Wednesday, February 9, 2011

Gold Coin Options

Although many gold coins are available for an investor, only 2 main types stand out. The gold bullion coins and the rare gold coins. Gold bullion are strictly for a hedge against inflation; hence they form a good basis to own gold whereas numismatic gold coins or rare gold coins which are typically used to privately grow wealth over the long-term.

Gold Bullion Coins

The large market size for gold bullion coins makes them a favorite with many people. Gold bullion coins hold many benefits for their owners; security, safety, convenience and liquidity. But the best benefit of all is great potential profit as the coin’s value is directly related to the current gold price.

The Krugerrand from South Africa was the first modern issue gold bullion coin that surfaced in the market in 1967. This should not be surprising as South Africa has always led the pack in exporting gold; it is still the world’s leader in gold exports. The South African Krugerrand enjoyed its fame for a long time as many individuals took it as a means to possess gold. This is precisely the reason that the term ‘Krugerrand’ was interchangeably used with ‘gold coin’ during its hey days; just as one associated ‘Kleenex’ to facial tissue or ‘Xerox’ to photocopiers at the start of the respective industries.

But other countries caught on with South Africa's innovation with gold coins and started minting their own special gold bullion production. Now, the market offers the American Gold Eagle, the American Gold Buffalo, the Canadian Gold Maple Leaf, the Gold Australian Kangaroo and the Austrian Gold Vienna Philharmonic.

Rare Gold Coins

Rare gold coins can be collected for either investment purposes or just to own gold; some rare gold coin owners do not even bother to make a distinction of their collection.

US gold coins that were minted from 1795 to 1933 are classified as rare gold coins because the US Mint discontinued the minting for circulation. There were many denominations of rare gold coins distributed in the 138 years when these gold coins were minted. Sometimes, the US Mint minted various denominations of gold coins for commercial circulation such as $1.00, $2.50 (also known as Quarter Eagle), $3.00, $4.00, $5.00 (also known as Half Eagle), $10.00 (also known as Eagle) and $20.00 (also known as Double Edge).

Although small in size, the US Gold Dollar came in 3 types-I, II and III; it was minted between 1849 and 1889.

The Quarter Eagle's denomination is $2.50 and was minted between 1796 and 1929 sporting 7 different motifs.

The US gold coin that is stamped with $3.00 is the Indian Princess that saw its mintage from 1854 all the way to 1889. The US $4.00 gold coin was called ‘Stella’. It was minted as an experimental piece in 1879/80; hence there are very few pieces. The Half Eagle gold or US $5.00 gold coin came in 8 varieties of designs when it was minted.

The Gold Eagle of $10.00 came in 4 unique designs during its mintage between 1795 and 1933. The Double Gold Eagle of $20.00 is the largest among the US gold coins issued; it was minted between 1849 and 1933 with 2 designs.

These gold coins are in high demand because of the gold content in them as well as their beauty, rarity and historical relevance.

Gold close to an All Time High Once More

It is good news for those who are interested in buying gold coins for the price of gold is on the rise again; this time closing on an all-time high. Its price has been steadily rising over 10 consecutive years and it is expected to continue to rise this year.

With the gold price at more than $1,400/oz, it is quite close to a previous high of $1,421/oz.
Though gold price may fluctuate, its recent performance is indicative of long-term prospects investment.

US Dollar weaker

The performance of gold rises steadily due to the many disappointing US economic news figures; the weakened dollar has been hurt by global statements that the U.S. currency is not as attractive or ‘appetizing’ as before.

The US dollar has been, and currently is, the world’s reserve currency but gold tends to counter its prominence all the time. Gold has set itself to be the world’s currency major competitor and it is often referred to as the only real money.

China has surpassed Japan’s economy recently to take second spot with massive reserves in foreign currencies. China's reserves over the years were built on the US dollar but now a turnaround spells bad news for the greenback.

That in turn benefits gold as its price tends to move in opposite direction of the greenback. Gold owners are the major beneficiaries in this course of event. But it is not just the dollar’s decline that has buoyed the price of gold; there are other factors affecting the US economy.

High Unemployment

The increased unemployment rate in the US is now around 10%, despite the large stimulus package announced by the US government. This rate has become the country’s highest in a long time. The financial markets are concerned over this figure which does not augur well for the economy, since much of the country’s work force is sitting idle. With persistent unemployment occurring, analysts are starting to call the situation ‘depression’. Hence people are driven towards gold, the safer haven.

The troubled real estate market also caused the gold price to rise. Real estate is traditionally regarded as an alternative to stocks and bonds which are paper assets, and a cover against inflation.

Ailing Real Estate

However, even the real estate market performed badly over the past two years; many Americans lost big bucks in real estate instead of having shelter from alternative assets. Their wealth fizzled out in the financial crisis caused by the recent subprime mortgage fiasco that rocked the stock market. Now, everyone stands alert to a paradigm shift when it comes to real estate and stocks.

It is not true anymore that real estate is independent of the stock market as both environments declined with the same factors. Hence, more people are turning to gold, especially gold coins. These are more affordable, convenient, portable and readily liquid.

Financial markets will remain a concern with Americans seeking solace and safety with the uncertain U.S. economy. Gold prices are expected to climb in such situations.

Monday, January 10, 2011

How Current Gold and Silver Prices Are Determined

Precious metals are constantly traded; their markets are so active that it may seem that there is no pause in its trading activities. With the different time zones, it is not surprising for gold and silver to be traded 24x7 in various international bourses and financial exchanges.

It is the market activity that determines the gold and silver prices which may go up or down. The basic supply and demand factors are the main contributors to these metals’ daily prices.

Demand for gold

There are 3 main sources that affect the price of gold and silver.
One, investment demand by an individual, organization or government can affect these precious metals’ pricing. Small or large investments can affect the said metals’ pricing easily depending on the trade demand.

Next, industrial demand of gold and silver affects their pricing easily as they have attractive properties suited for many industrial uses.

Thirdly, there is always the jewelery demand of gold and silver to be adorned or stored and passed on from generation to generation in Oriental cultures. Such high esteem of gold keeps its pricing buoyant.

Supply of gold and silver

However, the supply of gold and silver is not as dynamic as their demand. Supply is limited from the earth’s resources and difficult to source using expensive technology and tools. This causes gold and silver to be more valuable. It is estimated that the total amount of gold that can ever be sourced is only a 20 cubic yard.

And because these precious metals are scarce, their current owners are holding on to them tightly; hence, the value of gold and silver keep increasing making it a vicious cycle on its supply and demand value.

Another important source which can determine the value of gold and silver is the futures market. This arena holds the supply and demand level of these precious metals as this is where buyers and sellers of gold and silver trade actively on various commodities as well as financial derivatives.

Spot price

Futures prices of these precious metals can affect the spot price of a commodity, which is usually gold; a spot price of a commodity is the actual price that the commodity is agreed upon to be traded and delivered immediately.

A spot price of any commodity is the actual value of the commodity at that point in time which is usually traded in US currency. But today the trend is changing with the spot price being traded in other currencies like the European Euros, Chinese Yuan, Japanese yen, Australian dollars, Hong Kong and Canadian dollars.

Where should I Buy Gold Coins?

One must be very careful when choosing to buy gold coins, whether you are a coin collector or a serious investor. Sufficient knowledge about the gold coins is necessary before a purchase should be made. In America, there are 2 basic types of gold coins that one can purchase – the rare gold and the bullion gold.

Gold Bullion Coins

The value of gold bullion coins lies in the content or amount of gold they possess. These gold coins exist in the millions with no outstanding appeal from serious coin collectors. It is easy to possess these as a means of owning in gold.

Many governments have minted their own gold bullion coins such as US mint on the American Eagle Gold coin and the Buffalo Gold coin, the Royal Canadian mint on the Gold Maple Leaf, the South African mint on the Krugerrand, Austrian mint on the Austrian Vienna Philharmonic and the Perth mint on the Australian Gold Nugget.

There are many sizes of these national gold bullion coins.

Rare Gold Coins

Rare gold coins are those minted between 1795 to 1933 in the U.S. which are few in number and thus are considered collectibles that are highly demanded.

The value of rare gold coins is not confined to the gold content within but according to the demand which can range from $1,000 and into the millions.

The U.S. Double Eagle twenty dollars gold pieces are the most popular rare gold coins that were minted between 1850 and 1933.

Buying Options

Although there are many places where you can purchase gold coins, it is best to purchase them at reputable coin dealers, like ITM Trading, especially for the rare gold coins. Local coin shops may also carry some gold coins for your convenience but not a good variety of choices would be available. A coin show is another place of purchase of gold coins which caters mainly for dealers. The public will not likely get the best price from a coin show as they are not knowledgeable enough about gold to negotiate a good deal. The last possible place to purchase gold coins is banks. But these may not always offer good bullion prices or service as gold coins trading is not their forte.

An individual who is an amateur in gold investment should get education on gold before getting involved in investing gold.

Sunday, December 5, 2010

Epitaph for the U.S. dollar

It is now getting more and more the clear that the strength of the dollar is not what it used to be. The US dollar has existed for around 100 years but as you look at the history of fiat currency, the US dollar as a fiat currency has already existed 39 years out of an average 80 years. Looking from this angle, it would seem that the US dollar is on its exit path. There are many reasons to indicate so.

The main reason

US dollar has evolved from being an asset-based currency into the currently debt based status. A few hundred centuries ago, money was strictly asset based through gold or silver with an intrinsic worth that you had it close with you all the time; you would be a case of ‘you are what you are worth’ quite literally.

We have had famous explorers such as Marco Polo who traveled around the world using European silver and gold to trade for Asian products like silk and spices, making gold and silver the widely acceptable monetary unit then until now, where daily commerce is performed via coin money. Coin money was also used in trade before the Civil War came on. Time and again in history, gold and silver were the preferred choices of trade, especially when the California gold rush saw a great natural supply to fuel the US economy.

Federal Reserve

The US Federal Reserve came on in early 1900s to streamline and regulate the banking processes. Silver and gold coins were the major form of currency but these were heavy and hard to carry and store. Hence, the Fed came up with certificates to replace the bulk of gold and silver which could be exchanged back to the precious metals. It put up a market value of $20 for every ounce of gold with a switch to paper money as the standard currency based on the gold exchange rate.

Gold and silver coins were considered real money; meaning, you are only as rich as the amount of these precious metals in your possession. This is called asset based money or currency which limited the amount of money in circulation in relation to the amount of gold and silver available. When you have such a currency that is controlled, there is no debt.

Simplicity

When paper money was introduced and became the standard currency form, its worth was based on the amount of gold and silver the nation had; meaning, you could only print one piece of paper money if the Fed had only one piece of gold of that worth.

It was all so simple until President Nixon came on the scene and took the US off of the gold standard.

CHOOSING A GOLD TRADING COMPANY

Factors to take into consideration

There are many factors to take into consideration while seeking the most appropriate company for gold trading; the offers, safety and security are only some of the most important. There are many such companies waiting to be chosen, especially in the United States. With all these factors to consider, one has to be sure of the choice he or she makes.

One of the most important associations is called the BBB, or Better Business Bureau. Many important companies are part of this association, as it is safe and reliable. Check the background of the company; it is reliable only if it receives a high rating from former clients. So, the first question to ask is whether the company is a member of the BBB or not.

Although the longevity of a company is not important in terms of the services it provides, it is not advisable to deal with very new trading companies. After the gold industry rose on the market, the numbers of this type of company rose significantly. Try to do business with a company that survived both the good and the bad periods.

Connecting with a trading company

When you try to create a connection with a trading company, it is advisable to choose the company that has the education of its clients as its top priority. If you want to start doing business in the gold industry, don’t hesitate to ask for help from those who already have some experience in the field. If a company doesn’t meet your needs and expectations, you should look for another one.

Another important aspect about a trading company is the efficiency of its methods. Being in touch with the latest news and information from the field is very important, especially for a company that deals with the gold industry. In order to make the right choice, pay attention to the company’s way of improving its services. Since we live in a world full of unreliable people, we all look for safety, especially when doing business. A company that uses gold as its tool of doing business should also have a legal department as a component. When a company doesn’t have relations with certain banks and legal institutions, it surely has problems, so it is better for you not to choose it in order to help you with your business idea. Regardless of the trading company you choose, keep in mind that the gold industry is a harsh one. You need to inform yourself in detail before taking the next step.

A QUICK GUIDE TO Gold Bullion Coins

It is one of those special hobbies in which not everyone would indulge although there are no bounds for anyone who is interested in buying gold coins. However, there are many different types of gold coins on the market for you to consider including in your new or current collection. Others may want these gold coins for investment purposes.

The More Popular Gold Coins

The following lists some of the preferred gold coins by the public. They are:

American Gold Eagle

This gold coin began minting in 1986 by law with a specification of copper-silver alloy for a more sturdy appearance to endure against wear and tear. This gold coin of the American Gold Eagle became the nation’s official bullion gold with Lady Liberty carrying the torch on the front side. The American Eagle gold coins are available in 1/10oz, 1/4oz, 1/2oz and 1 full ounce weights.

South Africa Krugerrand

This gold coin is the product of South Africa where it is minted from a durable gold alloy. The image of the previous President of South Africa, Paul Kruger, is imprinted on one side with Springbok on the other side.

Chevronets

The gold Chevronets was introduced by Russia in 1701 to replace the nation’s Ruble in 1757. However, the Russian Revolution caused a temporary halt of the Chevronets’ minting until the revolution ended. The authorities resumed Chevronets production in an attempt to ease out the devaluing Ruble; however, production of the Chevronets halted again in 1926. The Moscow Olympics in 1980 saw the revival of the 1925 Chevronets as a commemoration of the grand and prestigious event.

Britannia Gold

Britannia gold is Britain’s pride and joy with 22 carat and a mixture of 91.7% gold and silver or copper. The Britannia became the British’s official coin amongst its gold bullion collection. Britannia gold coins are available in ten pound denomination of 1/10 ounce troy gold, twenty-five pound denomination of ¼ ounce troy gold and fifty pound denomination of ½ ounce troy gold.

Gold Panda

The Gold Panda was minted with 99.9% gold by the Chinese with the Temple of Heaven imprinted on one of its sides. Though minting was frozen in 2002, it was resumed after much popular demand by coin collectors.

Islamic Gold Dinar

Malaysia also produced its own Kelantanese Dinar in September 2006 where these gold dinars were to be used in that state alone for paying dowries in accordance with the state’s Islamic Law, purchase of merchandise and even savings.

Gold Maple Leaf

The Royal Canadian Mint produced this Gold Maple Leaf gold coin from its locally mined gold that is 99.9% pure gold. There are two versions of the Gold Maple Leaf: normal and deluxe standard. This Maple Leaf gold coin can fetch $1,000,000 on the market with its 100kg weight at 3cm thick and 55cm wide in 2007.