The Mystery and Wonder of Gold Prices
Gold prices are constantly changing, which keeps investors checking the price of this precious metal every morning. Despite this level of speculation, gold continues to be the most popular investment precious metal. For centuries, gold has been a mysterious symbol of value and wealth. Learn more about the prices for gold and what makes this precious metal coveted by so many people around the world today.
A Brief History of Gold
Dating back as far as 600 BC, gold has been used as money and to preserve wealth. Today, mints produce gold bars and bullion coins for gold dealers to sell to buyers. The first coins with gold were struck in Asia Minor.
However, gold was used during the period of Grecian history before and during the time of Homer's life. During the thirteenth and fourteenth centuries, European nations starting minting gold coins rather than their earlier preference of using Silver bullion for coinage
The gold standard for money was used throughout the years of industrial economies in the nineteenth century. Gold certificates and bills were added to this circulating stock of money based on the value of gold. After World War II, the gold standard was replaced by convertible currencies with a fixed Exchange rate based on the Bretton Woods system
Starting in 1971, the USA refused to redeem its dollars in gold
because excessive government debt and money printing had caused the gold price per ounce
in the free market to rise way above the fixed redemption price of gold. Since the United States dollar was backed by gold up to that point and had gained the status as the most important reserve currency, most other countries around the world had already abandoned their own gold standards and instead pegged their currencies to the United States dollar. To maintain demand for an unbacked dollar, the U.S. persuaded Saudi Arabia to price Petroleum in dollars on the world market.
The financial turmoil and debt problems in recent years have reinvigorated the debate about returning to a gold standard, particularly as gold prices have risen sharply.
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Gold Price: The Pure Beauty and Value of Gold
As an alloy, gold content is measured in carats. Pure gold is 24k. Gold is always considered the most desirable precious metal, even as the prices of certain Platinum
group metals have been higher. The perception of gold brings to mind wealth and comfort, beyond that associated with stocks, equities and money. Buying gold
is a way to diversify risks, as the stock market can be unpredictable
. The safest, most reliable play on gold prices is to own physical gold
. However, investors also use contracts, gold futures, and derivatives to build financial portfolios exposed to gold prices.
"The safest, most reliable play on gold prices is to own physical gold."
The globalist International Monetary Fund (IMF) in Washington, D.C, maintains statistics of national assets reported by countries around the globe. This includes gold holdings. Live gold prices are reported per ounce. An investor refers to a 24-hour spot gold price chart. The price per ounce is reported in real-time as 24-hour trading ensues worldwide. Before investors decide to buy gold from a dealer, it is wise to refer to trading charts for AM and PM values – or better yet, reference live gold global spot prices – to ensure accurate pricing. While is can be impossible to predict the value of future markets, live gold reports help buyers make a prudent purchase. The use of an online calculator can also be helpful.
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What Are the Benefits of Buying Gold as an investment?
Commodities are basic goods that can be interchanged with other commodities of the same type in commerce. Gold is not specifically a currency or a commodity. Since it has the features of both, it is best described as commodity money. Trading happens on the spot market in addition to the future market used for commodities. Gold is not reliant on a single central bank or government. For this reason, precious metal investments are used to hedge against inflation and financial turmoil.
What is the Gold Spot Price and How is it Determined?
Traders determine the spot price of gold
on futures exchanges. Metals contracts change hands in London and Shanghai when U.S. markets are closed. But the largest and most influential market for metals prices is the U.S. COMEX exchange. The quote for immediate settlement at any given time is effectively the spot price or Spot contract. Gold is also priced in the Euro, Indian rupee, the Chinese Yuan, etc.
Spot (paper) prices can sometimes diverge from real-world pricing in the markets for physical precious metals. For example, during periods of extreme stress in markets it may be impossible to obtain physical metal anywhere near the quoted spot price. Premiums on retail bullion products may surge as a consequence. When the physical gold market diverges from the paper market, wholesale over the counter prices may be more realistic than spot prices.
Why Does the Gold Price Fluctuate?
Excessive money printing tends to drive gold prices up, as there are more currency units chasing basically the same number of gold ounces. On the other hand, the price of gold does not tend to perform as well as compared to other assets when governments are behaving responsibly and living within their means. Geopolitical conflict, mine supply, and demand for gold in jewelry also have a bearing on gold prices.
The Money Metals website is on the to best sources for news relating to precious metals, but so is Zero Hedge and a few other sites.
An investor will seek to make a profit, but there is always a risk of loss with any investment. The most successful investors seek updated information daily, each week, and every month before they start to trade, sell, or purchase gold. The published US dollar amount rates will constantly change, so buyers will expect to gain and lose along the way. Before investing, check indexes such as the NASDAQ for the latest rates based on the USD. Review the end of the day Commodity Future Price Quotes for Gold (COMEX) and determine the bottom line using online calculators. Rely on facts rather than the opinions of a writer at a blog website, tweets from a social media account you follow or commentary at the office. A random comment may not be valid while facts and figures are verifiable. Rather than making a quick response to a conversation, take the time to do your own research.
What Causes the Price of Gold to Go Up?
A hundred years ago, gold sold for just $20 per ounce. In recent years gold has traded between $1,200 and $1,900 per ounce. That’s a huge move up in nominal terms over the past century. Yet in real terms gold prices today aren’t much different from what they were when they were last quoted at $20 an ounce.
It’s not that gold has become so much more expensive. It’s that the currency in which gold prices are quoted has depreciated so much. (The US dollar has lost nearly 97% of its value since the Federal Reserve was created in 1913.)
Over time, gold’s value in terms of purchasing power
stays relatively constant. Of course, there are major cycles wherein gold can gain or lose value dramatically due to supply and demand issues, speculation, or manipulation. But as long as the U.S. Dollar Index keeps losing value, gold – the ultimate money – can be expected to ultimately reflect that depreciation by carrying a steadily higher price tag.
What Was the Highest Price of Gold per Ounce Ever?
Gold prices hit an all-time high of $1,900/oz. in August 2011. However, that nominal high wasn't actually a new high in real terms. The January 1980 peak of $850/oz still hasn't been surpassed when adjusted for inflation.
According to the government's own inflation calculator, $850 in 1980 dollars translates to $2,475 in 2011 dollars…and $2,708 in 2018 dollars.
These are low-end inflation adjustments based on a heavily massaged Consumer Price Index. In recent years the CPI has tended to understate real-world inflation, according to many independent economists. So gold could run significantly higher even than the CPI-adjusted figures before making a true new high in real terms.
Gold Price Per Gram
How many grams are in an ounce of gold?
One troy ounce of gold is equivalent to 31.1 grams. Although gold prices are most commonly quoted in ounces, gold bullion is also bought and sold by the gram. Grams can be a more convenient unit for pricing when trading gold in small quantities or using gold for everyday barter transactions.
Better bullion dealers sell gold bullion products by the gram. For example, Pamp Suisse and other well-regarded mints produce 1 gram gold bars
. Also, the Royal Canadian Mint produces packs of 1 gram gold Maple Leaf coins.
What is the Dow to Gold Ratio?
The Dow:gold ratio measures how highly valued the stock market is compared to gold. The Dow:gold ratio tends to move lower during both deflationary depressions (as in the 1930s) and inflationary panics (as in the late 1970s). At the bottom of the Great Depression, Dow:gold reached a 1:1 ratio. That same 1:1 ratio was briefly reached again in January 1980 when both gold prices and the Dow Jones Industrials sported an 850 handle.
In 2017 and 2018, the Dow:gold multiple has ranged from 16 to 20. During the next financial crisis, that ratio is likely to collapse in favor of gold. Some gold bugs believe a return to 1:1 parity will happen again.
A 10,000 Dow and $10,000 gold, for example, may seem far fetched today. But during a true panic in markets, one or the other price extremes – or both, simultaneously – could be realized.
Ways to Purchase Gold
Gold products as an investment are typically purchased in the following three forms:
- Gold Bullion Coins
- Gold Bullion Bars
- Gold Bullion Rounds
The weight of gold is measured by troy ounce. Gold can be purchased by the gram, in ounces, or even by the Kilogram in the form of a gold brick. Since sizes vary from an oz to kilos, direct physical possession of gold is not required. Often this gold is stored in a safe, with a dealer, or at the bank or another facility. Other options include gold certificates, Exchange-traded fund products, gold bullion price
derivatives, and gold accounts.
For example, contributing to a gold or precious metals IRA
is another way to invest get and exposure to the gold price and the physical metal itself. The IRA custodian allows more diverse investments. The IRA holds physical bars or bullion as well as paper assets. Gold self-directed accounts can also include other types of retirement accounts. Precious metals that can be held in these IRA accounts include Gold, Silver, Palladium, and Platinum. It is required these metals held inside of an IRA are in the form approved by the IRS for this purpose.
Types of Gold Bullion?
The three main types of gold bullion are bars, rounds, and coins. Each type come in a variety of sizes. Bars may range from a single gram to 100 ounces each. Rounds and coins are commonly sold in 1 ounce and fractional sizes.
The main difference between a round and a coin is that the former is produced by a private mint while the latter is produced by a government mint. A government-minted Gold coin (like the Vienna Philharmonic coin from Austria) typically has a legal tender face value attached to it (which is considerably less than its intrinsic metal value).
Specialty products such as jewelry and collector’s items are generally not considered to be bullion. Bullion investors should avoid collectible (numismatic) coins that carry high premiums over spot prices.
Is Gold Bullion Traceable by the Government
In almost all cases, no – dealers do not have to report the transaction to the IRS or other federal agencies.
There is one extremely rare exception. For a disclosure requirement to be triggered, BOTH of the following conditions have to be met:
- The transaction is (or related transactions are) larger than $10,000 in size.
- Payment is made using actual cash (i.e. Federal Reserve notes) or with two or more cash instruments (defined as money orders, cashier's checks, or traveler's checks) which total more than $10,000.
Personal checks, debits, bank wires, and credit card payments are NOT considered cash or cash instruments. Therefore, purchases using them do not trigger disclosure by a dealer regardless of the amount.
How to Invest in Gold
From beginners to educated investors, it is easy to invest in gold. Before signing a contract or purchasing any gold product, prices should be calculated and clearly quoted. Verify all costs and fees before you commit to buy anything. Ask questions and remember that time is of the essence. While you should never feel pressured, the gold price rises changes every minute so expect to be asked to make a commitment to lock in your price.
Whether you have hundreds or thousands to spend, this savvy financial asset is accessible to everyone. Call Money Metals Exchange
for a free expert consultation today. The process is discreet, secure, and beginner-friendly. Investing in gold is a cost-effective, simple way to create a safe-haven for your assets. Money Metal Exchange is with you every step of the way as you discover the mystery and wonder of owning gold. Contact us today to find out more about investing in gold and other precious metals!
Storing Physical Gold Safely
It’s good to take a two-pronged approach. First, store some of your gold at home in a well-concealed safe for immediate access in case of emergency. Store the remainder of your gold in a secure, insured bullion storage facility. Insist on segregated gold storage
to avoid co-mingling your bullion with that held by other customers.
Safe-deposit boxes at banks are generally not suitable for bullion storage. Some banks have policies that explicitly prohibit gold bullion. Plus, your gold would be at risk in the event the bank goes under or gets raided by government agents. You don’t want your gold tied into the banking system, even indirectly.
Gold Price and the Gold Mining Process
Gold mining is an energy-intensive, labor-intensive, risky endeavor. Most of the world’s easy to get gold has already been gotten. Miners looking for new reserves going forward will have to drill deeper and move more earth to obtain comparatively small amounts of gold. As they do so, they will also face growing political risk because of environmental concerns – and risk of nationalization in politically unstable places such as South Africa and socialist-controlled countries in South America.
For these reasons, many gold analysts are forecasting “peak gold” and declining mining supplies in the years ahead. Mining companies are wary of investing exploration and new mine development at the current price. Much higher prices will be necessary to incentivize miners to take the risk of pursuing high-cost gold projects.
Do Gold Mining Stocks Historically Return Bigger Gains than Gold Bullion?
No. Since its inception, the HUI gold stocks index has underperformed the gold price.
Gold stocks are more volatile than gold itself, so during cyclical bull markets the equities often do outperform. However, that Share price outperformance has historically more than been offset by extreme underperformance during downturns.
It’s important to keep in mind that physical gold and gold mining stocks are entirely separate asset classes. During the turbulent market conditions of 2008, gold prices finished the year in positive territory. The leading gold mining stock index lost nearly 30% of its value. Gold is a tangible form of money; mining stocks are financial assets that are subject to a host of additional risks besides the market price of gold.
Do Cryptocurrencies Like Bitcoin Represent Sound Money? Is Bitcoin Superior to Gold?
Digital alternative currencies such as Bitcoin lack intrinsic value. A Bitcoin as such has no utility – the computer code behind it can’t be used for anything except to validate that a Bitcoin is a Bitcoin. The market value of a Bitcoin
is entirely speculative. It could go to $1 million. It could go to zero.
Gold cannot go to zero because gold is both scarce and useful – it’s useful in jewelry, industrial applications, space technology, art, and coinage. Bitcoin proponents note that Bitcoin is also scarce since only a limited number of Bitcoins will can ever be mined into existence. But scarcity in itself doesn’t create value. After all, anyone can start a new cryptocurrency that has the property of scarcity.
The bottom line is that cryptocurrencies lacking tangible backing can’t be regarded as sound money. They are more akin to pure speculations. However, it is possible for the blockchain technology behind cryptocurrencies to be used as a medium for sound money. Projects to put gold on the blockchain as backing for sound cryptocurrencies are currently in the works.