GOLD MONEY AND
Everyone uses paper currency and yet few people possess gold, the money
used since before Biblical times and throughout Egyptian and and Roman
eras, to pay for
goods and services.
paper printing became widely available, receipts were sometimes issued
gold deposited in vaults. Eventually, the paper receipts were found to
be more easily
the physical gold. Now no paper money in the world is backed by
gold (or silver), everyone knows it has great
value, and yet few people have traded their paper currency for any of
enough to inspire fever, passion, and still many investors remain
indifferent. With declining mining reserves, increased
investor demand, China
converting their currency to gold, and increased purchasing of citizens
of India, it has become more difficult to find. Many
experts anticipate a return to gold and silver for backing future money.
Gold is found in
jewelry, coins, electronics and even on the U.S. Capitol
dome. While 24k (karat) gold is soft enough to be pounded into thin
sheets of gold leaf, it is too soft to be handled roughly without
deforming. Hardening by
alloying with copper, silver or other base metals is the common
While pure gold is designated as 24k, other common alloys are 22k, 18k,
and 14k. For example, if you have an 18k necklace, to find the gold
ratio, you can divide 18k by 24k. This calculation shows that you have
a item which contains 75% gold.
Most gold coins in
circulation since the 14th century were minted in a
22k alloy; the remainder of the metal alloy is copper. However, newer
bullion coins are sometimes pure 24k gold, while the U.S. Gold Eagle,
the British Sovereign, and the South African
Krugerrand continue to be traded due to their ability to withstand
handling. Pure gold
coins, however, have a luster that is often more attractive to gold
gold Canadian Maple
Leaf coin, at 99.99% pure, enjoyed higher demand until the
U.S. Mint issued the Buffalo pure gold bullion coin.
REASONS FOR OWNING GOLD:
Gold can be used around
the world as money; It is easily recognizable
and crosses almost all language barriers effortlessly. Or, it can be
traded for local currency in almost every corner of the world. Many
fans of gold coins or bars speak of using them to hedge against
economic or political difficulties.
JUNK GOLD SALES:
In the United States,
many are consolidating their junk necklaces,
rings and gold crowns, and converting them into paper currency through
various services. Coin shops and other businesses will often
exchange the gold for U.S. dollars.
TIMELESSNESS OF GOLD:
Gold has been so coveted that it has been linked to a variety of
symbolisms and ideologies. Its bright yellow
color and luster found to be alluring since before humans started
recording history. It maintains
appearance and value by not oxidizing in air or water.
INDUSTRY AND ELECTRONICS:
Gold is so malleable
that it can be made into thread and used in
embroidery. It can also be pounded so thinly that fine coatings are
used in electronics. Although silver is the best conductor of
electricity, where conditions are harsh (like in outer space), gold is
a better choice.
Initially, gold was most often found in naturally occurring
nuggets or fine
grains. Later, miners refined their techniques to seek gold in veins
in alluvial deposits near rivers and streams. While gold is often
recovered and recycled, it is most often mined in large open pit or
hard rock underground mines.
Deposits with a few grams (a few large paper clips) per ton are
extract. It is believed that about 50% of refined gold deposits,
have been from South African ore. Recently China, however, overtook
Africa in current gold production. The United States, Peru, Russia and
Australia comprise the rest of the majority of gold mining. In the
U.S., South Dakota and Nevada supply two-thirds of the ore processed
extraction of gold.
Gold is most often
measured using grams, with 31.1 grams in a troy
ounce, with 28.35 grams in an avoirdupois ounce. The price per
determined using Gold Fixing in London, which was created in in
1919 to provide a common world price. The U.S. Government
enjoyed a troy ounce value of $20.67. Then in 1934 Franklin Delano
Roosevelt devalued gold to
$35.00 per troy
ounce. President Nixon eventually took the U.S. off the gold standard
which allowed the market price of gold to trend much higher.
PLATINUM AND PALLADIUM:
About 8 million troy
ounces of Palladium are mined and refined each
year, making it about 10 times as rare as gold. Much of palladium
is consumed for industrial uses, such as catalytic converters which
reduce car exhaust emissions. Many consider it to be a "green" metal,
friendly. Platinum has many of the same properties
of palladium and is even more rare and more expensive.
from jhmint.com and silverstockreport.com was recently interviewed by
his local newspaper. So I don't have to re-invent the wheel, excerpts
from his article are below:
People often ask us
about the silver content in old US coinage, in
quarters, half dollars, and dimes minted in 1964 or earlier. The metal
content consists of 90% silver, and 10% copper -- that's called the
purity level. But one dollar's worth of coinage contains just
under 72% of one troy ounce of silver -- that's the measure of the
weight. People get the two things mixed up, and they have
difficulty with the math, not knowing what amount to multiply or divide
against the silver value per ounce.
And there are other
things that affect the value, too. Old
coinage can be sold in bulk in bags of $1000 face value at a time, and
so, there are better prices if you can trade in bulk. But if the
coins are very worn out, or if you have only a few coins, you won't get
such a good price.
To figure out a rough
value, figure that a large bag weighing about 55
pounds, and containing $1000 face value of silver coinage, will have
about 715+ ounces of silver. Then, multiply the ounces by a
percent or two under the spot price of silver, and that's about what
it's worth, but even that varies, depending on market conditions.
Sometimes, 90% silver can trade above spot, and I've seen it as high as
about 30% above spot, but not in today's calm market.
Because many people find
it confusing to calculate the value of 90%
coinage, most people prefer to own 99.9% pure, 1 troy ounce "rounds"
that are a bit heavier than the old silver dollars, that contained
about 76% of 1 troy ounce of 90% pure silver. They are called
"rounds" because they are privately minted, and not issued by the US
government, which would make them coins.
Many people wonder if
they own any rare coins in their old coin
collections. Most people just own junk. A general rule is
that unless it's silver, gold, and a US coin in very good condition,
then forget about it. Foreign coins are typically worthless,
unless they are silver or gold. Most pennies and nickels are
hardly worth the time to look through.
government levies a sales tax on bullion purchases
under $1500, but over that, sales tax is not charged. The Federal
government requires a "CTR", or cash transaction report on anything
over $10,000, and so many buyers tend to buy just under that limit for
the sake of personal privacy. Wire transfers are often used for
amounts over that.
GOLD AND SILVER SPREADS:
People also wonder about
dealer markups, or the spread. Gold and
silver both cost about 9-10% over the spot price when you buy, and when
you sell it back, you can usually get about spot, or maybe 1-3%
under. Many people think that's a wide spread, but the true
profits for the dealer is often much less, due to the volatility,
regular business operating costs such as rent, wages, advertising,
minting costs, and the fact that re-ordering inventory from mints or
other wholesalers requires placing orders in bulk.
Around 9% over spot is
very cheap. Historically speaking, when
silver was the circulating currency during the great depression, the
U.S. government bought silver from miners at 29 cents per ounce, and
then turned that into $1.40 worth of coinage! That's about a 400%
premium over the cost of the silver, so a 9% markup is great by
comparison! The difference can be explained by the government
monopoly verses the lower costs created by free market
competition. The bullion market today is very competitive.
Charge more, you lose customers. Charge less, and you risk taking
a big loss due to the volatility and all the other costs.
It can cost over $2.00
per oz. just to mint a 1 oz. round at many of
the smaller private mints. With our narrow spread, and the
volatility, and the
normal 1-2 day delay of putting cash into the bank to re-order, we lose
money on some trades, but that's just the normal risk of doing
SILVER VERSUS GOLD:
Most people just don't
understand how small the silver market really
is. World silver mines produce about 600 million oz. of silver
per year, with most of that going to industry. Investors buy only
about 100 million oz., but at $18/oz., that's barely $1.8 billion per
year. In the scale of world finance, that's nothing. With
dealer profits of about 2-3% of that, after costs, the entire silver
investment market earns barely $30 million per year, across all
dealers, worldwide! Without gold sales and scrap gold purchases,
we'd go broke!
PAPER CURRENCY vs. GOLD /
Some people really
wonder how we can accept inherently worthless cash
for real gold, after all, the JH Mint can't back up all the paper money
that the banks have printed. Well, as long as the families of the
miners and the refiners still want and use paper cash to pay their
bills, you can still get the stuff. Watch out for the day that
the miners decide they want to be paid in silver rounds!
**Jason Hommel writes a
free internet based newsletter with over 80,000 readers
worldwide. You can
subscribe to his free newsletter and read prior articles at
silverstockreport.com. You can buy and sell gold and silver bullion at
his coin shop in Grass Valley, California, jhmint.com.