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The Gold Market



Welcome to The Gold Market, the place where you can find out about gold history, live gold prices and news, gold stocks prices, gold mutual funds that invest in gold, how to invest in gold coins, etc. Really we just love gold and other precious metals, an



Updated: 2015-01-01T01:10:16.556-08:00

 



Gold Once Again Rising After Dramatic Drop

2011-08-26T13:34:46.154-07:00

Gold continues on its upward trend, with periodic drops in price. This week gold reached a new high of over $1900 per ounce, followed by a $200 drop in price. I can`t say I`m surprised by that, since every time prices soar there will be traders and speculators rushing to sell off their gold to take quick profits, and then possibly buy gold once again after the prices have fallen temporarily.

Whenever the price falls, some people will claim that the bullmarket is over and that the gold bubble has burst. But all you need to do is look at the current economic climate to know that gold is still going to be sought out as a safe haven, despite daily fluctuations due to trading. Uncertainty over Europe`s debt troubles remains, and this week`s unemployment figures in the US also resparked economic worries (well, they never really went away) and the gold price has begun approaching its all-time highs again.

You can read more about the differing interpretations of the $200 drop in the gold price in this article on Forbes.com

http://www.forbes.com/sites/afontevecchia/2011/08/25/gold-falls-10-due-to-over-extension-bullish-fundamentals-still-in-place/?feed=rss_home



Asia sees increase in gold investment as debt uncertainty continues

2011-08-13T11:46:00.645-07:00



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The Standard and Poor`s downgrading of the United States` credit rating is not the only driving investors towards gold this week. Fears over Eurozone debt is also pushing investors into gold as a safe haven. This trend is occurring all around Asia. In the video, regular everyday investors are now buying large amounts of gold, despite the fact that the gold price is as high as it has ever been. This is the reversal of the usual trend, in which investors come to sell gold when the price is high and buy gold when the price is low.

Words of wisdom regarding gold investment are also spoken in this video. Beware to those who see gold as a source of short-term profits or want to trade gold. Investing in gold is a long term strategy intended to preserve your wealth, rather than make you a huge profit. Those who violate this guideline will do so at their own risk.



Steven Leeb: Gold is now the defacto world currency

2011-08-11T10:00:32.018-07:00

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This is a very interesting video of a discussion between Peter Schiff and Steven Leeb on the Lou Dobbs show. They are discussing the latest economic chaos and the drops in the stock market and subsequent climbs in the price of gold. Peter Schiff is funny, this guy is the king of soundbytes. He says that "What we`re experiencing now is the hangover from the last round of monetary stimulus". The overspending, the borrowing, the printing of dollars that debase the US currency, have all taken their toll on the American economy. Another brilliant Schiff soundbyte is "Rather than letting the economy check into rehab, they`re shooting it up with more drugs, and we`re gonna overdose!" He says this in reference to the low interest rates intended to keep stimulating and pumping up the economy, and the lack of willingness to let the economy`s assets naturally redistribute themselves.

Steven Leeb made an impressive comment and one that has special interest to this blog. Leeb said that "Gold is now the defacto reserve currency," citing gold`s dramatic rise in price to nearly $1800 and people`s increasing trust in the integrity of gold over the integrity of the dollar.

Peter Schiff disagreed and said that the dollar doesn`t deserve to be the reserve currency anymore but that it still is because central banks are only just starting to buy gold, and because countries around the world continue to buy US dollars to prevent its collapse. Japan alone bought $50 billion US dollars last week. Japan, China, and other countries continue to do this to keep the US dollar from falling too far, so that they can continue to export to the US. Eventually this cycle will break down, but for now the dollar is being artificially resuscitated.

In any case, both agree that the future looks grim for the US economy and that the future looks bright for gold. As Peter Schiff says in the video, "You better have some gold".



Gold Price Rises and Oil Price Falls

2011-08-10T12:55:00.337-07:00

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Pension funds that invest in stocks in order to grow the funds of their members` contributions have started to buy gold to make up for losses in the prices of the shares they hold. With this week`s downgrading of the US`s credit rating from AAA to AA+, the Dow fell by a large margin and that is causing more movement into gold as a safe haven. In the case of pension funds, obviously the main intention is to preserve the value of the premiums paid by contributors, and since gold is a wealth preserver rather than a way to gamble and get rich quick, gold is a wise choice.

At the same time, in this video they mention that oil prices have been fallen because of fears of economic slowdown around the world. Silver tends to follow the price of oil, since its value too partly depends on economic activity (silver is used for many more industrial purposes than gold). Precious metals investors with holdings in gold and silver should consider these developments. Though in the long term, silver is most definitely going to rise much, much higher.



Barack Obama Says The US "Will Always Be a AAA Country"

2011-08-09T12:35:44.538-07:00

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On August 8th Barack Obama responded to the downgrading of the United States credit rating by declaring:

"This is the United States of America. No matter what some agency may say, we have always been and will always be a AAA country."

This seems like a highly delusional statement, and quite an arrogant one at that. Just because your country is the United States, that doesn`t mean that your country is immune from self-destructive and irresponsible behaviour. The US can no longer get away with borrowing money it will never be able to pay back, the US has been given a wake up call that there are consequences for their short term financial policies. But hopefully the American people won`t hold onto their delusional ideas that American can do no wrong, hopefully they will become informed of where the US dollar is headed and prepare themselves accordingly.

For those of us who refuse to delude ourselves, gold remains a comforting option and silver remains a highly exciting option in the coming days when the dollar will suffer greatly.



Senator Ron Paul: History Says Gold Is Money

2011-08-04T12:55:51.229-07:00

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(image) In a new interview on CNBC Newsline, Senator Ron Paul made some interesting comments about gold. Nothing revolutionary if you are familiar with gold investing and the problem of fiat currency. But interesting comments nonetheless. Some of his commments were as follows:

Obviously gold is money. And it`s not because I say it`s money, it`s because history says that gold is money.


This was in response to comments made by chairman of the federal reserve Ben Bernanke that gold is not money, after being asked by the Senator whether gold is indeed money. Senator Paul labelled the comments as humorous, since the historical evidence that gold is money is, shall we say, overwhelming.

After hearing Bernanke`s reply that gold is not money, Ron Paul then asked why the Fed has so much of it if it`s not money. The chairman`s reply was "Because it`s tradition".

(image) Of course Bernanke could not publicly announce that gold is money, given that such an announcement could result in masses of people using their dollars to buy gold, resulting in an even weaker US dollar. By attempting to downplay the value of gold as money, he is trying to limit increases in the demand for gold in order to protect the perceived value and integrity of the US dollar.

Another interesting comment by Senator Paul was that "Gold is acting as a very strong currency right now because people are very very nervous. Guess what? They`re going to gold." Paul made the comment that he doesn`t want to dictate a gold standard but that he wants the market to dictate what currency reigns supreme, and that the federal reserve should have competition so that we would not be the slave to its monetary policy. Perhaps some competition would force the fed to maintain the US dollar`s integrity, to whatever extent that is now possible (it may be a lost cause at this point). Paul would make sure it remained legal in practice to use gold and silver as legal tender.

Indeed, gold is money as history proves and is continuing to prove this very moment.



Peter Schiff Says Gold Will Reach $10,000 Per Ounce

2011-07-28T12:56:00.503-07:00

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In this video Peter Schiff of Euro Pacific Capital is asked about a previous quote in which he suggests that gold could reach a price as high as $10,000 per ounce. At the time this video was recorded, the Dow`s value lied at around 10,000. Schiff clarifies in the video that the value of the Dow could move up or down, but that he predicts a one to one ratio of the gold price to the down. That means thathttp://www.blogger.com/img/blank.gif it would cost 1 ounce of gold to buy one share of the Dow. So if the Dow stays at 10,000, then the price of gold will also end up somewhere around $10,000.

The one to one ratio also occurred in 1929 and 1980, at the peak of gold`s bull markets. Today the Dow is at approximately 12,500, so if the gold to dow ratio was one to one today, then it gold would cost $12,500 per ounce.

According to Mike Maloney of goldsilver.com, the gold price could reach as high as $15,000 per ounce. In light of this prediction, Schiff`s prediction seems thoroughly credible.



US Debt Crisit Sends Gold Price to All Time High

2011-07-27T12:27:00.235-07:00

(image) This week gold reached a new all time high of $1630 US dollars. Of course, along the way to this new milestone, gold has hit many all time highs and will hit more as it continues to increase in value. The commodities and precious metals bull market still has years ahead of it, and global ecnomic uncertainty continues to push the gold price upwards, and the US`s longterm economic troubles and the near-certain continued decline of the US dollar all make the price of gold continue to rise.

The US has declined over the past year or two, making the US dollar gold price increase more than the value of gold has increased. If the value of the US dollar decreases while the value of gold stays the same or rises only slightly, then the US dollar price of gold will rise. So the degree of the increase in the gold price is somewhat artificial if you are reading it in USD. But even in a currency like the Japanese yen that has held steady much more than the US dollar, the price of gold has risen steadily over the past couple of years. So regardless of currency, precious metals are still in a bull market and gold is still being used as a safe haven investment.

The new all time high this week was related to the American debates over debt, the debt ceiling, and a possible default on the US`s debt. A US default would be an extremely frightening situation for most, since it would seriously harm the credibility of the US government and its ability to pay back its debts. Such damage to the US`s credibility could lead to the dropping of US debt instruments or reluctance to purchase more. The value of the US dollar could be severely affected by this.

The good news for people with investments in gold is that the collapse of the dollar will make their gold even more valuable. As I alluded to above, a simple increase in the USD value of gold itself doesn`t mean that gold has increased in value. But it does mean that those with investments in gold will avoid losing the value of their wealth. And if US dollar denominated assets drastistically drop in value, those who own gold will be in the perfect position to liquidate their gold and buy up US dollar assets at rock bottom prices.

This scenario will in all likelihood happen at some point in the next few years. The question is, will it happen in the immediate future when the US government makes a decision on whether to increase the debt ceiling or not? I seriously doubt that the US will default right now. I think a lot of politicians are milking the current debates for all they are worth. There will be a time when defaults are unavoidable, but I don`t think that will be in the immeidate future.

Gold will continue to rise anyway.



Selling Gold Jewelry

2009-10-25T11:49:09.751-07:00

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One of the great benefits of investing in gold is that it typically functions as a safe haven for investors in times of economic turmoil. During the current economic instability, gold has risen to record high prices as one would expect. Some people will keep hold of their gold stocks until the peak of the instability then try to sell it off when gold prices reach their highest. But other people who struggle during tough times have another option: selling gold jewelry or other gold items to get cash to get through the hardships. You can easily sell gold bullion coins and bars to a bullion dealer, but how do you go about selling gold jewelry?

Selling your gold jewelry is not a difficult task. You can find various companies either online or around your area that will offer you cash for your gold items and make the process quite simple for you. The gold buyers are looking to get their hands on as much gold as possible, so they can profit from prices that will likely rise even higher over the longterm, and profit from some price spreads or transaction fees. But their businesses are usually legitimite and you will get a fair amount of cash for your gold.

A well-known example of such a company is Cash4Gold. They are a mail-in gold refinery, meaning that they will buy your gold items and melt them down. Cash4Gold is a good option for people who own old or broken gold jewelry or other items that are no longer attractive or desirable to wear. If you wish to sell newer and more attractive-looking gold jewerly, you will likely receive more money by selling your items to a local jeweler in your area, or to a pawn shop. That is because gold jewelry is sold at a premium price that can be much higher than the value of the item's metal alone. The premium price covers things like quality of design and craftsmanship. But a refinery like Cash4Gold will simply melt down your items, so they don't care if your items are resaleable or not. They will simply pay you a price based on the official spot price of your jewelry's constituent metal (plus they will charge a transaction fee of some sort).

The things you should know about your gold before selling it are its karatage (which should be printed somewhere on the item, its weight in gold, and if possible also its resale value, so you can know whether to sell to a refinery or to a pawn shop or jeweler instead. Getting your item appraised by a reputable dealer might be a good idea. You should also be aware of the terms of your agreement with the buyer of your gold. If you have intentions to buy your item back, you should be sure to check how much time you have to do so, and the specific terms surrounding the buyback. When you are dealing with valuable items that might have special meaning to you, the last thing you want is any kind of disappointing surprise that deprives you of your cherished item.



Choosing a Gold Mining Stock

2009-09-05T13:10:54.243-07:00

(image) Over the past couple of years while most investments have slouched and gold has held steady, the most profitable investment for me has been my gold mining stock segment, which have increased in value a fair bit. The returns may not be life changing, but making a reasonable profit is much better than losing a ton!

Since gold mining stocks are a good option and could be for some time, what makes a solid gold mining stock? The average person might just look at their stock price over the past few years, and if it's going up they think it's a good stock. But that's a bad strategy. You have to look at the value of the gold mining company's assets and compare that to the stock price.

You need to know the value of the company's proved gold reserves. Proved reserves means the amount of gold that has been determined, within reason, to be present and accessible through mining. These are the company's main assets. Let's say gold company A has $20 billion in proved reserves, and there are 10 million shares, and each share costs $100. But when you divide 20 billion by 10 million (the number of shares) you discover that the value of their assets is $200 per share. That means that this is an undervalued stock. You should buy this stock.

There is also the converse situation in which a company's stock is overvalued when you divide the number of stocks into the value of the company's proved reserves. As with all stocks, gold mining stocks can be under or overvalue but when they are, that means there will be a correction at some point not too far down the line. You want to buy undervalue stocks.

There is another way to measure potential value of mining stocks, and that is by probable reserves. Probably reserved are thought to be present, but their presence is not definite so they factor into the price of a company's stock at a discount rate. If you find a mining stock with a large number of probably reserves that turn out to be truly present, you could make a lot of money. If they turn out not to be present, you would lose a lot of money. So I prefer to be a little more secure and I only look at proved reserves.

This is a simple guideline and not exact. To find out the real value of the stock you would also have to factor in the cost of extracting gold from the ground.



Political Risk Of Gold Investing

2009-06-17T23:58:25.114-07:00

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One of the realities of investing is that political unrest or upheaval can pose a risk to your investment. This is true with a variety of investments, including gold investment. This can happen to your investments in foreign countries or at home.

The government and lawmakers can basically do whatever they want, and can change laws in a way that adversely affects your investment. One of the best examples of this in the US is the Gold Reserve Act passed by Franklin D.Roosevelt in 1934, which made private ownership of gold illegal. People were compensated for their gold, but then the dollar was immediately devalued rendering their investments less valuable.

Some people try to avoid this kind of scenario by diversifying their gold investments and having gold stored in various places around the world. This is probably a smart idea. It is best to understand the stability of the country where your investment lies, though. I would much rather have an allocated storage account in Switzerland or Australia than somewhere in South America or Africa, for example.

These political risks also affect companies, which are sometimes nationalized by governments or have their assets expropriated. If you own stocks in a gold mining company, it is important to be aware of these risks. Some countries are obviously risky, such as Venezuela where nationalization seems to be policy. Other countries may seem stable and pro-free market, but the reality could change with a new election or a military coup. Mexico, for example, seems like a safe bet at the moment but there is certainly no guarantee that it will be in the future.

Share prices often drop due to general instability that is not even related to nationalization. Instability inhibits free market activity, so even seemingly unrelated events can cause stock movements. Understanding the political situation
of the country you are invested in will help you navigate all the fluctuations and understand your investment's performance, and take action to minimize the risks when necessary.



Why Silver Will Be a Better Investment than Gold

2009-06-03T05:10:47.198-07:00

While gold is and always has been money, and its status as the ultimate preserver of wealth is untouchable, in the coming years silver promises to be a significantly more lucrative investment than gold. There are a few reasons for this.According to (fairly) recent surveys, there are around 400 million ounces of silver bullion in the world versus 2 billion ounces of gold bullion. That means there the supply of gold bullion is 5 times greater than the supply of silver bullion. If we include coinage that can be melted down into bullion, then the supply of gold is three times greater than the supply of silver, with 1 billion ounces of silver and 3 billion ounces of gold. So silver the amount of silver available for use is much smaller than the amount of gold available.The global supply of gold increases by about 2% per year, largely because gold is normally recycled and reused. But silver has many industrial uses, and silver is largely not reusable, so every year there is a supply deficit. Even in years of low demand, the supply of newly mined silver falls short of demand by about 70 million ounces. In years of high demand, it may fall short by as much as 200 million ounces. These deficits need to be taken out of the existing silver supplies above ground, which are therefore being depleted. Demand for silver has been outstripping supplies for 15 years straight, and there is no sign of this reversing.In addition to those simple realities of supply and demand, the case of silver is complicated by some of the financial funny business that goes on in this world (which we've seen plenty of over the past year and a half). One of those funny things is the existence of unbacked silver certificates. Silver certificates are like IOUs that indicate that you have paid for an ounce of silver, and these certificates are supposed to be redeemable for physical silver. There are one billion of these certificates out there. But remember -- there are only 400 million ounces of silver bullion in the world. So what happens when the price of silver increases and people want to convert their certificates? A big shortage will occur, and that will send the price of silver soaring even higher.Another bit of funny business is that there is a massive short position in silver that greatly exceeds the supply of physical silver. When you short an investment, it means that you borrow it and sell it now while the price is high, and you buy it back later when the price is lower. The problem is that when everybody goes to buy back the silver they have shorted, there won't be enough! There are approximately 508 million ounces of silver shorted on NYMEX, but there is only 132 million ounces of supply. Remember that worldwide, there is only 400 million ounces of silver bullion in existence, less than the amount that is shorted on NYMEX. When these people all go to cover their short positions then the rediculous degree of the silver shortage will become apparent.For all of these reasons and others, silver is destined to be an amazing investment opportunity over the years to come. While gold will protect you from currency devaluation, silver will help you multiply your wealth, if you are significantly invested in it.[...]



Gold Fluctuations are a Recurring Pattern

2010-09-29T14:08:33.919-07:00

It's been a while since I've updated The Gold Market blog. That's mainly because I know that the journey gold is on is not an overnight one, and I was getting a little obsessive about gold, reading about it every day and getting anxious for gold's inevitable rise to occur immediately. So I decided to take a break from thinking about gold for a while and work on some other blogs I keep up.

But this week I delved back into gold news once again. Things are much as they were before, with the public's confidence in the economy swinging back and forth. But the stuff seems to be hitting the fan a little bit with the bond market hitting its lowest point of 2009, and with US government warnings about the health of America's banks.

The short of it is that the price of gold has risen by around $75 per ounce since the beginning of this month. In fact it is rising in all currencies. People are realizing that the hope instilled by Obama's stimulus package was not a solution to our problems, and that the amount of debt caused will be staggering.

So basically, everything is progressing as normal. But since the same patterns keeps recurring, I've also left my gold investments on autopilot, buying the same amount of gold (and silver as well) each month. If there is a big drop (for example if the IMF sells off its gold) then I may buy a larger amount, but I know that the death of our currency will be a slow death so I think it's reasonable to enact a plan for your gold investments and automate that plan. Stressing over the minor swings in the gold market can be exciting, but at the same time it's unnecessary. Gold will hold its value, and its dollar value will skyrocket over the years to come. So just keep buying and trust that the daily fluctuations will not make or break you.



The Dow Jones US Precious Metals Index

2009-04-14T02:04:46.001-07:00

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The Dow Jones Precious Metals Index is a composite index that reflects the performance of the stocks of companies involved exploration and mining of precious metals. The designation of "precious metals" refers to gold, silver, and the platinum group metals (which include platinum, palladium, rhodium, osmium, iridium, and ruthenium). The index does not track the physical metals themselves, only company stocks.

The companies in the index are required to be US-listed stocks or ADRs (American Depository Receipts). The companies also face scrutiny to decide if they are too small or too illiquid. The companies must also be listed in the Gold Mining Subsector
or the Platinum & Precious Metals Subsector of the ICB (Industry Classification Benchmark).

You can't invest directly in the index unless you have a lot of money and time to invest in all the stocks that comprise it. But you can invest in a index mutual fund or ETF/ETN that mirrors the performance of the index itself. One fund that tracks the Dow Jones Precious Metals Index but is leveraged at 150%, is the ProFunds Precious Metals UltraSector ProFund (PMPIX).

If any of you readers are familiar with other funds that track the Dow Jones US Precious Metals Index, please post the name of the fund in a comment and I will add them to the body of this entry. Thanks!



How Is Gold Mined?

2009-04-14T01:05:06.764-07:00

The definition of gold mining is the removal of gold from the Earth, done through various techniques. There are three main types of gold extraction: placer mining/sediment mining, hard rock mining, and byproduct gold mining.Placer mining/sediment mining is the extraction of gold from the ground with little or no excavation. Most other metals are not mined using placer mining techniques, but since gold is so valuable even in small quantities, placer mining has been used to obtain it, particularly during the California gold rush. It is still used to a limited extent today.The main technique of placer mining is gold panning. A pan is filled with sand and pebbles that may include small pieces of gold. You add some water to the pan and shake it, and since gold is a very dense mineral it quickly settles at the bottom of the pan. This is done at placer deposits, stream beds where gold settles. Gold panning might have been viable for the independent miner during the gold rush, but is not viable for large gold deposits unless done in a place where labor costs are extremely low.An aid to gold panning is the use of a metal detector, which the miner can use to locate gold below the surface. Another placer mining technique is sluicing. A sluice box is a box placed in the water stream that collects gold particles as water washes through it.The next major type of gold mining is hard rock mining. This is what we most typically think of as "mining", with pits or tunnels dug into the earth to extract gold ore from the hard rock. The largest amount of new gold supplies come from hard rock mining.Then there is byproduct gold mining. This means that the main metal being mined is not gold, but that some gold is extracted along with the main metal. For example, copper mining often results in the extraction of some gold. (It should be noted that silver is largely a byproduct of copper mining as well).Once the miners have extracted the gold ore, how do they extract the gold from the ore? The most common method is gold cyanidation. The gold-bearing ore is finely ground, and then sodium cyanide solution is added to it. The gold and cyanide form a solution that can be separated from the rock. Then zinc is added to that extracted solution, which separates the gold from the cyanide. The zinc is then removed from the gold using sulfuric acid, leaving a gold sludge that is then ready to be smelted and refined.That's quite a long process just to obtain gold. It is precisely because of gold's undying prestige and status as true money and preserver of wealth that we go to such lengths to obtain the precious yellow metal.[...]



How much gold is in Fort Knox?

2010-09-29T14:09:35.880-07:00

The Fort Knox Bullion Depository is in Kentucky, and was opened in 1937. In 1933 the US government expropriated privately held gold, and the increased gold reserves were stored in Fort Knox.What is kept in Fort Knox?The U.S. Department of Treasury claims that the Fort Knox gold vault contains 147.3 million troy ounces of gold.It is also holds some important US historical treasures such as the Declaration of Independence and Abraham Lincoln's Gettysburg Address.In the 1970s, because of conspiracy rumors that Fot Knox actually contained no gold reserves, an official of the US Mint led reporters and congressmen through part of the facility, showing the 8 foot tall stacks of gold, 36,236 bars in all. One Fort Knox bar of gold weighs 400 troy ounces. The problem is that this was not a real inspection, just a "glimpse" at the gold, and participants claim that they were only allowed to view one storage room, and that they viewed it only through small peepholes. This Fort Knox visit is largely thought to have been little more than a photo op.Suspicion over the amount of gold kept at the facility persists. The last full audit of Fort Knox's gold took place in the 1950s during President Eisenhower's administration. Since then, partial visual inspections have been done, such as the above mentioned walk-through with journalists. During the 1970s a wealthy businessman named Edward Durell alleged that most of the gold in Fort Knox had been secretly moved out of Fort Knox by President Johnson in the late 1960s in an attempt to keep the gold price suppressed at $35 per troy ounce (the price at which it was fixed under the gold standard). His evidence was mostly circumstantial and anecdotal, so it's far from definite, but it goes without saying that his claims were suppressed and that reporters covering his allegations were soon out of a job.In 1982 President Reagan set up a gold commission to investigate the possibility of returning to a gold-backed currency. His commission's investigation concluded that the US Treasury now owns no gold, that it is now owned by the Federal Reserve - a private bank and non-government entity.Theories similar to Durell's have been held by many, that the Federal Reserve has leased out its physical holdings of gold to suppress the gold price and keep the US dollar high. Chris Powell, chairman of GATA, the Gold Antitrust Action Committee points out that since 1995 the US Federal Reserve has been swapping gold with other countries' central banks to rig currency markets and keep the gold price low. The Federal Reserve is a private bank and not controlled by the US government, but as we mentioned before, the Fort Knox gold is now owned by the Federal Reserve. Perhaps this is because of the US's massive amount of debt to the Federal Reserve. How could the Fed's gold swapping be affecting the gold market today? Chris Powell claims that in a free market environment for gold, prices per ounces would be thousands of dollars higher than they are now. The good news for precious metals investors is that price fixing and market manipulation never works in the longterm, and natural market forces always force a correction to the true level of value. How Much Gold is in Fort Knox?[...]



Gold vs Commodities Index

2010-09-29T14:10:20.159-07:00

If you've been reading my blog regularly you have probably figured out that I like not only gold, but also silver. I call this blog the gold market because I see gold as something of a symbol of preserving your wealth against fiat currencies that are being devalued. But gold is not the only precious metal I invest in, and not the only commodity I invest in.Right now we are in a commodities bull market that began in 1998 or 1999. The average length of a commodities bull market is 18 years, giving us plenty of more time to position ourselves to profit from it. Many think that the commodities bull market has ended, but what we are seeing is a mid-bull market correction. The current prices of commodities in general are extremely low, so now is an opportunity to buy. I continue to buy gold, but during the current slump in commodities prices I am buying a lot more of other commodities than of gold. The main reason is simple: they have dropped in price while gold hasn't (speaking in general times). At the time of writing, gold is trading at $887.48 per troy oz. That is about the same as June of last year. Compare that to the Reuters-CRB Index (CRB stands for Commodities Research Bureau) that tracks the price of commodities in general, is way down, around 40% down. This is because of reduced economic activity as a result of the global economic recession. Gold has held relatively steady during this time as it is seen as a safe haven during economic crisis. So even though gold has dropped down from its highs, it is not as good of a buying opportunity as other commodities right now. In fact, when economic activity starts picking up again I think that gold will initially drop because it will lose some of its safe haven image, and we'll have a better buying opportunity at that time. Gold will continue to go up much higher when people realize how much the government has debased the currency, but this will be later on. Right now other commodities are cheaper and offer better opportunities for gains.So what am I buying? Well, of course I love silver, because it has many of the benefits of gold as "real money" that can not be debased, but it is also much more of an industrial metal than gold. That's why the current industrial slowdown offers a great buying opportunity for silver. There is also a lot of data to show that silver supplies are much more limited than most people are aware of, and when shortages become apparent, the prices will skyrocket like crazy in the coming years. I am snatching up as much physical silver as I can afford to buy.But I am also putting money into a diversified commodities futures fund, so that I can invest in commodities in general. This fund allows the managers to both short and long different commodities, so it normally goes up even when commodities have dropped, because the managers are shorting commodities. But due to the extra risk in that (they could make a bad trade) I chose a fund that deals only in cash and does not use leverage. Some funds that use leverage get hit very hard when they make some bad trades.You can also invest in a simple commodities index tracker fund that involves no shorting. I would probably invest in one of these, but I don't have access to a good one where I currently live.I am also putting money into an energy fund that invests mainly in oil companies. This one is a bit of a wildcard and I expect to sit on this for a while until oil reaches over $100 a barrel again, and then I'll sell it. I'm doing this as an opportunity to learn more about energy, so I can't really put my full weight behind this yet.I also have a significant chunk of my savings in[...]



Mexican Fifty Pesos Gold

2009-04-07T06:39:37.702-07:00

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The most popular gold bullion investment coins continue to be US American Eagles, Canadian Maples Leaves, and other widely available and very liquid coins. But another coin that continues to be a strong gold investment is the Mexican 50 peso gold coin. It has a number of features that are different from the most popular bullion coins. First off, rathern than containing exactly 1 troy oz of gold, Mexican 50 peso gold pieces contain 1.2057 troy ounces of fine gold (37.5 grams). It is also struck in 20 karat gold, in other words 90% pure gold with the remainding 10% being copper. This gives them an orangey color similar to a South African Krugerrand.

Because of their high gold content and additional copper, they are quite large coins, with a diameter of 36 mm and a total weight of 41.67 grams. Compare that to a Canadian Maple Leaf which has a diameter of 36.07 mm and a total weight of 31.65 grams, and to an American Eagle that has a diameter of 32.7 mm and a total weight of 33.39 grams.

The 50 peso coin was minted in two runs, from 1921 to 1931, and again from 1944 to 1947. The earlier series sells for a somewhat higher premium, but the later restrikes sell at a low premium above spot, similar to the low premium of South African Krugerrands. They therefore make a good bullion investment. I was surprised when I first learned about their low premium, assuming that their age would give them more numismatic value.

(image) Mexico gained independence from Spain in 1821, and the 50 peso coin was produced for the centennial celebrations of Mexico's independence. The obverse of the coin features "El Angel de la Indepencia" (which you can probably guess means "The Angel of Independence"), an image of the statue erected in Mexico City for centennial commemoration. On the reverse of the coin is the Mexican coat of arms.

Because of their relatively large size and captivating imagery, Mexican gold peso coins are striking and enjoyable coins to have as part of your physical gold stack. But they are also solid bullion investments. Just don't let their beauty prevent you from selling them when the price is high! Don't fall in love with your investments or you'll make unwise decisions. But with some self discipline you can enjoy both the coins and the money they will eventualy yield for you.



IMF Plans To Sell Off Gold

2010-09-29T14:11:21.409-07:00

This week gold prices have been dropping, hitting a low of $893.24 per ounce on Thursday, April 3rd. This is partly due to the rally in equities, with the Dow rising back up above 8000 points, with investors hopeful that the G20 meeting will help implement solutions to the global economic recession. The second reason is that on Thursday the G20 summit participant countries endorsed a plan by the international Monetary Fund to sell over 400 tons of gold. With this gold being seen as additional supply entering the market place, demand naturally dropped. The IMF's selling of gold, however, has been planned for some time now and Thursday's affirmation by the G20 didn't indicate any new plans to sell off gold.

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What does this mean for gold prices? Well, the price of gold will likely remain down in the short term, as stocks rally. Also, I imagine the prices will fall somewhat when the IMF sells off 400 tons of its reserves, simply because the selloff conjures up images of excess supply flooding the market and will scare some investors into selling. However, the gold market will most likely bounce bank when it becomes clear that the buyers are mostly the central banks of countries who want to increase their own gold reserves. Particularly in emerging economies like China, Russia, and India, there is a desire to acquire more gold for their reserves and reduce US dollar reserves. So even though this selloff may cause a shockwave, I think it will actually improve the fundamentals of gold, because the dollar's value will fall as it is sold off by these countries' central banks. There won't be an immediate rush out of the dollar, but they will gradually reduce the amount they hold.

As for the equities rally, I think this is another short term rally, and I don't think we've seen the market's bottom yet. This recession (I'm being nice and avoiding the "D" word, even I think that's what we're entering) is far from over. And even when the stimulus finally kicks in, we may see stocks rally again, but with inflated currency - making it an artifical rally, essentially. I have little doubt that gold will outperform stocks over the next couple of years. We are, after all, in the middle of a precious metals bull market that is far from over. Equities are in a bear market. I wonder if people have forgotten that markets are cyclical. They seem to think that equities can be in a bull market forever with only minor short term interruptions. These people are still in denial of what is really happening.

I'm still holding onto all my gold. In fact, when the IMF sells off gold, if the price drops I will be buying more.

Reference: Marketwatch.com



Washington Mint 4 Oz Golden Eagle

2009-04-01T20:51:30.585-07:00

In some recent entries I've written about some silver rounds that are replicas of officially-minted classic coins. Today I'll show you an example of a replica coin, or silver "art round" as they are sometimes called. This is a "Giant Quarter Pound Golden Eagle" produced by the Washington Mint (note that this is a private mint, not the US Mint). The quarter pound Golden Eagle is a replica of the American eagle gold bullion coin, approximately copying its design of St. Gaudens' Lady Liberty and the American Eagle. However, it is not a gold coin, it is a silver round containing one quarter pound of .999 fine silver, and 24 karat gold plated.A quarter pound is equivalent to 4 oz. troy, and this silver art round's price is based on the spot price of silver. The gold plating is pretty thin (in the certificate of authenticity it says "layered with" gold), so the gold layering doesn't really affect the price, it seems, since it's such a small amount.The thing that immediately distinguishes this item from an original American eagle is its size. Its diameter is 3.5 inches (89.8 mm), while a 1 oz American gold eagle's diameter is 32.7 mm and a silver eagle's diameter is 40.6 mm. Its name also does not include the words "American Eagle" but rather "Golden Eagle". But you will see people selling these under the name "American Eagle" to give the impression that they are officially minted. I bought this one on Ebay, and it was referred to as a giant American Eagle. I knew what it was, so I wasn't fooled, but other less-informed buyers might be misled by such mislabelling.The Washington Mint also produced giant 1/2 pound golden eagles and 1 pound golden eagles, as well as silver eagle replicas and platinum eagle replicas of the same giant sizes. The silver and platinum versions are also silver rounds containing .999 fine silver, with the platinum eagle replica being layered in platinum.Even though these rounds are replicas of official bullion coins and may not be as liquid as officially minted eagle coins, they are indeed fine silver bullion and I expect to have no problems selling mine for at least the spot price of silver. I'll have it melted down if necessary. I wouldn't pay too much of a premium above spot price for this kind of replica though.[...]



Buffalo Silver Rounds

2009-03-29T09:31:37.380-07:00

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Buffalo silver rounds are some of the most popular silver investment items being sold today. Like American gold buffalo coins, their design is based on the Indian Head nickel, also known as the Buffalo nickel, which was minted between 1913 and 1938.

Buffalo silver rounds are not produced by the US Mint, but rather by a private mints, with the most popular version being produced by the Wall Street Mint. They have no official connection with either the Indian Head nickel or the American gold buffalo coin, but is rather inspired by their design.

(image) On the obverse of the Wallstreet mint issued round is a portrait of a Native American man along with the word "LIBERTY" at the top right edge. On its reverse is an image of a buffalo, along with the purity and fineness listing of ".999 FINE SILVER" along the top edge above the buffalo, along with the weight description "ONE TROY OUNCE" below the buffalo at the bottom of the coin. It has a diameter of 37 mm.

If you don't buy directly from mints or reputable dealers, be careful of fake buffalo silver rounds. I have heard reports of fakes made of silver plated copper, which can be spotted by their marking of ".999" or ".999 FINE" instead of ".999 FINE SILVER". Real silver 1 oz. rounds weigh 31.103 grams, but the fakes weigh 3-4 grams less than that.

Since they are not officially minted bullion coins but rather silver rounds, silver buffalos can be bought at significantly lower premiums than officially minted silver coins like the American silver eagle. They will, of course, sell for a lower price to, and since they are not world famous like silver eagles they may not be as immediately liquid. But silver bullion is silver bullion, and buffalo silvers are an efficient way to invest in silver at prices close to spot.



Investing in Gold Certificates

2010-09-29T14:12:17.485-07:00

What are gold certificates? They are certificates that indicate you are the owner of gold that you do not physically possess. Normally, these certificates are issued by financial institutions from whom you buy gold, and those financial institutions physically store the gold for you. At least that's how it's supposed to work.Possessing certificates of ownership is like having your money in a gold pool account. You give your money to the company who runs the program, and when you cash out they pay you whatever returns you may have accrued according to the current gold price. But they may not store any physical gold for you. Rather, they are thought to take your money, and invest in whatever they expect to get the highest returns rather than in gold, pay you the returns on gold, and keep the rest of their gains for themselves. That begs the question of what happens if they make some poor investment decisions and lose your money, and are unable to pay you your returns on the gold price? I don't know. What happens if the institution goes bankrupt what happens to your investment? If it's not a physical asset, I suspect it would vanish.There are some positive aspects of gold certificate programs. One is that you can essentially invest in gold at the official spot price without having to pay any premiums for physical metal or pay any storage fees. Those premiums and storage fees can cut into your profits quite a bit, so gold certificates representan alternative that gives you the most efficient returns. One option for gold certificates is the Perth Mint's gold certificate program. The Perth Mint's program is full backed by the government of Western Australia, which affords somewhat more of a sense of security than possessing gold certificates from a private institution that could go bankrupt and watch your non-physical gold vanish. The Perth Mint's gold certificate program charges 1.75% fees on all purchases plus a $10 certificate fee, plus a 0.75% fee when you sell. This is much lower than the current premiums on physical bullion which have skyrocketed during the current bullion and coin shortage. There are no storage fees. There is a minimum initial investment of $5000 Australian dollars. The Mint claims that every ounce you buy remains on the premises of the mint that can not be removed. Your investment is both government backed and insured by Lloyds of London. This is for basic unallocated storage (though again they do claim to have gold on premises for you, in some form).The Perth Mint also offers allocated gold storage accounts, though this requires both storage fees and a fabrication fee (to mold the gold into whatever formyou choose to have set aside for you).You can find more information on the Perth Mint Certificate Program hereWhether or not you invest in gold certificates will depend on how much faith you are willing to place in an institution to store your purchased commodity for you. I am personally someone who is prepared for the worst while simultaneously not paranoid, and seeking the best returns possible. That has lead me to the conclusion that holding a stack of physical bullion as the base of your portfolio is important, but that on top of that base it is fine to diversify and hold certificates or other kinds of gold accounts that do not have allocated storage. I personally do not take part in the Perth Mint program or similar ones, but I do have an e-gold account. I think those are fine as long as you know that there is some degree of risk, and [...]



How will $1 Trillion Dollars of Inflation Affect The Price of Gold?

2010-09-29T14:13:30.000-07:00

A little over a week ago we heard of plans for the US Federal Reserve to buy $300 billion in US Treasury Bonds as well as $750 billion in mortgage-backed securities. You do the math, this amounts to the printing of over a trillion new dollars to be pumped into the US economy. This is separate from Obama's stimulus plan which will spend $787 billon dollars into the economy this year and next, money for which will also need to be borrowed from the Federal Reserve. The intention here is to stimulate markets and getting them moving upwards again. But remember that "stimulate" is a euphemism for "inflate", so even though we will see market prices going up, the value of everyday goods will also be going up as the dollar becomes devalued. It is impossible to pump 1 trillion dollars into the economy without prices inflating, unless people start saving all their money without spending. But that's the whole point - for people to spend and for this money to circulate. The government wants inflation. They want to avoid deflation at all costs, even at the cost of our buying power. Why? I suppose because deflation causes immediate problems that are politically unpopular, while inflation, if it can be controlled, wreaks its havoc slowly without the public really noticing. If it can be controlled.I think the significance of this for gold and silver investors is pretty clear: while the US moves out of deflation and into inflation, the dollar will become devalued and lose much of its buying power, while the gold price will rise as its role as a safe haven and as real money will become solidified. With the inflation will come rising commodities prices in general, as economic activity creates demand. Oil prices will likely skyrocket once again, and since silver's function as an industrial precious metal makes its price somewhat follow the price of oil, silver will once again rise in price. This is not really new information, but the Federal Reserve's plans give a new indication that these conditions are just around the corner.How much will a 1 trillion dollar injection inflate prices? To be honest, I don't know. The reason I don't know is because there used to be something called the M3, a wide measure used by the Federal Reserve to indicate how much currency is in circulation. In 2006 the Federal Reserve decided to stop publishing the M3. My guess is that they knew they would soon be pumping trillions into the economy, and seeking to hide the currency inflation they stopped publishing the M3. But in 2005 the M3 was around 10 trillion dollars. This doesn't account for all US money, since there are so many lines of credit and electronic dollars created through fractional reserve banking and other kinds of fancy "money", but the M3 was some kind of reliable measure. If the M3 was 10 trillion dollars and you added an extra 1 trillion dollars, you can see how big of an effect there could be. But what if this new money fails to stimulate the economy? People are scared, and may save all their dollars. Well, I predict the Federal Reserve will print more and more in desperate attempts to stimulate the economy. And eventually, all of those desperately printed dollars will make their way into the economy. And when they do, we'll see big inflation.I think with all the economic news coverage we've become desensitized to just how big a number "trillion" is. Trillions do not even fit on the display of my calculator, the number is too big. With such a mindboggling[...]



What's the difference between coins, rounds, and medallions?

2009-03-25T08:11:06.599-07:00

When shopping for bullion coins you may have encountered something called rounds, and been confused about the term and what it means. Similarly you may have encountered medallions and wondered how they differ from coins. The basic difference between a coin and a round is that a coin is officially minted and is legal tender, while a round is not legal tender, and is usually privately minted. In its most standard usage, the word "medallion" refers to a metal piece that is, similarly to a round, not legal tender. But the word "medallion" tends to be used for a lot of commemorative coins aimed at collectors, whereas "round" tends to be used for bullion coins aimed at investors.An example of a bullion coin is an 1 oz. American gold eagle or American silver eagle, since they are legal tender and officially minted by the US Mint. An example of a silver round is this North West Territories (NWT) Mint one ounce silver round. I can't give you an example of a gold round, because even though I know they exist they are rare. Gold is so much more valuable than silver that investors prefer the safety of officially-minted and well-recognized coins. An example of a gold medallion is this Winston Churchill commemorative medallion. It should be noted that while the above definitions are the most common specific definitons, the word "coin" is often used in a general sense to refer to allcoin-shaped items. But a true "coin" will have a clearly marked face value in the currency of its country of mintage. For example, a 1 oz American Gold Eagle has a face value of $50. A generic silver round will not have a face value indicated, but just the precious metals weight and purity. For example, "1 troy ounce .999 fine silver" as printed on the NWT silver round. Commemorative medallions sometimes don't even have the precious metal content and purity written, so to determine that information you need an appraisal or certificate of authenticity.Are there any advantages of coins over rounds and medallions?Well, as mentioned before, officially-minted coins are easier to trust and feel secure with, since you know that your bullion purchase was made in accordance with all laws and regulations. In addition, officially minted coins, especially major ones like Maple Leaves, American Eagles, Krugerands and the like, are highly recognizeable and very liquid because of their visibility. The downside of officially minted bullion coins is that they carry a relatively high premium, partly because of higher demand but partly because they are not sold directly from the mint to individual investors, they first go through middle men. The US Mint for example sells its coins to distributors called "Authorized Purchasers". The authorized purchasers then mark them up and sell them to bullion retailers, who also mark them up before selling them to you. So in the case of an American silver eagle, you pay a significant premium over the spot price of silver to pay for the operations of distributor and bullion retailer. In the case of a silver round, you can order directly from the mint, or retailers order directly from a mint, so you pay a lower premium over the spot price. This difference in premium can be quite hefty, for example the current spot price of silver is around $13.50, but an officially minted 1 oz bullion coin will probably command at least $18 while a silver round could be bought for as little as $15. If you are buying in large quantities, silve[...]



How to Spot Fake Coins and Replicas on Ebay

2009-03-24T17:28:31.823-07:00

In my last blog entry I talked about buying silver on Ebay, and over the past couple of days I've been looking through a lot of Ebay and Yahoo Auction listings. Despite online auctions presenting a unique opportunity to trade precious metals from peer to peer, there are dangers of fraud that you need to be aware, most notably fake coins and replicas being passed off as official coins. What got me looking into this issue was a listing about a 2002 1 kilogram Silver Panda coin. Immediately I thought "Wow, the Central Mint of China must have produced some large size proofs of the Silver Panda! I have to get one!" Then I clicked on the listing and had a look at the photos and desription. My instincts alerted me that something was wrong, and I didn't bid on the item. Something about the coin didn't seem right. Here's the photo of the "Silver Panda" on Ebay.I went straight to Google images and searched for a 2002 1 kilogram Chinese Silver Panda, but couldn't find one. So I looked at some 1 oz silver pandas, and right away I noticed a few differences that confirmed by instinctive feeling. The 1 kg giant Silver Panda was not a Silver Panda at all, it was either a legal replica of a silver Panda and struck by a private mint, or an illegal fake. Either way I was highly suspicious that this coin was made of real silver, at least not pure silver. The obvious differences between the 1 kilogram item and a 1 oz Silver Eagle's design are the lack of a face value in Yuan, signifying that this is not legal tender, and the lack of the purity indication "1 oz Ag .999" (instead it simply reads "1 oz"). The implications of that are most certainly that this replica is not made of silver at all, but probably nickel or a cupronickel alloy. My guess is that because those markings are removed, this coin is a legal replica in China but that the vendors are fraudulently passes these off as real silver bullion coins when they are not.Yesterday I saw at least a dozen identical items listed on Ebay, all originating in Hong Kong or China, several having the exact same photos and description page but different user names. Today it seems that all of the listing have been removed as complaints come in and Ebay closes the offending accounts. After looking around the Ebay forums I discovered that there is a huge problem with counterfeit coins and misrepresentations coming out of China. There are items like the above misrepresented replica, but there are other items which are the same as real bullion coins in size and design but have either reduced precious metals content or no precious metals content.How can you prevent falling for fake precious metals scams on Ebay? Well, the first step I would take is to avoid purchasing from anybody in China, or in any other country where I think that regulations are lax. But beyond that there are signs to watch out for. Many of the fake Chinese Panda coins and others have a very low starting bid, often less than $1 US. But they have exorbitant shipping costs, which the seller keeps for himself. In the case of the 1 kg Panda replica above, the starting price was $89 US, but free worldwide shipping was being offered. Would a legitimite individual vendor really offer free worldwide shipping on a 1 kilogram item? I really doubt it. Another sign was the vendor's sales page, which looked like a desperate attempt to seem like a professional page but totally missed the mark. And anothe[...]