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Wednesday, January 03, 2007

Are Gold Proofs Worth More than Gold Bullion

Are gold Proofs worth more than gold bullion?

Gold Proofs are coins that are specially minted to an extremely high standard over and above the usual coins. Gold Bullion covers all the various forms of physical gold a person may own.

Lets look firstly at why people accumulate gold.

Here are some reasons:

Asset Allocator - Some people like to use gold as an investment or part of an investment portfolio. This was popular up to the 1980s and then dropped off. It is now coming back in favor possibly due to the uncertainties with fiscal currency.

People hiding wealth - Many people feel a need to hide some or all of their wealth. Such reasons can include, spouse, family, tax considerations, creditors, thieves and other possible reasons.

Speculator - As the gold price moves up and down the gold speculator will buy and sell gold, usually on a daily basis in order to accumulate profit. Gold itself holds no beauty for the speculator who uses it merely as a tool to achieve a specific result.

Currency speculation - To buy gold in one currency and sell in another as a possible way of making a profit. One does need to have some knowledge and experience in this field to be successful.

Gold Bug - A gold bug is someone who believes in accumulating and holding gold in the face of potential financial uncertainty. This has been a popular activity for many years, even and especially during times of war where the currency or financial situation of a country may be in doubt. Gold bugs believe that by holding gold their future financial certainty is assured.

In short, although gold was used as money for hundreds of years up to around the 1970s, it is now primarily viewed these days more as a way of storing assets for whatever reason with some speculation to take advantage of fluctuating gold and currency prices.

There are a number of ways of accumulating gold.

Buying gold coins and bars is a popular past time. Here the physical ownership of gold is important. A person might have a number of gold coins tucked away in their house or in a safe deposit box, even some small gold bars. In this area one is the collector as well as the potential investor. Some advantages to this are that gold does not tarnish or corrode, is easy to store and transport and, importantly, is easy to dispose of by selling.

Wealthier individuals and companies may store the larger gold ingots in bank vaults.

One can also buy gold through a gold exchange traded fund. Here the gold does not leave the bank vault but your ownership is represented by a certificate. The value of the certificate of course changes with the change in the gold price.

Other more precarious methods of investing in gold include shares in mining companies. Here the value of the share is influenced not only by movements in the gold price but also by management activities of the company and other influential factors in the share market.

Gold has a specific price, however proof coins, especially as time moves on, can increase in price out of proportion to the price of gold. Mostly due to their increasing rarity (only a limited number of proof coins of any particular type are struck) and also due to the demand collectors place on the proof coins.

So while the price of gold may rise, it is likely that proof coins for collectors and investors alike will rise over and above the price of gold which means that the question, are gold proofs worth more than gold bullion would very likely be yes.