Getting Wealthy Owning Gold
For centuries, gold has allured investors, speculators and jewelry collectors. The precious metal is a commodity and a monetary asset. During twentieth century, gold tremendously increased in demand, for the industrial metal. Major gold producers, are Canada, United States, and Western Australia. Mines in South Dakota, and Nevada, supply two-thirds of gold, used in the United States. United States has biggest gold reserve, in the world, at 8,000 tonnes, worth approximately $0.12 trillion. The precious metal, is excellent superior electrical conductive and resistance, from corrosion. Incorporated, in the production of computers, communication equipment, spacecraft, and jet engines. Many Central Banks, around the world, Governments, and cash rich countries, currently store, their gold in vaults, and secret hideaways. During historical times, when world economies, are in a state of pandemonium, times war, inflationary concerns, and times of terrorism, gold has seen, increases in price and demand. Gold is a high liquid asset, bought and sold, throughout the world, and available, in various forms: Gold bars, coins, and jewelry. Any one of these hard assets, can be melted down, and converted into any size, shape or dimension. Financial markets, around the world, trade gold. The third quarter of 2005, represented the seventh quarter increase, demand for gold, and 56 percent increase, for investment demand. During the fourth quarter of 2005, gold price has increased, over 25 percent, and historically trading, almost at 25 year high. Middle of December 2005, price of gold traded at $546 an ounce, compared to the record high, $876 an ounce, in January 1980.
Throughout the world, various financial markets, including the COMEX (Commodity Exchange, which is a subsidiary of the New York Mercantile Exchange), gold is traded, in futures and options exchanges. Often, price of gold, reflected by the strength or weakness, of a country’s currency value. For example: When value of the US Dollar is decreasing (or predicted by economists or investors), against the value, of other major currencies, inflationary concerns, maybe reflected, in an increase, value of gold. Also, relevant factor, affecting the price of gold, is the budget surplus or deficit, and trade budget surplus or deficit amount. In the United States, as the budget deficit increases, has a domino effect, likely to cause, the US Dollar to devalue, and price of gold to increase. Increase in trade deficit, has the same affect. Financial commodity markets, allow investors to hedge, their investments, as the price of gold is traded. When buying a ‘put’ or ‘call,’ for option or future contract, investors try to predict, future price of gold, either on the upside or downside. Making correct investment decision, saves money, buying the precious metal, at lower price or selling at current price, before the opposite, price change, in the future, will cost more. Various stock markets exchanges, around the world, trade mining stocks (Including Newmont Mining Corporation, which is the largest gold mining company, in the world.), and underlying mutual and hedge funds. The price traded, for these securities, often reflected, by increases or decrees, in the price of gold, and financial reporting, of these companies.
Unfortunately, purchase of gold is untraceable. Many terrorists, unsavory Governments, and those laundering money, purchase gold, as coins or bars. These are easily transported, any location, and anytime in the future, can be redeemed, for cash. Money collected, unlawfully and deposited into bank accounts, is traceable to the recipient, and accounts are often, seized, by authorities. Certainly, concern for gold traders, when governments, terrorists or large estates, in the future, sell their gold. Unfortunately, affecting the financial markets, causing a sharp decline, for the price of gold.
The United States Mint produces gold coins. These coins are only sold to dealers, and are resold, to the public. Reputable numismatic coin dealer, be a member of American Numismatic Association. The organization educates dealers, and prevents fraudulent sales of coins, working with national and federal law enforcement agencies. When purchasing gold coins, from a reputable dealer, a premium price is paid, above current bullion price. The premium is the profit margin, and should preferable, not exceed ten percent. Above ten percent, is excessive. In the United States, gold coins minted, before 1932, are worth, more than price of gold, for their age. Gold bullion coins, sold around the world, range in size, from 1/20 ounce to 1000 grams. Most common weights of gold, is sold (In troy ounces of fine gold content) 1/20, 1/10, 1/4, 1/2, and one ounce. The first bullion coin, sold as an investment to the public, was South African Krugerrand, in 1967. However, due to the policy of Apartheid, in South Africa, the Krugerrand, was prohibited, from sales, in the Western countries, during the 1970s and 1980s. The ban was lifted, and sold, during 1990 – 1994. Recommended purchasing: “The Red Book” titled – “A Guide Book of United States Coins,” which is published, each year, by R.S. Yeoman. The price guide for US coins, including gold coins. However, fluctuations in the price of gold, may adversely change, the price for gold coins, listed in the book.
During 2005, gold demand and price increased, for many reasons. Concerns, rising budget deficits, in major world economies, including the United States. Russia stated, increase gold reserves. Fears of inflation, as energy prices increase, and devaluation of currency values, especially, if economies, of certain countries, including United States, turn downward. Also, regarding, supply and demand, for the commodity use, both for industrial use, and jewelry purchases. In 2004, according to the Western Gold Council (WGC – Association of gold mining companies worldwide.), China increased demand for gold by 12.8 percent, compared previous year, increase of 1.7 percent. The increase in demand, attributed to Chinese Government, less than two years ago, allowing Chinese people, legally own gold coins. In 2005, China will sell, a new Panda 50 Yuan gold coin, weighing 3.11 grams. China is the fourth largest gold consumer, after India, the United States, and Turkey. During, first three quarters of 2005, gold jewelry demand, increased by twelve percent in tonnage, and twenty percent increase, in dollar terms.
