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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 GoldMoney.com. "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 TheBullionDesk.com.

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!