as wars and even dramatic weather influences, such as earthquakes, tidal waves etc.

The biggest influence of course is the perception of the value of gold as against their currency. There are hundreds of analysis on a daily basis busy writing on what they think the gold price is going to do, go up or down or remain steady. In the final analysis no one can predict with 100 percent certainty if the value of gold will go up or down. In the long term, one can see historically that gold has always gone up. Provided there is inflation, currency manipulation, economic upturns and downturns it would be safe to say that, in the long term, gold will continue the trend it has had over the past 100 years. It can be confusing to decide what to do, either buy gold or sell gold or just keep what one has.

Also you can ask the question, what sort of gold should one buy? Bullion in the form of coins or bars? Or buy into shares or gold producers or Exchange Traded Funds? Each have their advantages and disadvantages. Coins and bars are mainly for those keen to store up value and are really more for the long term storage or investment purposes.

Easier to move on a shorter term such as daily, or even on an hourly basis, are stocks in gold companies and such items as exchange traded funds where a bank might hold gold stocks and you buy and sell a slice of that gold which is represented by an account you have with that bank.

Buying and selling stocks in gold companies and gold producers is more volatile and done on the markets through share brokers or if you use a fund through fund managers.

Here is a list of the five main gold markets around the world.

Market hours (local time)
2:00 PM - 8:00 AM Mon-Thu
7:00 PM - 8:00 AM Sun.

After-hours futures trading is conducted via the NYMEX ACCESS electronic trading system beginning at 2:00 PM on Mondays through Thursdays and concluding at 8:00 AM the following day. On Sunday, the electronic session begins at 7:00 PM. All times are New York time. Trading is in US Dollars

Market hours (local time)
8:30 AM - 4:00 PM, with Fixing at 10:30 AM and 3:00 PM.

As mentioned before, here the metal prices are fixed twice a day, known as London Fixes, these are the guidepost for the official gold trading around the world. Trading here is in British Pounds Stirling

Market hours (local time)
8:00 AM - 5:00 PM.

The three biggest banks in Switzerland pool their gold for the purposes of this market. The Euro is the currency used here.

Hong Kong
Market hours (local time)
8:30 AM - 12:30 PM
2:30 PM - 5:30 PM.

Hong Kong is the center of gold trading for the Far East and the Southeastern Asia region. The Hong Kong Dollar is used here.

Market hours (local time)
9:00 AM - 3:00 PM.

Australia's geographical location is ideally placed time zone wise to maintain the continuity of the spot gold market after New York traders go home and before the Asian traders wake up. Sydney opens up just after the NY market closes and is still open when the Hong Kong market opens. The Australian Dollar is traded here.

In addition the gold price is shown in US Dollars and Euros around the world in all markets.

Gold is, indeed, a very popular metal and the gold markets are very active places with many millions of dollars of gold being traded on a daily basis.

London Gold Prices

London gold prices are fixed twice a day at 1030am and 3pm London time. The London Gold Fixing is done by five members of the London Bullion Market Association. They sit down and discuss the price until they come to an agreement. This has, in the past, taken some time but these days it usually only takes a few minutes.
According to Wikipedia, the first fixing actually took place on 12 September 1919 among the five principal gold bullion traders and refiners of the day: N M Rothschild & Sons, Mocatta & Goldsmid, Pixley & Abell, Samuel Montagu & Co. and Sharps Wilkins. The gold price then was a princely four pounds 18 shillings and ninepence (GBP 4.9375) per troy ounce. Due to wartime emergencies and government controls, the London Gold Fixing was suspended between 1939 and 1954.
The gold fixing was then done twice daily at the City offices of N M Rothschild & Sons in St Swithin's Lane until May 2004 when it was taken place by the telephone. In 2004 N M Rothschild & Sons withdraw from gold trading and the London Gold Fixing and was replaced by the Barclays Bank.
A curious tradition of the London Gold Fixing was that participants would raise a small Union Jack on their desk to pause the proceedings. Under the telephone fixing system this changed and participants can now register a pause by saying the word "flag", and the chair ends the meeting with the phrase "There are no flags, and we're fixed".
The current five participants in the Fixing, who must be members of the London Bullion Market Association, are now all banks unsurprisingly. They are:
Scotia-Mocatta — successor to Mocatta & Goldsmid and part of Bank of Nova Scotia
Barclays Capital — Replaced N M Rothschild & Sons when they abdicated
Deutsche Bank — Owner of Sharps Pixley, itself the merger of Sharps Wilkins with Pixley & Abell
HSBC — Owner of Samuel Montagu & Co.
Société Générale — Replaced Johnson Matthey and CSFB as fifth seat
Now even though you will see a gold fix price in dollars it is actually done in British Pounds Sterling and Euros not dollars. The gold fix in euros is a new venture. Traditionally, the London gold fix has always been in Pounds Sterling.
Although the London gold fixing is done twice a day and a gold price established, this does not mean that the price of gold stays at that price until the next gold fix. This is not the case. The fix price is the price at the exact instant in time at which it is agreed but within seconds it will be trading at different prices again.
So why have a London gold fix at all? Basically the five members use this as benchmark to establish a market price fixed for that precise moment when they can balance their sales and purchase transactions including orders and commissions from their clients. It also serves as a guideline for other gold dealers internationally.
Because five banks now 'control' the London Gold Fixing, it could be said that the banks are controlling the price of gold. This would be incorrect. The London Gold Fixing has become more of an institution and tradition than anything else. The price of gold is controlled by peoples perceptions of the value of gold, world economic affairs, how much gold is being bought and sold and other external influences such as new discoveries, sudden large purchases etc.
The London Gold Fix or London gold quote, as it is sometimes called, simply acts as a guideline which, in fact, many around the world do not follow. If a new gold strike is discovered in the outback of Australia, or China decides to buy sa few more extra tones, that is likely to have a greater impact on the price of gold than any agreement 5 men in an office is going to make.
Historically it has not controlled the value of gold, which seems to retain its own value regardless of the many variables that can appear to affect it. There are daily rises and falls and even weekly or monthly rises and falls which many analysis enjoy discussing and making up charts for. But in the final analysis, gold has been rising steadily over the past 100 years against just about any currency you care to name and is likely to continue that trend.
People love gold. People love to own and keep gold. Gold is considered valuable. People will always consider owning gold a better option than paper currency. Paper currency is a tool these days used by governments and those that influence them to control economies. This cannot be done with gold, hence the dropping of the gold standard. A currency will change and can be the subject of manipulation, inflation and depression (sorry – recession).
Gold stands alone. Offer gold to someone and they will take it. You can buy exactly the same value with an ounce of gold now than you could 50 years ago. Not something that could be said about currency.
Regardless of the London Gold prices and the fixing of the gold price each day, gold will continue to be a favorite and considered valuable regardless of the times and economics of the day.