Tuesday, November 25, 2008

Gold Warrants

Gold warrants are another way people sometimes like to invest in gold. However there are some important issues to be aware of before putting ones toe in the precarious world of gold warrants.

What is a Warrant

Very basically a warrant is a financial instrument* that entitles the holder of the warrant to buy stock in the company that issued the warrant at a specific price.

Simply stated, a warrant is a type of option (also known as a derivative. A ‘derivative’ is an investment product whose price is derived from another.). Many investors are familiar with exchange traded options being 'call' options and 'put' options. A Warrant is a privately issued (and not necessarily exchange traded) option.

The key advantage of Warrants is they can be issued with as many different features and benefit as the issuer or the customer requires. In gold warrants, a gold derivative is an investment product that offers price exposure to gold, but does not deal in actual physical gold. It is a speculation on the price of gold either rising or falling.

There are two types of warrants. Call Warrants and Put Warrants

Call Warrants
A call warrant is the right to buy a share at a predetermined price.

Let's assume you want to invest in Goldilocks Mining. Goldilocks Mining shares are currently $10, which you expect to appreciate to, for example, $15. This would give you a profit of $5. Of course, if you are wrong and the share price falls to $7, you would lose $3.

This is where warrants come in. Instead of buying shares directly, instead you can buy a share through a Call Warrant on the Goldilocks Mining share. This might cost $0.80 and gives you the right to buy the share for a predetermined warrant term, at the fixed price of $10. Now if the Goldilocks Mining share goes up to $15, the warrant would be worth at least $5, because the warrant allows you to buy the share for $10 and immediately sell it again for $15. Rather than actually buying and selling the share, however, you would simply sell the warrant itself for $5. After deducting the purchase price of $0.80, you end up with a profit of $4.20.

Of course if the share price falls, the warrant is effectively worthless because no one would pay $0.80 for a warrant with a $10.00 strike price, when the share itself can be bought in the market for $7. So if you think the share is going to move downwards, the best strategy is to sell the warrant as soon as possible before expiry, in order to limit any losses. In any case, you cannot lose more than the $0.80 warrant that you paid in the first place for the warrant. In short, when you buy a warrant, you know from the very beginning what your maximum possible loss could be.

Put Warrants
A Put Warrant is different in that here you are betting that the share price will fall. Your profits are related to the share price falling rather than rising. Using the same example, a put warrant entitles you to sell one Goldilocks Mining share for $10. In this case, if the put warrant costs 60 cents and the Goldilocks Mining share price plummets to 6 dollars, the put warrants will be worth at least $4 because you can now buy a share for $6 and immediately sell it again, using the warrants for $10. The difference of $4 is your profit, less the initial purchase price of $0.60 of course. If the price rises, say up to $12, the warrant would be worthless because investors could sell the share for $12 in the market, while your warrants is only worth $10. Again, If you think the price will not go back down before the expiry of your put warrant, your strategy would be to sell your warrants as soon possible. Your risk is always limited to the price you paid for the warrant in the first place, in this case $0.60

Gold Warrants
Gold warrants are commodity warrants and related to commodities such as gold and silver for example. Usually issued by mining companies or mints, among the gold warrants available are the Perth Mint, Australia Gold Warrants (PMG).

The Perth Mint Gold product (PMG) is a typical example of a warrant which provides direct, non-leveraged exposure to gold. The PMG product is essentially a right created on-market by Gold Corporation to facilitate trading in gold on market. Remember, that one is not actually owning gold with a gold warrant, but only betting on the movement of the price to ones advantage.

PMGs are structured as long-dated call warrants with a very low exercise price of 50 cents per 100 warrants (no leverage). So here one is betting that the price of gold will rise.

Tracking the international over-the-counter market spot price of gold, the price will be based on the market value of the gold backing (1/100th of a troy ounce).

The minimum exercise set is 100 warrants, which entitles you to take delivery of 1 troy ounce of fine gold (99.99% purity). An additional fee may be payable at the time of exercise, depending on the form of settlement that is elected and there are annual management fees to be paid also.

Owning Physical Gold
Of course this does not compare to owning actual gold. Gold warrants are transitory and eventually one will have to sell the warrant at some time and maybe not at the best or most advantageous time.

Gold warrants may have their place in the market for betting on the gold price, but for the serious investor, there is no substitute for actually owning physical gold.

* Financial Instrument
A real or virtual document representing a legal agreement involving some sort of monetary value. In today's financial marketplace, financial instruments can be classified generally as equity based, representing ownership of the asset, or debt based, representing a loan made by an investor to the owner of the asset. Foreign exchange instruments comprise a third, unique type of instrument. Different subcategories of each instrument type exist, such as preferred share equity and common share equity, for example.

Friday, October 31, 2008

How to Buy Gold and Silver on the Comex

This article is about how to buy gold and silver on the Comex. Firstly, for those unfamiliar with the Comex, it gives a brief overview of how it works and how futures contracts for gold and silver work. Then there is some information that an investor might want to use to buy gold at spot on the Comex Exchange.

In all activities of this sort it is highly advisable to consult with your financial advisers and brokers before embarking on any futures contracts.

Real Gold & Silver vs Gold & Silver Spot Price
Currently there is an unprecedented shortage of physical metal in the real gold and silver bullion markets. It is very difficult to buy physical gold and silver and the premiums (the amount over the spot price charged by dealers) are the highest since the 1980s and the waiting period is blowing out to 8 weeks or more for delivery.

In view of the increasing financial instability now worldwide, more and more people than ever are seeking physical gold and silver.

Yet, after an understandable climb in the gold and silver prices during the middle of the year when the 'credit crisis' really began to emerge, the spot price of gold and silver is falling. This is contrary to normal economics as, traditionally, in any past crisis , the value of gold and silver would consistently rise.

But nowadays, the spot price and the comex price, no longer reflect the true price of gold and silver in the market. Why is this so one might ask? Usually one would expect when a shortage of a commodity occurs, then the price would rise commensurate with the unavailability, and then more of the commodity should enter the market to make up the short fall, resulting in a balance being struck between the price and the commodity. Yet here we have a widening gap between the 'apparent' price of gold and silver and the availability of it.

To answer this conundrum and, possibly take advantage of it, we need to look at a number of issues. The first of which is, what is the comex or spot price of gold and silver?

If you already understand about the Comex you can skip this part.

What is the Comex
There used to be two exchanges in New York. The New York Mercantile Exchange and the Commodity Exchange, Inc (COMEX). In 2006 these two exchanged merged and became one. It is now the New York Mercantile Exchange (NYMEX) but is divided into two parts, the NYMEX Division upon which is traded such commodities as oil, gas, palladium and platinum and so forth, and the COMEX Division on which gold, silver copper and aluminum is traded. It is this exchange that we are most interested in. On this exchange are traded 'Future Contracts' of gold and silver.

Futures Trading
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.

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.

One of the perceived advantages of futures trading is that you do not have to put up all the money needed for the contract but usually only a percentage. Usually around 10 percent. This means that people can trade with a smaller amount. It is rather like going to the races and placing a bet for 1000 dollars but only putting 100 dollars down. If you lose you have to come up with the 1000 dollars of course but if you win you have only needed 100 dollars to play the game. There are some other factors of course that an investor in futures trading can come a cropper with, such as a drop in the price of the commodity resulting in more money being demanded of one by the broker. This happens only too often and many people over commit themselves and so can lose more than the shirt of their back this way. It takes good knowledge and due diligence and an excellent financial advisers and broker to play in the futures market.

Both parties of a futures contract must fulfill the contract on the settlement date. The seller then delivers the commodity to the buyer, or, more often than not, it is a cash-settled future, and 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.

Gold & Silver Futures Trading
In this case the futures traded are gold or silver and done through the Comex, the marketplace where one buys and sells specific quantities of gold or silver, in the form of a futures contract, at a specified price with 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 Gold and silver future trading, the precious metal is usually not delivered but a cash settlement is affected. Many institutions who by gold and silver futures contracts, especially banks, will sell short, or in other words sell before the contract expires. However, we are going to look at how one can see the contract through to expiry and then accept delivery of physical gold and silver

What happened with the Comex?
Firstly, to help understand how this works, we might ask the question, why is the Comex price of gold and silver so much lower than the real price of gold and silver?

The “Resource Investor” (www.resourceinvestor.com) noted recently, "In that CFTC (Commodities Futures Trading Commission) report, it surfaced that those few banks took the huge net short positions in gold and silver futures just ahead of the largest and harshest fall in prices for gold and silver since the Great Gold Bull began in 2001 – 2002. The 'Got Gold Report' covered it from the silver point of view earlier this week."

This means that, artificially through a process of short selling on contracts, the price of gold and silver was driven down as part of the effort to boost up the dollar. Of course this only affected the COMEX gold and silver price and had no effect on the real price of gold and silver, which is demonstrably in short supply, except to focus more attention on the ever widening gap between the two.

This has consequently opened up the opportunity for investors and traders in gold and silver to buy at the Comex Price and sell on the open market. There are some costs issues to overcome but these are minor when you look at the difference in the price of the Comex and physical metal.

How to Buy Gold and Silver on the Comex
Taking delivery of a commodity is not usual and some brokers might try and talk you out of it as it involves more work for them. Something they are not keen to do. So you will have to find a broker willing to do the work and be insistent about taking delivery. It is quite legal and in fact that is what the market was originally designed to do.

The following outlines the basics, including the various procedures involved in taking delivery of a gold or silver future contract on the Comex. There are some costs involved of course which will vary with the broker you use.

Whereas, with a cash market you can buy or sell during the term of a contract, to take delivery you will need to wait until the term of the contract expires and you can take delivery. This is called taking a long term. Various entities, such as banks for example, take a short term. They have no intention of taking deliver and so, with the ten percent leverage (remember?) they can take enormous amounts of contracts and sell them short, keeping the price down and, in effect, manipulating the gold and silver price.

But if you intend to take possession you will have to ante up the whole amount required to complete that contract and you would have to wait until the contract expires before you can organise and take delivery.

For example, if a contract was bought today, and the price on the gold contract was between $695 - $735 per ounce, the full value of the contract you bought would be $69,500 - $73,500 per 100-troy ounce. Likewise if the price on the silver contract was between $9.74 - $9.16 per ounce, then it would be $48,700 - $45,800 per 5,000 troy-ounce contract.

These figures would not include any commission charges incurred going through a broker of course and are just an example to illustrate how it works.

Of course, if you did not want to take possession of the metal you could simply enter a position without posting the full contract value, but instead post around 10 percent (The actual percentage may vary depending on your broker and other factors). This is the "margin" which is posted "in good faith". Price can go through some dramatic changes in the any futures market and if the price of gold drops significantly you might be called upon to add funds to your account to maintain your position. (called a maintenance margin) or you might find your position is liquidated. There is usually a risk maintenance level and if your account falls below that level then you would need to top up your account with the requisite funds.

Now, when the time comes to take delivery you will get a Notice of Delivery and the full amount will be debited from your account. So you would be required to have the full contract value deposited in your account with your broker at the price the contract was originally purchased. There would be a few days of processing at the end of the contract but then you would be able to take possession, usually a couple of weeks later.

You can do this in three ways.

You will receive a receipt, which in effect is like a stock certificate, and you could store that. The gold would be in storage in a vault and you would be up for some storage charges, This premium, compared to the gold price, will be minuscule. The gold is kept in storage for you and you can take physical delivery anytime you want of course. This is the first method.

The second is that you could have the gold bullion shipped to a warehouse. You can be put in touch with the vault that contains your gold (generally in or around New York, US) and have brinks or an Armored car transfer your gold to a warehouse or bank of your choosing. There would be more costs involved with this but, again, the charges would not be very much compared to the value of the gold bullion.

Of course you can avoid doing any of this by simply depositing the full value of the contract when you establish the position. Note, you can decide not to take delivery of course at any time and close out your metals position and take a profit or loss depending on the price movement.

Price and Delivery Costs
Usually when the contract is expired and delivered to you it is in the form of a Certificate. Many clients have the broker hold their certificate so the contract can be sold back into the market at a later date. However, In this case you want to take delivery so you would get the certificate from the broker.

The costs involved now will depend upon your broker, usually there is a contract fee and a commission, as well as insurance and storage fees. The gold can stay where it is and simply be stored for a regular fee.

However, IF you want to take it out of the Comex warehouse and have it stored elsewhere then it would be your responsibility to organise this. This would be typically done through a security shipping service and arranged storage at a bank vault.

In order to sell the gold or silver back on the comex there is also the addition action required which is to have the gold assayed (assayed: an analysis of a metal to determine the quality and weight of the metal). Any gold removed from the Comex Warehouse must be assayed prior to being sold again on the comex. So this would be an additional cost if you planned to sell it there in the future. However, you can sell the gold or silver to a gold dealer any time without having to have it assayed.

If your intent is to actually receive the physical metal, it is held in storage at specific "delivery points." It is your responsibility to make the arrangements to do this. There are fees associated with removal from the storage facility. In addition, if the metal is taken out of storage, it cannot be sold for delivery on the exchange without being re-assayed.

Some people actually turn up with a SUV, their receipt or certificate and have the gold loaded into the back of the SUV and drive off with it. Not something to tell the neighbors of course.

Of course to do all of this one needs to have an account with a broker who handles, or preferably specializes, in Commodity futures trading on the Comex. You will need to set up an account whereby you have access to broker-assisted trading rather than just trading online.

In step form it goes like this:
Broker holds the receipt in PFG's account for customer
Client buys the futures contract.
Client will take delivery between First Notice Day and the Last Trading Day.
On delivery day account is debited cost plus a small delivery fee.
Receipt is booked to customers account
Monthly storage charge also passed on to customer's account.

For Physical Delivery when the Customer wants the gold or silver bars in their procession
Client buys the futures contract.
Client will take delivery between First Notice Day and the Last Trading Day.
On delivery day account is debited cost plus a small delivery fee.
The broker provides the customer with name and phone number of the individual at the depository to
Customer makes arrangements for the physical delivery including having the gold or silver assayed if required in order to sell to a dealer.
Last word on Buying Gold and Silver on the Comex
For the new person or one inexperienced in futures trading, it is advisable to only use funds which you can happily afford to lose. It is also advisable to have a broker who fully understands gold and silver futures trading and with which one can build up a relationship. Also always seek the advice of a competent financial adviser prior to making any investment.

Buying gold or silver on the Comex can be a very fruitful exercise and following the above outlines and point will help you to understand a bit more fully how to buy gold and silver on the Comex.

Tuesday, October 28, 2008

Calculating the Value of Scrap Gold

Having scrap gold for sale is one thing but how do you calculate the value of scrap gold?

The spot gold price is really a poor indicator of the value of gold. Look around and you can see that gold sells for much more than the spot price of gold (which is only the paper price of gold on the market after all and is not really gold).

Scrap gold is really any gold that is not wanted or which can be turned into cash or profit so scrap gold can include the following therefore:

Gold jewelry
Gold chains
Gold fillings (dental)

In fact anything that is made of gold or has gold in it.

Before you sell scrap gold you should know exactly how much actual gold you have and how much it is worth. Then you can ensure that you are getting the right price for your gold.

There is a secret formula which scrap gold dealers use and when calculating the value of scrap gold and which is shown here.

These are a the steps you would take.

Separate the gold you have into their various karat fineness. Some will be 10 karat, some 14 karat, 18 karat, 22 karat or 24 karat, the purest. You might need to examine detailed numbers stamped on the gold or if there are none then have the gold examined or tested by a reputable dealer. You should keep in mind that some testing may involve the loss of some gold so this is only recommended where you have a decent amount. If it is just a ring or small chain it may not be worthwhile having it tested. It is possible that some gold is simply gold plated and therefore would hardly be worth while selling as gold.

Find out the value of each group by using the gram scale. If you are only able to weigh by the ounce then you will need to convert to grams by multiplying by 28.35 For example. 2 oz. Equals 2 x 28.35 which equals 56.7 grams. You can find charts to do this conversion. Fine gold is also measured in troy ounces. One troy ounce is equal to 31.1 grams of gold. This is all pure gold you understand.

Any gold coins should be looked at separately. They can have what is called a numismatic value. That is to say, the rarity, age, condition and other factors can have a bearing on the value of the gold coin. In some cases the gold coin value as a rare gold coin can be much more than the value of the gold it contains.

Once you have established that your gold is only worth the value of gold, get today’s price per gram, you can do this from the charts on this website. Multiply by the fineness of the gold. In other words divide the karat by 24, then multiply that number by today’s gold price per gram. For example with your 10 karat gold and the current price was 30 dollars a gram then the price of your 10 karat scrap gold would be $30 x .4167 = $12.501 per gram.

So you simply multiply the price per gram by the weight in grams. If you have 10 grams of 10KT gold and you calculated the price at $12.06 per gram, then your scrap gold is worth 10 x $12.06 = $120.59.

10KT = 10/24 = .4167
14KT = 14/24 = .5833
18KT = 18/24 = .750

Here are some more examples:

If you had 5.0 grams of 14KT scrap and gold was $900.00, per ounce for example, then $900.00 divided by 31.1 equals $28.9389 multiplied by .5833 (14KT) equals $16.88 per gram. $16.88 multiplied by 5.0 grams equals $84.40.

Now if you had 15.3 grams of 10KT gold scrap. $900 divided by 31.1 equals $28.9389 multiplied by .4167 (10KT) equals $12.06 per gram. $12.06 multiplied by 15.3 grams equals $184.52.

If you practice it a few times you can get quite good at it.

Most people use grams for these calculation but many scrap gold buyers use pennyweight (DWT) instead of grams. There are 20 pennyweights in a troy ounce. So in this case you can substitute 20 for 31.1 to calculate pennyweight in our formula. You can also multiply a pennyweight by 1.555 to get an equivalent gram weight or divide a gram weight by the same 1.555 to get pennyweight.

Scrap gold dealers generally will not give you top value for gold. However in these uncertain times many are looking for gold themselves so are likely to pay for gold and usual If you are selling scrap gold you might be better off selling privately or by auction, depending on the amount you have to sell.

Also one should be aware that, in some cases, there are other precious metals mixed with the gold and some of these, such as platinum, would be worth more than the gold.

In all cases, however, calculating the scrap value of gold or any precious metal for that matter, is an important step when it comes to selling scrap gold.

Thursday, September 18, 2008

Gold ETF, How Safe is it NOW in Today’s Financial Climate

In September 2008, shareholders in EFT Securities were left high and dry and unable to trade popular commodity securities, due to concerns over the future of their backer, AIG.

In fact, banks and brokerages stopped making markets in the Exchange Traded Commodities (ETCs) backed by the troubled insurer and sold by ETF Securities (ETFS). The price of the stocks also plummeted over 50 percent due to the worries over AIG.

Gold ETFs are vastly different to holding real gold. Turbulence, such as the above in the market, can affect the value of those gold ETFs markedly.

Owning gold ETFs means that one owns a stock in the price of gold rather than gold itself even though corporations such as ETF Securities owns gold. How much gold they own is not clearly discernable by the average “Joe” who may own ETF stocks.

Even a downgrading by credit agencies S&P or Moodies can drastically affect the share price in ETF Securities, as it has done, In fact in September 2008 shares in ETF Securities products, which are backed by AIG, were down as much as 50% in one morning after US insurer was downgraded by credit agencies S&P and Moody’s.

The cold hard reality is that if the issuer of an exchange traded note goes bankrupt, investors holding exchange traded products backed by these notes will join the ranks of other creditors hoping to get their money back.

Streettracks gold etf, for example, could also be in the same boat. Streettrack gold shares, Streettrack gold trust, you name it. It can equally apply to Canadian gold etf, gold etf in India and Barclays gold. Any etf gold funds in fact could suffer the same fate. With any gold etf one does not own actual gold and cannot redeem gold from the fund.

Indeed, to buy gold etf is a venturous and courageous, and one might almost say dangerous activity, in today’s economic climate.

However, for those astute people who decide to buy gold and own actual physical gold, as distinct to ETFs, their stored value remains stable. As the value of the dollar decreases, it takes more dollars to buy an ounce of real gold. The "share price" or stock of actual solid gold does not deteriorate as a result of any financial meltdown. Indeed the value of their gold holdings are very likely to go up and the gold price will continue to increase with the addition of more and more people seeing it, quite rightly, as a safe haven in these stressful times.

The true value of gold, measured in dollars (US) is more like 1500 according to some sources and this means that, if you buy gold now and hold on to your gold, your holding is going to be very safe.

Sunday, August 31, 2008

Shariah Compliant Gold and Silver ETF

In London recently, ETF Securities (ETFS) launched what is claimed to be, the world's first Shariah Compliant precious metal exchange-traded commodity, (ETC) based on physical platinum, palladium, silver, gold and a basket of the above metals.

According to Meralli, formerly with Goldman Sachs and Deutsche Bank, an Exchange Traded Commodity (ETC) is very similar to an ETF (exchange-traded fund). However, it is a security structure not a fund. "Conceptually, an ETC offers investors a simple, efficient and cost-effective way to access commodities via a priced security listed on a regulated exchange. ETCs trade and settle the same as equities. ETCs are open-ended and can be created and redeemed to demand. ETCs are simple to access as they are traded in three currencies (euros, US dollars and sterling)." he explained.

"In Shariah, the common issue of a commodity Murabaha contract is that it cannot feasibly be structured for gold and silver. With the ETFS physical precious metals ETCs, the nominate transaction is an entirely different structure. In purchasing the security, the investor obtains an allocated physical entitlement to the underlying bullion and his return is tied directly to the spot price of that precious metal less the management fee." he stated.

This appears to be ETFS answer to entering the multi billion dollar Islamic finance and Sameer Meralli, head of sales for Middle East and North Africa at ETF Securities, then stated, "... they are a purer form of Islamic commodity transactions, for instance compared with Murabaha (cost-plus financing). In an ETC, investors do not have to worry about margins, delivery or the underlying assets."

What makes the ETC Shariah complaint is that, according to ETF Securities, all of the physical precious metal ETCs are backed by allocated metal - uniquely identifiable bars and ingots which carry no bank credit risk. The bars and ingots are held in trust in London by custodian HSBC Bank NA (USA), the leading custodian for ETCs in the world. Unlike the usual gold Exchange Traded Fund (ETF) where one is betting on the value of the fund going up and the fund is not directly related to specific bars of precious metal, gold in this case.

The precious metals conform to the rules of good delivery of the London Bullion Market Association (LBMA) and the London Platinum Palladium Market (LPPM) and securities are only issued once the metal is confirmed as being deposited into the company's bullion account with the custodian. Also consistent with allocated gold, no precious metal is borrowed, loaned out and nor does it earn any income.

This then is an assurance for the Islamic investor that his or her holding is actually precious metal in the form of gold rather than an account reflecting the price of gold and interest is not earned on the precious metal but one is relying on the value of gold moving up in order to recoup ones investment is necessary to ensure that one is Shariah complaint and not violating the law with regard to usury or riba as it is called in Islamic law.

The five ETCs that are Shariah-approved are specifically the ETFS physical precious metals products - the ETFS physical gold, ETFS physical silver, ETFS physical palladium, ETFS physical platinum, and the ETFS physical precious metals basket (an aggregation of the four precious metals). Each of these securities, said Meralli, are backed by physical allocated metal held by the custodian. These are designed to track the spot price of the underlying physical bullion less the management fee.

Meralli also explained, "Three weeks ago, after an extensive approval process, the Shariah Advisory Board at Al-Qalam Group approved the product as being fully Shariah-compliant. Since the security is backed by physical allocated bullion, which is held in trust on behalf of the security holder, the underlying transaction enables investors to obtain a spot return on the basis of a precious metal that they actually hold (in a vault in London or Zurich to be exact). The logistics of this transaction are in pure concordance with Shariah financial tenets,"

Also Shariah Complaint and where stability and security is paramount and where one can monitor the existence of the precious metals such as gold and silver, one could be better off looking at buying gold and silver from such places as goldmoney.com rather than as an ETC.

In this case there is no interest or riba and it is a safe and secure way to hold assets and not lose value due to inflation and other reverse interest penalties. besides which one can now take delivery of the gold in the form of 1000 gram gold bullion if one wants to. This makes GoldMoney a great safe haven for storing gold.

Friday, August 08, 2008

Gold Medals at the Olympics

With all the attention right now on the Beijing Olympics some have asked what the Olympic gold medals are made of and who makes them.

The Olympic Medals are a symbol of the utmost achievement in sport and of course this is represented by none other than Olympic Gold Medals.

According to legend, the ancient Olympic Games were founded by Heracles, one of the sons of Zeus. And the first Olympic Games, for which we still have written records, were held in 776 BC. At this Olympic Games, a naked runner by the name of Coroebus, a cook from Elis, won the sole event at the Olympics. The stade (from which the word Stadium comes) - a run of 192 meters or 210 yards. This made Coroebus the very first Olympic champion in history.

Medals were first introduced in 1896. Winners received a silver medal, the second place received a bronze medal, the third none at all. Then, in 1900, most winners just received cups or trophies instead of medals.

The IOC has since retroactively assigned gold, silver and bronze medals to the three best placed athletes in each event to fit in with more recent traditions.

Most gold medals are actually gold-plated with notable exceptions, made of solid gold, being the Lorentz Medal, the United States Congressional Gold Medal of Honor and the Nobel Prize medal. The last Olympic gold medals that were made entirely out of gold were awarded in 1912.

The Olympic medals are designed especially for each individual Olympic Games by the host city's organizing committee. Each medal must be at least three millimeters thick and 60 millimeters in diameter. Also, the gold and silver Olympic medals must be made out of 92.5 percent silver, with the gold medal covered in six grams of gold.

The concept of the sequence of medals being gold, silver and bronze for the first three places dates from the 1904 games and has since been adopted by many other sporting events.

Minting of the medals is always the responsibility of the host city.

From 1928-1968 the design has always been the same. The obverse showed a generic design by Florentine artist Giuseppe Cassioli with text giving the host city and the reverse showed another generic design of an Olympic champion.

From 1972-2000, Cassioli's design, sometimes slightly changed remained on the obverse but now with a custom design by the host city on the reverse. Note that Cassioli's design showed a Roman amphitheater for what were originally Greek games and a new obverse design was commissioned for the Athens 2004 Games. Winter Olympics medals have been of more varied design. The silver and bronze medals have always borne the same designs.

So over the coming weeks we will watch with wonder as the athletics of the day perform their very best in order to obtain that most treasured of possessions, An Olympic Gold Medal.

Thursday, February 14, 2008

Gold Bar Price

The gold bar price of course changes daily with the price of gold. Large gold bars are a useful safe haven for storing assets for the long term in economic uncertainty, while the smaller gold bars can be easily bought, stored, transported and sold for the short term.

Types of Gold Bars
There are basically two types of gold bars. Cast and minted.

Cast gold bars are produced by pouring molten gold into molds. These are usually called ingots. They are rough and the markings, such as the foundry or manufacturing mark, gold purity and registration number are pressed into the gold. Although gold is quite dense it is nevertheless quite soft and easy to manage.

Cast gold bars are manufactured by around twenty-seven accredited manufacturers around the world. They produce small cast bars in many gold bar weights including in kilos, grammes (usually 500g or less) and in twenty ounces or less sizes. The smallest cast gold bar known weighs 10 grams and is made in Brazil. More popular cast gold bars are manufactured in Brazil, Europe and Japan, The ounce bars are made in Australia, Europe, UK and the USA.

Minted bars are manufactured from gold that has already been poured into a mound and then drawn out into strips. The gold bullion bars are then stamped out to the required sizes and shapes and the markings, in this case, are applied during the minting process.

Gold coins are produced in the same way incidentally, although more care is applied during the stamping process to produce the finer finish of the coins.

There are four accredited manufacturers of the standard minted bars. These are:
Argor-Heraeus. A subsidiary of Union Bank of Switzerland
Metalor. A subsidiary of Swiss Bank Corporation
Valcambi. A subsidiary of Credit Suisse
Pamp SA
They produce around 35 percent of the worlds minted gold bars. The bank subsidiaries also issue their bars with the bank brand name so are easily recognisable.

Gold Bar Purities
All gold bars have a purity expressed in units per 100, 1000 or 10000. There is a universal trend now for bars to be 99.99%, however, there is still some variation in some countries. For example:
Dubai - 99.9%
Iran - 99.5%
Hong Kong - 99%
Thailand - 96.5%
A new product, called ChipGold, has also entered the market. This is a relatively new form of gold bar, consisting of a small ingot of one to twenty grams presented in a sealed and certified package, about the size of a credit card. Chip Gold is designed to be used as a liquid investment in gold and can be easily stored and transported. The typical weights available include, one through to twenty grams with a purity of .9999 fine gold.

The granddaddy of all gold bars is the larger 400 oz (12.5 kg) ‘London Good Delivery’ bars. These are held by central banks and used by banks, governments and large institutions to store value and to transfer value between banks, They almost always have a purity of 99.5 percent.

Gold Bar Weights
All gold bars are denominated in different units of weight to accommodate the various cultural preferences of different geographical regions:
Grammes. International
Ounces. Mostly English-speaking countries: USA, UK and Australia
Tolas. Mainly India, Pakistan, Middle East, Singapore
Taels. In the main, Chinese-speaking countries: Hong Kong, Taiwan, China
Bahts. Thailand
Chi. Vietnam
Dons. Korea
One troy ounce is equal to 31.1034768 grams. So if gold was 900 dollars an ounce then one gram would be worth about 28.935673 dollars.

Gold is measured in troy ounces as distinct to the more common avoirdupois ounce which is used for food and slightly lighter than a troy ounce. One avoirdupois ounce is equal to 28.349523125 grams.
One tonne = 1000 kilograms = 32,150.746 troy ounces.
One kilogram = 1000 grams = 32.15074656 troy ounces.
One tael = 50 grams. (the official rate of taels in mainland China since the country went metric. In Taiwan and Hong Kong today a tael is equivalent to 37.429g
Gold Bar Prices
Gold bar prices depend of course on the gold price at any given time. As the value of gold increases so the value of the gold bar increases. The premium, how much you pay over spot gold is made up of, the manufacturing costs, the gold bar dealers costs and profit. You also have to take into consideration the shipping and insurance costs. Their may, in some countries or US states, be a tax to take into account also.

You should buy the highest gold bar weight you can afford as you will pay less premium per ounce or kilo that way. As the gold bar price goes up, the premium per ounce decreases also. However, you may want to buy smaller one ounce gold bars if you think you may need to sell some of your gold bars from time to time to cover unexpected expenses. Often the premium for ounce gold bars is not that much higher than for the larger gold bars.

Unless you absolutely have to, I recommend you do not sell gold bars for national fiat currency as the value of fiat currency (paper money) is deteriorating rapidly and, although you might get more fiat currency than you paid for your gold, its value will dwindle from the moment you get it.

Why Buy Gold Bars
Gold bars are a safe haven for asset protection as well as a good future investment. Basically the value of gold does not change with regard to the goods and services you can get with its value. And ounce of gold still purchases the same value of goods and services as it did many years ago. But the amount of fiat currency which the gold value is assessed by does change and, as the economy goes through recessions and inflation, the apparency is that gold is worth more when actually it is the currency which is worth less.

A good reason to buy gold bars and not sell them.

But if you do have to sell some gold, bars are good as they are accepted anywhere in the world.

Where to Buy Gold Bars
You can buy gold bars from gold dealers, mints, foundries even, as well as from private individuals, auctions and the like.

The same basic principles for buying gold apply regardless of whether you buy gold bars in New York, Washington or anywhere on the planet.

Here are some basic principles you can use to ensure you get the best deal and the best gold for your buck.

1. Buy the biggest gold bar or bars you can afford. The bigger the bar the smaller the premium you will pay per ounce. This will reduce the gold bar price per ounce.

2. Pick established or accredited gold dealers and mints.

3. If you are going to take delivery, ensure you understand the cost of shipping and, importantly, insurance. Check with the gold bar dealer to find out the shipping costs and ensure that they provide insurance (which you will be expected to pay) this should be figured in the gold bar price.

4. Do due diligence on the gold bar dealer or person or company you are buying gold from. Who are they? Are they easily contacted? Are they accredited? Do you know friends or associates that have dealt with them before?

5. Lastly it is prudent to have a good understanding of gold and gold bars. How they are produced and in what form. The weights, fineness and all other aspects of gold bars. How much premium will you pay?

Taking some time to understand your gold bar investment will pay off in that you can ensure you get as much gold for you money as possible and that you do not pay a heavy gold bar price while doing it!

Thursday, February 07, 2008

Buy Gold

Why buy gold I hear some people ask. Gold is transitory and the price will always go down again!

In fact gold is not transitory. It has been around and used by man for thousands of years as decoration, jewelry and also, importantly, as a medium of exchange and preserving assets. It may drop temporarily but it always goes up again and is now worth more dollars than ever before.

Why Buy Gold
Why buy gold indeed! Nations and governments come and go. Currencies come and go. Economic conditions come and go. Inflation and recessions all come and go. Various bartering systems come and go. Stocks and shares and the ancillaries to those, futures etc, all come and go. But gold lives on and persists throughout the centuries and continues to be a stable resource for man.

Additionally gold does not tarnish, gold is welcome anywhere in the world. You can buy gold and sell it. Keeping assets in the bank means one gets a paltry interest rate (if that) which is generally eaten up by bank charges and inflation as each year the dollar is worth less than the year before. But gold. Ah! Gold does not hit you with bank charges and is not subject to inflation. Gold does not wear out and is not subject (mostly) to taxes. No. Gold is a stable asset that keeps its purchasing power.

In fact, regardless of the current economic situation, gold remains ... as good as gold!

So the time to buy gold is always now, regardless of when now is. The time to sell gold is ... never! And as to how much gold to buy? Well, as much as you can possibly lay your hands on!

Gold Price
The gold price fluctuates daily, even hourly. The live gold price is dependent on market forces, upon the economic conditions and peoples perception of what is happening economically and how the economy affects them. When the economy is unstable, people look for alternatives such as precious metals like gold and silver. The price of gold moves up and down with these apprehensions. The current price of gold to day reflects peoples moods and expectations. Since the economy has been unstable for so long and there is no likely hood of stability any time soon, more and more people are turning to gold.

Gold is undervalued even now. It takes many more dollars to buy an ounce of gold now than it did 30 years ago although you can still by the same products now as you did years ago. Gold has not changed. Only the purchasing power of the dollar which has gone down over 95 percent since 1910. Yet an ounce of gold will still buy now what it did in 1910. That tells you that you have much more chance keeping your assets if you buy gold than by sticking your money in the bank.

In the short term gold prices may change by the minute. But in the long term the price of gold is on a steady uptrend and looks set to continue as more dollars are printed and the purchasing power of becomes less and less.

Gold, in short, is a safe haven for assets.

A Short History of Gold
The historical gold price chart over the past few years shows that gold has been on a long term upward trend. There are peaks and troughs and, of course, who can forget the major spike in gold in 1980 when it hit the high 800s. But over the past 30 year gold price history, the trend has been essentially up and looks like continuing as the value of the currency it is set to continues to diminish in value..

The value of the gold, of course is not changing. One can still buy the same value of goods and services with one ounce of gold as one could 30 years ago. But the value of the dollar has plummeted and it takes a lot more dollars to by those same goods and services than it did 30 years ago. The gold has not changed. One ounce of gold is still one ounce of gold. But the dollar has changed and the price of gold reflects that.

Even the five year and one year gold history demonstrates that.

Buy Gold Coins
Some of the best places to buy gold coins are of course gold mints, gold dealers, gold shops and eBay. From these one buys gold retail and one can also buy gold wholesale. The main trick when buying gold is to keep the premium over the spot price of gold to a minimum. This is difficult with gold coins as the manufacturing costs are high and the mint and dealer want their profits.

The advantages with buying gold coins is that they are easy to buy, store and transport. Also to sell. You can sell gold coins anywhere in the world. Gold coins are easier to sell than bars. Dealers who buy bars will want to assay the bar fist and this may require sending the bar off, if the dealer is online, which can be a bit of a security risk.

The disadvantage, of course, is the price you pay for gold coins. The premium is higher than bars and can be up to double the price of gold for small coins such as the one tenth ounce for example. This means it is going to take a long time to recoup the value of the gold.

What you do will depend largely on the reason why you buy gold coins. It may be you enjoy just collecting certain types of gold coins, or for convenience if you travel a lot and need to be able to convert gold into money quickly.

Buy Gold Bullion
Out of all the ways to buy gold, the best buy is gold bullion. You can buy gold online either as gold coins or gold bars or even share in actual gold pooled by buying gold from GoldMoney.com, probably one of the cheapest and most secure ways to buy gold. You can also buy direct from Mints or dealers and all are equally valid ways of buying gold. Each method has its advantages and disadvantages..

To buy gold bullion in the form of coins and bars means you will have to pay a premium. How much this premium will be depends on the coins and bars you buy. The smaller the bar or coin in weight the higher the premium per ounce. The higher the bar or bigger the coin the less premium per ounce you pay. The premium itself is stable as the fabrication and other associated costs per coin or bar stay the same.

One way of not having to pay a heavy premium is to buy gold from goldmoney.com. Here the gold is stored in vaults and you can buy any amount of that gold. This system guarantees that you actually own gold, not shares in gold and your account details and balance will reflect that holding. One of the main advantages here is that the premium and fees are so incredibly low. Instead of paying vast sums over the spot price of gold you simply pay a small storage fee that amounts to less than one percent per year and a management fee of one quarter of one percent. This must make it the cheapest gold around. The system is fully transparent and you can see the bar count and audits on the website.

The only possible disadvantages are the costs associated with wire transfers in and out of the account in some cases. But that can be disadvantage with any online purchase of gold.

Buy Gold, Pure Gold
Bu gold, pure gold! That is the catch cry but which gold? Canadian Maple leaf, 24k American Gold Buffalo Coin, Krugerrands,, whatever gold coin you buy it should be 99.99 fine gold or 999.99 pure gold. Sometimes you will find coins that have a lesser quantity of gold in them. Some mints are now offering gold coins as 22 carat instead of the 24 carat. These may say they are 99.99 fine gold and of course the gold contained within the coin IS 99.99 fine gold. Any gold anywhere is 99.99 fine gold. But if it is alloyed or mixed with another or other metals then it is not a pure gold product. Look at the Karat. Is it 22 Karat gold? Or 24K gold? The 24K gold is pure gold. The 22k gold is not all gold. It may be advertised a pure fine gold and the gold itself would be but it is not all solid gold..

When you buy gold coins always, always check the karat and ensure it is 24 karat gold as well as being 99.99 percent gold.

Buy Gold Eagles
American Gold Eagle Coins are perhaps one of the most popular of the gold coins and are official legal tender in the USA.

They are considered a beautiful gold coin. the $20 Double-Eagle gold coins minted from 1907 to 1933 has the graceful Striding Liberty design inspired by the Augustus Saint-Gaudens on the obverse and the reverse of the coin displays a nest of American Eagles.

All American Eagles ere struck with 91.67% (22 Karat) fine gold and the total gold weight is stamped on the reverse of the coin.

One interesting aspect of American Eagle Gold Coins is that the weight, gold content and purity are all guaranteed by the US Government.

You can buy American Eagle gold coins from most coin dealers as well as on eBay and the American Gold Eagle and are likely one of the most traded of gold coins in the US.

Buy Gold Maples
The Canadian Gold Maple has been said to be the most beautiful gold coin in the world. It is certainly one of the best being a pure .9999 (24 karat) gold coin with no alloys added.

The Canadian Gold Maple Leaf Coins are among the purest gold coins available then.

All Canadian Maple Leaf Gold Coins have a bust of Queen Elizabeth II, on the obverse designed by Arnold Machin and on the reverse (tails or flip side) we have the famous Canadian Maple Leaf symbol.

Canadian Maple Leaf gold coins are official legal tender in Canada and can be bought from most of the major coin dealers.

Buy Gold Krugerrands
Everyone has heard of Krugerrand Gold Coins. They have been made famous in exciting and adventurous movies.

In fact the Krugerrand was named after Stephanus Johannes Paul Kruger, a former South African President and well known person involved in the formation of the South African Republic. His head is on the obverse, or "heads" side of the coin

The Krugerrand was the first gold coin to contain one ounce of fine gold. These days you can also get half ounce, quarter ounce and even one tenth ounce Krugerrands.

If you want to buy gold Krugerrands, they are generally available from most coin dealers, at a premium, and, although not the prettiest coin, perform the basic function of having gold cons available when you need them.

Buy Gold Bars
One of the best ways to buy gold is to buy gold bars. These can be from the simple one ounce gold bars up to the 400 ounce gold ingots. In practice most people buy the smaller gold bars as 400 ounce ingots are somewhat impractical.

1 ounce gold bars, 1 kilo gold bars, Swiss gold bars, all are popular and all can be obtained for a premium. All gold bars are .999 fine gold and 24 karat. Each is stamped with the weight, purity and manufacturer. The larger bars also have a specific number unique to that bar stamped on them.

The larger the bar you can afford, the less the premium. Bars are more difficult to sell than coins however so are more suitable to people who have no intention of selling their gold.

Best Gold to Buy
In truth the best gold to buy is solid gold as distinct to "paper gold". This means buying actual gold bullion and not stocks or shares in gold. Stocks and shares are subject to other influences and stock market fluctuations. Some people say that gold does not provide any interest. This is a good thing since if gold were to pay interest then the return on gold would be dependent upon other factors instead of it being just pure gold.

Some people say that gold stocks are better than gold itself. This is another fallacy as gold stocks are subject to other market forces, such as, for example, when there has been a stock market crash, gold stocks have suffered the same fate, which gold has actually moved up.

Gold could be considered just another commodity, such as sugar or pork bellies. This is clearly incorrect as sugar and pork bellies are consumed and have to be replaced. All the gold that ever was is still around either in circulation or stored somewhere. It does not decrease and alone is accumulated and saved and used as a currency back up.

In fact gold stands by itself. The best gold to buy is solid gold bullion. Either by purchasing and storing the gold yourself or in bank vaults or through a trusted custodian.

Yes gold bullion in the form of gold coins and bars is definitely the best gold to buy.

Best Way to Buy Gold
probably one of the best ways to buy gold is through GoldMoney.com. Here you can open an account, send the funds through and purchase a share of pooled gold, in the form of gold bars and coins, in either a bank vault in London or in Z├╝rich. The gold you purchase is yours and belongs to you. You have a very small storage fee but can buy and sell and even use gold as a medium of exchange by simply exchanging it with another GoldMoney.com account holder for a product or service. You have no transport, security or storage issues to worry about and your gold can continue to improve in value against currency. However, GoldMoney now offers the option of taking delivery of your gold in the form of 1000 gram gold bullion bars if you wish to. One simply goes to the website and places an order. Of course you have to own the gold in the first place and this is done through opening an account, as described earlier, and funding it with gold bullion. this is probably the best way to buy and sell gold.

In addition it is fully secure and GoldMoney.com has audits and a bar count on a regular basis which can be seen on site.

Sell Gold
Sometimes people have a need to sell gold. If it can be avoided it is better not to sell your gold coins or bars but if it is a dire necessity then there are two basic ways to do so. One is simply selling back to a dealer.

Another way to sell gold coins or bars is through an auction, a little more hit and miss as you may or may not get the value of the gold in your coin or coins. Also selling privately, usually the best way, as you are selling to someone that particularly wants the gold coin or bar and is prepared to pay for it. Selling by newspaper ad is known to be the least effective way to sell gold.

Scrap Gold
The scrap gold price is usually just under the spot price of gold for the day. There are some variations depending on the type of gold you are selling as scrap. Selling scrap gold jewelry for example. Much gold jewelry is less than 24k, usually 14k gold, 18k gold and sometimes 22k gold. Obviously you will get different scrap gold prices for each. Gold scrap dealers have a system for working out what the value of gold is in a gold ring for example./

Also keep in mind that they may be other precious metals in that gold jewelry piece, such as silver, platinum etc so it is not just the gold value you should be paid for but the value of the other metals also.

Investing in Gold
What is the best way to invest in gold? Gold investment can be done through stocks and shares in gold exploration or gold mining companies, gold futures, gold shares in ETFs, buying and storing actual gold bullion and possibly many other varied ways.

The closer to actual gold you can get is the best way to invest in gold. The optimum is, of course, owning actual gold bullion.

Stock and shares in mining and exploration companies are subject to external influences, such as costs involved in extraction, takeovers, buyouts, financial market fluctuations and other variables.

The same principle applies in general to gold ETFs, the subject of the next section.

Gold ETFs
A gold ETF, also called etf or gold exchange traded fund, is basically a share in a company such as StreetTracks GLD for example and not dissimilar to owning shares in a gold company in some respects..

This is where you are betting that the price of gold will rise. You do not actually own the gold, although your investment is 'backed' by gold, and you cannot redeem the gold. If you sell you get cash only. This is very different to actually owning the gold yourself.

So, in a gold ETF you do not own gold. Your investment is back by gold instead. Some people might consider this the same but there are some important differences. You have no control over the ownership of the gold. Your investment is subject to external influences, whereas owning gold bullion yourself means you have gold come what may and regardless of the financial state of the economy.

Gold Futures
Gold futures are precarious things. Simplified, here an individual is betting on what the gold price will be at some time in the future. Not only that, it is done with a small deposit that represents a larger amount of money. If your bet is right you get the larger amount of money. If it is not you will end up paying someone else the larger amount of money possibly depending on the final result of the gold price on the date specified. Gold futures are more complicated than that of course and require a great deal of knowledge and experience if one is to play in that market. 75% of all people that play in the gold futures market lose.

Far safer and more profitable to stick to buying gold where you know what you have got.

Gold Stocks
Under gold stocks can be lumped, junior gold stocks, best gold stocks, gold mining.

All are concerning gold shares or stock in gold mining companies or gold exploration companies. Again here one is betting that the companies can:

1. find the gold
2. extract the gold with out too much expense
3. process and sell the gold at a satisfactory rate.

All are subject to the costs involved in getting the gold and the current price of gold. Many mining companies buy what is called forward gold to protect themselves an this can affect the their share price also since this can amount to many tonnes of gold and they are betting on the future price of gold in this wise.

Information on mining and exploration, as well as current market forces that affect the gold price can be found in the various gold news letters and gold stock picks on the internet. Although substantial profits can be made with gold stocks, it is an area that requires much study and due diligence before one invests one's funds in possibilities rather than actual gold,.

Buy Gold
Gold has been around for thousands of years. And it will be around for thousands more. All the gold that has ever been dug up is still around and the gold you have could have been in an Inca Temple or used on the banks of Egypt during the Pharaohs. Gold does not tarnish or deteriorate and little is used in industry compared to silver.

Owning gold is a security against the uncertainties of the economy, against the loss of assets, and as a safe haven for the future. Gold value does not change through the years, only that currency measured by it.

And when people say "As good as gold" everyone knows exactly what they mean.

Sunday, January 20, 2008

Why Buy Gold and When to Sell Gold

Why buy gold and when to sell gold is not as difficult as it seems.

On the-privateer.com it states, " In any discussion of the future of Gold, or of the price of Gold, the first thing that must be realized is that Gold is a political metal. In the true meaning of the word, its price is "governed".

"This is so for the very simple reason that Gold in its historical role as a currency is fundamentally incompatible with the modern worldwide financial system."

Throughout history, up to August the 15th 1971, in fact, there has always been a link between paper money and gold. The history of money is littered with the connections. Either gold itself was used as a currency, or if paper was used it was backed by or represented a value of gold.

Since that fateful day in August 1971 however, the successful action of having a medium of exchange was dropped and paper itself was called upon to represent value. But paper currencies hinge on the concept that the debt on which they are based will be repaid. The only way this is being done currently is with more paper money.

Richard Russell, editor and publisher of the Dow Theory letters commented in a recent post on his website:

"Quotes are great if you own stock in a public company in a big bull market. But the great majority of amateur investors make more money holding their homes over the years than they ever make in the stock market. And the reason is that if they own a home over the years, and that home is sensibly financed, they aren’t scared out their home by those damnable quotes during bear markets.

Holders of gold might mull over the same concept. Sure gold is quoted every hour of the day around the world. Long-term holders of gold might do well to ignore the quotes. If gold doubles in price, so what? -- are you going to swap your gold for paper? If gold drops by a third, so what? – are you going to dump your gold for paper?

Why not just relax and hold your gold? Hold your gold – why? The reason is that gold is the only true money, it's the only money that remains wealth no matter what happens in the world. Gold is wealth during the biggest boom and gold remains wealth during the worst depression. So why dwell on the daily dollar price, even though gold is quoted everywhere every hour of the day? Forget the bloody quotes, just accumulate gold. It's a good thing to have in today's unstable world."

So in short, that answers the question, why buy gold and when to sell gold.

Monday, January 14, 2008

What Happened to the Gold Price in 1980?

In January 1980 gold hit a record 850 US dollars an ounce. After reaching those dizzy heights it then plummeted down and remained steady in the 300-400 dollar range for some years before starting to climb again to new levels.

Now gold has broken through the 900 dollars an ounce gold barrier and some investors and analysts are wondering, is this going to be a repeat of the 1980 gold spike?

In fact, there are many differences between the 1980 spike in the gold price and the current rise in gold value, not the least of which is the longer term trend currently occurring. In 1980 gold basically shot up like a bullet out of a gun and then, like a bullet, slowed down and returned to earth.

In January 1980 gold was fixed at a record 850 USD an ounce while high inflation, strong oil prices , Soviet intervention in Afghanistan as well as the impact of the Iranian revolution prompted investors to heavily buy the metal.

Adjusting for inflation, meant the 1980 record high price was actually $2,079 an ounce at 2006 prices, while, according to precious metals consultancy GFMS, the real average price in 1980 was calculated at $1,503.

As a result of the removal of the gold standard by Nixon in1971, what little life was left in the Bretton Woods, built during the devastation of World War II to help Europe recover its faith in credit and currencies agreement was killed off. The result?

"Inflation in most countries at the end of 1979 was running in double digits," writes Peter Bernstein in his classic The Power of Gold. Pointing to the OPEC-led spike in oil prices, he also notes that "political conditions were perhaps even more frightening."

"Iranian radicals in Nov. 1979 took over the US embassy in Tehran…At the same time, the Russians were building up their strength in southern Yemen near Saudi Arabia, near Afghanistan’s border with Iran, and near Bulgaria’s border with Yugoslavia."

Key Dates in Gold History
Here are some key dates in gold's trading history covering the period from the early 1970s through to January 2008 including that period when gold rose, fell and, like the phoenix, has risen again.

In August 1971, took the dollar off the gold standard. With some minor variations this had been in place since the Bretton Woods Agreement of 1944 and fixed the conversion rate for one Troy ounce of gold at $35.

In August 1972, United States devalued dollar to $38 per ounce of gold.

In March 1973, Most of the major countries adopted a floating exchange rate system.

Then in May 1973, the United States devalued dollar again, to $42.22 per ounce.

January 1980. Gold hits record high at $850 per ounce. High inflation because of strong oil prices, Soviet intervention in Afghanistan and the impact of the Iranian revolution, which prompted investors to move into the metal.

In August 1999, gold fell to an all-time low at $251.70 on concerns about central banks reducing gold bullion reserves while, at the same time mining companies were selling gold in forward markets to protect against falling prices.

In October 1999, gold reached a two-year high at $338 after an agreement by 15 European central banks to limit the gold sales.

During February 2003, gold reached 4-1/2-year high on safe-haven buying in the run-up to conflict with Iraq.

Then in December 2003 to January 2004, gold broke above $400, reaching levels last traded in 1988. Investors started to increasingly buy gold as risk insurance for portfolios.

In November 2005, the spot gold rises above $500 for the first time since December 1987, when the spot hit $502.97.

April 11, 2006, and gold prices then surpass the next big level of 600 US dollars an ounce, the highest since December 1980, with funds and investors pouring money into commodities on a weak dollar, firm oil prices and geopolitical worries.

May 12, 2006, saw gold prices peak at 730 US dollars an ounce This was the highest level since January 1980, with funds and investors pouring money into commodities on a weak dollar, firm oil prices and political tensions over Iran's nuclear ambitions.

June 14, 2006 gold falls 26 percent to $543 from its 26-year peak after investors and speculators went on a flurry of profit taking.

Nov 7, 2007, spot gold peaks at a 28-year high of $845.40 an ounce.

Jan 2, 2008, gold breaks above $850 for the first time since 1980.

Jan 8, 2008, gold hits record $875.80. (Sources: GFMS, World Gold Council, Commodity Research Bureau and Reuters database).

Jan 12, 2008, Now gold has breached 900 dollars an ounce and looks set to reach the magical 1000 US dollars per ounce.

Why Gold
Some similarities can be found between the two highest evers but there is a marked difference between the two that show this latest high is not a spike but a continuing trend.

In James Turk's "2008 Gold Should Glitter", he comments
"Although gold’s previous record high of $850 reached in January 1980 gets attention, rarely do people consider that a 1980-dollar had substantially more purchasing power than a 2007-dollar. Adjusting for 27 years of inflation, it takes $2,208 today to equal the purchasing power of $850 in January 1980. So by this measure, gold is still far from a true record high."
He follows this on with:
"Another useful measure to determine gold’s relative value can be made by comparing gold to the Dow Jones Industrial Average. Gold is overvalued when it takes only one ounce to buy the DJIA. For example in the 1930s, one ounce of gold at $35 bought the DJIA, and it did so again in 1980 when an ounce of gold was $850 and the DJIA was 800. Though this ratio has fallen from more than 40 ounces in 2000, it still takes 16 ounces of gold to buy the DJIA, meaning that gold continues to be a relatively good value while the DJIA is relatively expensive …."
So gold is still relatively, undervalued, or "cheap" as it were, and there is still a long way to go for it to catch up to inflation.

The current rise is being helped of course by the current situation in the US and the increased level in oil price but these are really contributory rather than causative.

What is causative is the general trend of investors having less faith in fiscal currency. Two component parts of the current economy is the passion by governments for printing more money to handle debt and debt crisis. And the other is the banking fractional system which allows banks to 'creatively create money for the purposes of debt. Both these forces oppose each other creating, in their wake, a rising tide of inflation and recession.

This is perhaps, unconsciously, understood by most people as not a good thing. They see this in their pockets with prices rising, less money available, and more restrictive practices surrounding their control of finances.

All this despite hot mint printing presses actively at work printing more money while banks offering more debt yet at the same time struggling with the debt they have.
This is likely to be the biggest cause of the investors, and even the man in the street's attention being turned to gold. And this is not something that is going to go away anytime soon.

Golds Future
Many analysis are predicting further increases in gold. Of course there will always be the inevitable "correction" as it is called. This is where those investors, in for the short term, decide to take a profit and the price then drops for a while. But with gold currently undervalued and with the prime economies on what could be called a long term unsteady footing, there is plenty of room for gold to continue its steady rise to, some say, over the 2000 dollars an ounce mark.

So it seems the value of gold has a lot of catching up to do