The Truth About Gold

The Gold Frenzy: Why Investors Should Resist

The price of gold hit record highs over the week of May 10-14, attracting the attention of many retail investors. But this precious metal is no safe haven.

As an investment, gold has never been more popular. And, for individual investors, that's part of the problem.

Encouraged by TV and radio ads touting the virtues of gold, retail investors are buying it up. One leading gold dealer, Goldline International, estimates it has added 50,000 clients in the past three years. The gold frenzy is worldwide: On May 13, a vending machine that dispenses gold bars was unveiled at Abu Dhabi's Emirates Palace hotel.

Financial experts warn that all this enthusiasm for gold could be a warning sign -- that gold prices could be near their peak. "It's very in vogue right now, which is usually a telltale sign [of] a bubble-like mentality," says James Miller, president of Woodward Financial Advisors in Chapel Hill, N.C.

Gold's advocates may be right that the metal could head higher still, driven by the fiscal crisis in Europe, high deficits in the U.S., and fears of inflation. "All we can do is put our money into real assets, because paper money everywhere is being debased," Jim Rogers, chairman of Rogers Holdings, told Bloomberg Television on May 12 as gold hit new highs.

Treacherous Field

But even if gold keeps rising -- a prospect very difficult to predict, given the metal's volatile track record -- there are several features of gold that make it treacherous for individual investors, financial advisers say.

Gold might have a reputation as a "safe haven," but nothing could be further from the truth, says Susan C. Elser, of Elser Financial Planning in Indianapolis. Unlike other commodities, gold has few industrial uses. Unlike businesses owned through the stock market, gold earns no profits and doesn't pay out dividends. Unlike bonds, no one pays interest to holders of gold. And, unlike insured bank deposits, there is no guarantee of your principal investment.

"There is no downside protection on investing in gold," Elser says.

Gold used to be the backing for currencies, but no longer. Now "it really is only a store of value because people say it's a store of value," says Ken Eaton, principal at Stepp & Rothwell, a financial planning firm in Overland Park, Kan. That can lead to extreme volatility, which financial planners cite as one of gold's biggest downsides.

Gold may be up 84 percent in three years, but it has taken a wild path to get there. Most recently, gold fell 12.6 percent from Dec. 2 to Feb. 8, then rebounded 16 percent in the next three months.

Much of gold's appeal is built on its use as protection against inflation, which some -- but not all -- investors see as a potential threat.

"We're in very unusual times," says Barbara Camaglia, head of Legacy Financial Advisors in Beachwood, Ohio. "Everyone is debasing their currencies, so I think having some gold is not a bad idea."

Portfolio Allocation

Gold is just one part of a diverse portfolio, she says, with a portfolio allocation often kept to 5 percent, though "you could argue for a higher percentage." A small gold holding is typically recommended even by financial planners, like Eaton, who are skeptical of buying gold now. Gold is one sliver of commodity holdings that make up 2.5 percent to 5 percent of his clients' portfolios, Eaton says.

It's true that gold kept pace with inflation in the 1970s. The annual increase in the consumer price index averaged 9.3 percent from 1973 through 1981. The market price of gold at the end of 1972 was $63.91, rising to $456.90 by the end of 1982. That's a 615 percent increase, compared to cumulative inflation from 1972 to 1983 of 138 percent.

However, gold's record as an inflation hedge is more mixed over the long term. Because gold fell from 1980 to 2001, the metal's total appreciation from 1972 to 2001 was just 336.5 percent. That barely beats inflation over those 29 years of 323.7 percent, and is way behind the 2,466 percent return of the broad Standard & Poor's 500-stock index if dividends are included.

"There are [short] periods of time -- like now and the 1970s -- when there is really a lot of uncertainty out there, and people flock to [gold] for safety," says Miller of Woodward Financial Advisors. But gold's long-term record is weak, he adds. "It's a short-term trading vehicle rather than a long-term investment."

There are practical problems with owning gold, as well. It's heavy, and not easy for the average investor to buy, sell, ship, and store. "You're dealing with a lot more transactional costs," says David Lamp, a financial planner at BBJS Financial Advisors in Seattle. He keeps no more than 1 percent or 2 percent of client portfolios in gold.

Goldline's Profile

One easier way to get exposure to gold is through exchange-traded funds. For example, the SPDR Gold Trust (NYSE: GLD - News) holds actual gold bullion. The PowerShares DB Gold Fund (NYSE: DGL - News) holds futures contracts linked to the price of gold, and the Market Vectors Gold Miners ETF (NYSE: GDX - News) holds stock in gold mining companies.

Many gold investors, however, don't trust funds to hold their gold. The vast majority of Goldline customers want their gold physically delivered to their homes, says Goldline Executive Vice-President Scott Carter.

The company, which nets about $500 million in revenue each year, touts the endorsements of conservative pundits Glenn Beck, Laura Ingraham, and Mark Levin, as well as former Arkansas governor and Republican Presidential candidate Mike Huckabee. The average initial customer at Goldline invests $15,000 to $25,000, and Carter says Goldline discourages "the speculator," recommending holding gold for three to five years and only as 5 percent to 15 percent of a diversified investment strategy.

The transaction costs of gold are reflected in Goldline's prices. To buy from Goldline, gold bullion sells for about 5 percent above the current market price, while special gold coins can get markups of up to 35 percent. Selling back to Goldline, customers typically pay 2 percent below the market price, Carter says.

For many investors, however, the appeal of gold, especially in its physical form, remains strong.

"They don't want a piece of paper," Carter says. "You're buying something you can see and touch. There is a large group of investors who like to buy physical, tangible assets."

http://www.businessweek.com/investo...0513_844554.htm

 

 

Precious metal

 

A precious metal is a rare, naturally occurring metallic chemical element of high economic value, which is not radioactive (excluding natural polonium, radium, actinium and protactinium). Chemically, the precious metals are less reactive than most elements, have high lustre, are softer or more ductile, and have higher melting points than other metals. Historically, precious metals were important as currency, but are now regarded mainly as investment and industrial commodities. Gold, silver, platinum, and palladium each have an ISO 4217 currency code.
The best-known precious metals are the coinage metals gold and silver. While both have industrial uses, they are better known for their uses in art, jewellery and coinage. Other precious metals include the platinum group metals: ruthenium, rhodium, palladium, osmium, iridium, and platinum, of which platinum is the most widely traded.^[1]
The demand for precious metals is driven not only by their practical use, but also by their role as investments and a store of value. Historically, precious metals have commanded much higher prices than common industrial metals. In December 2009, gold was over $1200.00/troy ounce and silver was about $15.00/troy ounce, compared to copper at $0.11/troy ounce and nickel at $0.36/troy ounce

Bullion

A 500 gram silver bullion bar produced by Johnson Matthey

American Platinum Eagle bullion coin

A metal is deemed to be precious if it is rare. The discovery of new sources of ore or improvements in mining or refining processes may cause the value of a precious metal to diminish. The status of a "precious" metal can also be determined by high demand or market value. Precious metals in bulk form are known as bullion, and are traded on commodity markets. Bullion metals may be cast into ingots, or minted into coins. The defining attribute of bullion is that it is valued by its mass and purity rather than by a face value as money.^[2]
Many nations mint bullion coins. Although nominally issued as legal tender, these coins' face value as currency is far below that of their value as bullion. For instance, Canada mints a gold bullion coin (the Gold Maple Leaf) at a face value of $50 containing one troy ounce (31.1035 g) of gold—as of July 2009, this coin is worth about $1,075 as bullion.^{[citation needed]} Bullion coins' minting by national governments gives them some numismatic value in addition to their bullion value, as well as certifying their purity.

Silver 1000oz bar

The level of purity varies from issue to issue. 99.9% purity is common. The purest mass-produced bullion coins are in the Canadian Gold Maple Leaf series, which go up to 99.999% purity. Note that a 100% pure bullion is not possible, as absolute purity in extracted and refined metals can only be asymptotically approached. Many bullion coins contain a stated quantity (such as one troy ounce) of the marginally-impure alloy. In contrast, the Krugerrand is one of many historic and modern bullion coins of 22 Kt Crown gold, with a stated content (usually one troy ounce) of "fine gold"^{[clarification needed (define)]}, with the other component(s) of the alloy making the coin heavier than one ounce in total. Still more bullion coins (for example: British Sovereign) state neither the purity nor the fine-gold weight on the coin, but are recognized and consistent in their composition,^{[citation needed]} and many historically stated a denomination in currency (example: American Double Eagle).
One of the largest bullion coins in the world is the 10,000 dollar Australian Gold Nugget coin minted in Australia which consists of a full kilogram of 99.9% pure gold. There have been a small number of larger bullion coins, but they are impractical to handle and not produced in mass quantities. China has produced coins in very limited quantities (less than 20 pieces minted) that exceed 260 troy ounces (8 kg) of gold.^{[citation needed]} Austria has minted a coin containing 31 kg of gold (the Vienna Philharmonic Coin minted in 2004 with a face value of 100,000 euro). As a stunt to publicise the 99.999% pure one-ounce Canadian Gold Maple Leaf series, in 2007 the Royal Canadian Mint made a 100 kg 99.999% gold coin, with a face value of $ 1 million, and now manufactures them to order, but at a substantial premium over the market value of the gold.
Gold and silver are often seen as hedges against both inflation and economic downturn. Silver coins have become popular with collectors due to their relative affordability, and unlike most gold and platinum issues which are valued based upon the markets, silver issues are more often valued as collectables, far higher than their actual bullion value.

Bismuth and tellurium

Bismuth and tellurium are the only two metals which have abundances less than 10^-8 by mass part (g/g) in the Earth's crust, but which are currently not of high economic value.^{[citation needed]}

[edit] Rough world market prices

Valuable metal prices containing all precious metals names in bold

metal	mass abundance[5]	price 2009-04-10[6]	price 2009-07-22[7]	price 2010-01-07[citation needed]
	0	0	0	0
Platinum	5 ppb	42681 $/kg	37650 $/kg	49995 $/kg
Rhodium	1 ppb	39680 $/kg	46200 $/kg	88415 $/kg
Gold	4 ppb	31100 $/kg	30590 $/kg	36370 $/kg
Iridium	1 ppb	14100 $/kg	12960 $/kg	13117 $/kg
Osmium	1.5 ppb	13400 $/kg	12200 $/kg	12217 $/kg
Palladium	15 ppb	8430 $/kg	8140 $/kg	13632 $/kg
Rhenium	0.7 ppb	7400 $/kg	7000 $/kg	6250 $/kg
Ruthenium	1 ppb	2290 $/kg	2730 $/kg	5562 $/kg
Germanium	1500 ppb		1050 $/kg[8]	1038 $/kg
Beryllium	2800 ppb		˜ 850 $/kg[citation needed]
Silver	75 ppb	437 $/kg	439 $/kg	588 $/kg
Gallium	19000 ppb		425 $/kg[8]	413 $/kg
Indium	250 ppb		325 $/kg[8]	520 $/kg
Tellurium	1 ppb			˜ 158.7 $/kg
Mercury	85 ppb		18.9 $/kg	15.95 $/kg
Bismuth	8.5 ppb		15.4 $/kg	18.19 $/kg

Bullion coin

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A bullion coin is a coin struck from precious metal and kept as a store of value or an investment, rather than used in day-to-day commerce. Bullion coins are usually available in gold and silver, with the exception of the Krugerrand and the Swiss Vreneli which are only available in gold. The American Eagle series is available in gold, silver and platinum, and the Canadian Maple Leaf series is available in gold, silver, platinum and also palladium.
Bullion coins are also typically available in various weights. These are usually multiples or fractions of 1 troy ounce, but some bullion coins are produced in very limited quantities in kilograms and even heavier.
Bullion coins sell for a premium over the market price of the metal on the commodities exchanges. This is due to their comparative small size and the costs associated with manufacture, storage and distribution. The margin that is paid varies depending on what type of coin it is, the weight of the coin, and the precious metal. The premium also is affected by prevailing demand. The ISO currency code of gold bullion is XAU. ISO 4217 includes codes not only for currencies, but also for precious metals (gold, silver, palladium and platinum; by definition expressed per one troy ounce, as compared to "1 USD") and certain other entities used in international finance, e.g. Special Drawing Rights.

List of gold bullion coins

List of gold bullion coins

Country	Name of bullion coin	Fineness	Denominations (Gold weight)	Years of mintage
Australia	Gold Nugget	.9999	1/20 ozt, 1/10 ozt, 1/4 ozt, 1/2 ozt, 1 ozt, 2 ozt, 10 ozt, 1 kg	1986 - Present 1991 - Present
Australia	Lunar Series I	.9999	1 ozt	1996 - 2007
Australia	Lunar Series II	.9999	1 ozt	2008 - 2019
Austria	Philharmoniker	.9999	1/10 ozt, 1/4 ozt, 1/2 ozt, 1 ozt	1989 - Present
Canada	Maple Leaf	.9999 (.99999 available)	1/20 ozt, 1/10 ozt, 1/4 ozt, 1/2 ozt, 1 ozt	1979 - Present
China	Gold Panda	.999	1/20 ozt, 1/10 ozt, 1/4 ozt, 1/2 ozt, 1 ozt	1982 - Present
Israel	Tower of David	.9999	1 ozt	2010
Mexico	Libertad	.999	1/20 ozt, 1/10 ozt, 1/4 ozt, 1/2 ozt, 1 ozt	1991 - Present
Mexico	Onza	.900	1 ozt	Discontinued
Mexico	Centenario (50 Pesos)	.900	1.20565 ozt	1921 - 1931 Periodically 1943 - 1972
Poland	Orzeł bielik	.9999	1/10 ozt, 1/4 ozt, 1/2 ozt, 1 ozt	1995 - Present But 2001, 2003 and 2005
Russia	George the Victorious	.999	0.2537 ozt	2006 - Present
South Africa	Krugerrand	.9167	1/10 ozt, 1/4 ozt, 1/2 ozt, 1 ozt	1967 - Present
Switzerland	Vreneli	.900		1897 - 1936 1947 and 1949
United Kingdom	Sovereign	.9167	7.3224 g	1887 - 1932 1949 - 1952 (dated 1925) 1957 - 1959 1962 - 1968 1974, 1976, 1978 - 1982 2000 - Present
United Kingdom	Britannia	.9167	1/10 ozt, 1/4 ozt, 1/2 ozt, 1 ozt	1987 - Present
United Nations	Oro[1]	????	????	Not yet produced
United States	Gold Eagle	.9167	1/10 ozt, 1/4 ozt, 1/2 ozt, 1 ozt	1986 - Present
United States	American Buffalo	.9999	1 ozt	2006 - Present
United States	Double Eagle	.900	0.9675 ozt	1849 - 1933

 

 

List of silver bullion coins

List of silver bullion coins

Country	Name of bullion coin	Fineness	Denominations (Silver weight)	Years of mintage
Australia	Silver Kookaburra	.999	1 ozt, 2 ozt, 10 ozt, 1 kg	1990 - Present
Austria	Philharmoniker	.999	1 ozt	2008 - Present
Canada	Maple Leaf	.9999	1 ozt	1988 - Present
China	Silver Panda	Varies	Varies	1983 - Present (with exceptions)
Mexico	Libertad	.999	1/20 ozt, 1/10 ozt, 1/4 ozt, 1/2 ozt, 1 ozt, 2 ozt, 5 ozt, 1 kg	1982 - Present
Russia	George the Victorious	.999	1.01 ozt	2009 - Present
United Kingdom	Britannia	.958	1/10 ozt, 1/4 ozt, 1/2 ozt, 1 ozt	1997 - Present
United Nations	Uno[1]	????	????	Not yet produced
United States	America the Beautiful	.999	5 ozt	Not yet produced (2010)
United States	Silver Eagle	.999	1 ozt	1986 - Presen

 

Silver as an investment

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This article may require cleanup to meet Wikipedia's quality standards. Please improve this article if you can. (April 2009)

Silver, like other precious metals, may be used as an investment. For more than four thousand years, silver has been regarded as a form of money and store of value. However, since the end of the silver standard, silver has lost its role as legal tender in the United States. (It continued to be used in dimes and quarter dollars until 1964, and half dollars until 1970 when the intrinsic value of the silver overtook the coins' face values.)

Contents [hide] 1 Silver price 1.1 Factors influencing the silver price 2 Investment vehicles 2.1 Bars 2.2 Coins and rounds 2.3 Exchange-traded funds 2.4 Certificates 2.5 Accounts 2.6 Derivatives, CFDs and spread betting 2.7 Mining companies 3 Taxation 4 See also 5 References 6 External links

[edit] Silver price

The price of silver has been notoriously volatile as it can fluctuate between industrial and store of value demands. At times this can cause wide ranging valuations in the market, creating volatility.
Silver often tracks the gold price due to store of value demands, although the ratio can vary. The gold/silver ratio is often analyzed by traders, investors and buyers. In 1792, the gold/silver ratio was fixed by law in the United States at 1:15,^[1] which meant that one troy ounce of gold would buy 15 troy ounces of silver; a ratio of 1:15.5 was enacted in France in 1803.^[2] The average gold/silver ratio during the 20th century, however, was 1:47.^[3] The lower the ratio/number, the more expensive silver is compared to gold. Conversely the higher the ratio/number, the cheaper silver is compared to gold.

Annual average price of silver in US dollars. The large spike in 1980 was a result of the Hunt brothers failure to corner the market and Silver Thursday.

30 year history of market prices for silver.

Year	Silver price (yearly avg.[4]) US$/ozt	Gold price (yearly avg.[5]) US$/ozt	Gold/silver ratio
1840	1.29	20	15.5
1900	0.64	20	31.9
1920	0.65	20	31.6
1940	0.34	33	97.3
1960	0.91	35	38.6
1970	1.63	35	22.0
1980	16.39	612	37.4
1990	4.06	383	94.3
2000	4.95	279	56.4
2005	7.31	444	60.8
2009 (as of Nov 3)	16.44	1059	64.4

From September 2005 onwards, the price of silver has risen fairly steeply, being initially around $7 per troy ounce but reaching $14 per ozt. for the first time by late April 2006. The monthly average price of silver was $12.61 per troy ounce during April 2006, and the spot price was around $15.78 per troy ounce on November 6, 2007. As of March 2008, it hovered around $20 per troy ounce.^[6] However, the price of silver plummeted 58% in October 2008, along with other metals and commodities, due to the effects of the credit crunch.^[7]

[edit] Factors influencing the silver price

Private and institutional investors

• From 1973 the Hunt brothers began cornering the market in silver, helping to cause a spike in 1980 of $49.45 per troy ounce and a reduction of the gold/silver ratio down to 1:17.0 (gold also peaked in 1980, at $850 per troy ounce).^[8] In the last nine months of 1979, the brothers were estimated to be holding over 100 million troy ounces of silver and several large silver futures contracts.^[9] However, a combination of changed trading rules on the New York Mercantile Exchange (NYMEX) and the intervention of the Federal Reserve put an end to the game.
• In 1997, Warren Buffett purchased 130 million troy ounces (4,000 metric tons) of silver at approximately $4.50 per troy ounce (total value $585 million). On May 6, 2006, Buffett announced to shareholders that his company no longer held any silver.
• In April 2006 iShares launched a silver exchange-traded fund, called the iShares Silver Trust (NYSE: SLV), which as of April 2008 held 180 million troy ounces of silver as reserves.

The large concentrated short position

The CFTC publishes a weekly Commitments of Traders Report which shows that the four or fewer largest traders are holding 90% of all short silver contracts. Furthermore, these four or fewer traders were short a total of 245 million troy ounces (as of April 2007), which is equivalent to 140 days of production. According to Ted Butler, one of these banks with large silver shorts, JP Morgan Chase, is also the custodian of the SLV silver ETF. Some silver analysis has pointed to a potential conflict of interest, as close scrutiny of Comex documents reveals that ETF shares may be used to 'cover' Comex physical metal deliveries. This leads analysts to speculate that some stores of silver have multiple claims upon them. On 2008-09-25 the CFTC relented and probed the silver market after persistent complaints of foul play.^[10]

Industrial demand

The use of silver in items such as electrical appliances and medical products has increased since 2001. New applications for silver are being explored in batteries, superconductors and microcircuits, which may further increase non-investment demand. The expansion of the middle classes in emerging economies aspiring to Western lifestyles and products may also contribute to a long-term rise in industrial usage.^[11] Even so, due to the advent of digital cameras the enormous reduction in the use of silver halide-based photographic film has tended to offset this.^{[citation needed]}

[edit] Investment vehicles

[edit] Bars

A traditional way of investing in silver is by buying actual bullion bars. In some countries, like Switzerland and Liechtenstein, bullion bars can be bought or sold over the counter at major banks.
Physical silver, such as bars or coins, may be stored in a home safe, a safe deposit box at a bank, or placed in allocated (also known as non-fungible) or unallocated (fungible or pooled) storage with a bank or dealer.
Various sizes of silver bars:

• 1000 oz troy bars – These bars weigh about 68 pounds avoirdupois (31 kg) and vary about 10% as to weight, as bars range from 900 ozt to about 1,100 ozt (28 to 34 kg). These are COMEX and LBMA good delivery bars.
• 100 ozt bars – These bars weigh 6.8 pounds (3.11 kg) and are among the most popular with retail investors. Popular brands are Engelhard and Johnson Matthey. Those brands cost a bit more, usually about 40 cents to 2.00 dollars per troy ounce above the spot price, but that price may vary with market conditions.
• Odd weight retail bars – These bars cost less and generally have a wider spread, due to the extra work it takes to calculate their value and the extra risk due to the lack of a good brand name.
• 1 kilogram bars (32.15 ozt)
• 10 ozt bars and 1 ozt bars (311 and 31.1 g)

[edit] Coins and rounds

American Silver Eagle bullion coin.

Buying silver coins is another popular method of physically holding silver. One example is the 99.99% pure Canadian Silver Maple Leaf. Coins may be minted as either fine silver or junk silver, the latter being older coins with a smaller percentage of silver. U.S. coins 1964 and older (half dollars, dimes, and quarters) are 25 grams per dollar of face value and 90% silver (22½ g silver per dollar). (All 1965-1970 and one half of the 1975-1976 Bicentennial San Francisco proof and mint set Kennedy half dollars are "clad" in a silver alloy and contain just under one half of the silver in the pre-1965 issues.)
Junk-silver coins are also available as sterling silver coins, which were officially minted until 1919 in the United Kingdom and Canada and 1945 in Australia. These coins are 92.5% silver and are in the form of (in decreasing weight) Crowns, Half-crowns, Florins, Shillings, Sixpences, and threepence. The tiny threepence weighs 1.41 grams, and the Crowns are 28.27 grams (1.54 grams heavier than a US $1). Canada produced silver coins with 80% silver content from 1920 to 1967.
Other hard money enthusiasts use .999 fine silver rounds as a store of value. A cross between bars and coins, silver rounds are produced by a huge array of mints, generally contain a troy ounce of silver in the shape of a coin, but have no status as legal tender. Rounds can be ordered with a custom design stamped on the faces or in assorted batches.

[edit] Exchange-traded funds

Exchange-traded funds (or ETFs) represent a quick and easy way for an investor to gain exposure to the silver price, without the inconvenience of storing physical bars. The silver ETFs are:

• iShares Silver Trust (NYSE: SLV), launched in April 2006 by iShares.
• ETFS Silver Trust (NYSE: SIVR), launched in July 2009 by ETF Securities.
• Central Fund of Canada (TSX: CEF.NV.A, NYSE: CEF), which has 45% of its reserves held in silver with the remainder invested in gold.
• In September 2006 ETF Securities launched ETFS Silver (LSE: SLVR), which tracks the DJ-UBS Silver Sub-Index, and later in April 2007 ETFS Physical Silver (LSE: PHAG), which is backed by allocated silver bullion.
• PowerShares DB Silver (AMEX: DBS), holds its worth in futures contracts for physical delivery, which are later sold to silver consumers in order to roll over expiring contracts to contracts further from expiration.
• ProShares Ultra Silver (NYSE: AGQ), seeks daily investment results, before fees and expenses, that correspond to twice (200%) the daily performance of silver bullion as measured by the U.S. Dollar fixing price for delivery in London.

[edit] Certificates

U.S. $5 Silver Certificate.

A silver certificate of ownership can be held by investors instead of storing the actual silver bullion. Silver certificates allow investors to buy and sell the security without the difficulties associated with the transfer of actual physical silver. The Perth Mint Certificate Program (PMCP) is the only government-guaranteed silver-certificate program in the world.
The U.S. dollar has been issued as silver certificates in the past, each one represented one silver dollar payable to the bearer on demand. The notes were issued in denominations of $10, $5, and $1 and can no longer be redeemed for silver.

[edit] Accounts

Most Swiss banks offer silver accounts where silver can be instantly bought or sold just like any foreign currency. Unlike physical silver, the customer does not own the actual metal but rather has a claim against the bank for a certain quantity of metal. Many digital gold currency providers, such as GoldMoney, offer silver as an alternative to gold and work on a similar principle. Other electronic silver accounts include the eLibertyDollar and Phoenix Silver. Silver accounts are backed through unallocated or allocated silver storage. (Note: both eLibertyDollar and Phoenix Silver have shut down.)

[edit] Derivatives, CFDs and spread betting

Derivatives, such as silver futures and options, currently trade on various exchanges around the world. In the U.S., silver futures are primarily traded on COMEX (Commodity Exchange), which is a subsidiary of the New York Mercantile Exchange. In November 2006, the National Commodity and Derivatives Exchange (NCDEX) in India introduced 5 kg silver futures.^[12]
Firms such as Cantor Index, CMC Markets, IG Index and City Index, all from the UK, provide contract for difference (CFD) or spread bets on the price of silver.

[edit] Mining companies

These do not represent silver at all, but rather are shares in silver mining companies. Companies rarely mine silver alone, as normally silver is found within, or alongside, ore containing other metals, such as tin, lead, zinc or copper. Therefore shares are also a base metal investment, rather than solely a silver investment. As with all mining shares, there are many other factors to take into account when evaluating the share price, other than simply the commodity price. Instead of personally selecting individual companies, some investors prefer spreading their risk by investing in precious metal mining mutual funds.

[edit] Taxation

See also: Taxation of precious metals

In many tax regimes, silver does not hold the special position that is often afforded to gold. For example, in the European Union the trading of recognized gold coins and bullion products is VAT exempt, but no such allowance is given to silver. This makes investment in silver coins or bullion less attractive for the private investor, due to the extra premium on purchases represented by the irrecoverable VAT (charged at 17.5% in the United Kingdom and 19% for bars and 7% for bullion products with face value, e.g. US Silver Eagle and Maple Leaf, in Germany).
Other taxes such as capital gains tax may apply for individuals depending on country of residence (tax status) and whether the asset is sold at increased value.

References

1. ^ http://www.constitution.org/uslaw/coinage1792.txt
2. ^ http://www.dani2989.com/gold/goldsirverratio180027092004gb.htm
3. ^ http://www.dani2989.com/gold/ratiogoldsilvergb030105.htm
4. ^ "London Fix Historical Silver". http://www.kitco.com/charts/historicalsilver.html. 
5. ^ "London Fix Historical Gold". http://www.kitco.com/charts/historicalgold.html. 
6. ^ http://www.kitco.com/charts/livesilver.html
7. ^ http://www.mineweb.net/mineweb/view/mineweb/en/page32?oid=73294&sn=Detail
8. ^ http://www.silverinstitute.org/price/hist_priceuk.php
9. ^ http://silverbearcafe.com/private/01.09/circlek.html H.L. Hunt and the Circle K Cowboys
10. ^ http://online.wsj.com/article/SB122231175151874367.html?mod=rss_markets_main
11. ^ [1]
12. ^ [2]

 

 

 

References - Bullion Coins

1. ^ Platinum Guild: Applications Beyond Expectation
2. ^ Gold bullion facts from freegoldtips.com
3. ^ ^{a b} Aluminum: Common Metal, Uncommon Past, Chemical Heritage NewsMagazine, Winter 2007/8, Vol.27, No.4
4. ^ George J. Binczewski (1995). "The Point of a Monument: A History of the Aluminum Cap of the Washington Monument". JOM 47 (11): 20–25. http://www.tms.org/pubs/journals/JOM/9511/Binczewski-9511.html. 
5. ^ The abundance of the element, a measure for its rarity, is given in mass fraction as kg/kg in the earth's crust (CRC Handbook). David R. Lide, ed (2005). "Section 14, Geophysics, Astronomy, and Acoustics; Abundance of Elements in the Earth's Crust and in the Sea". CRC Handbook of Chemistry and Physics (85 ed.). Boca Raton, Florida: CRC Press. 
6. ^ All given prices from 10th April 2009 are taken mostly from London Metal Exchange.
7. ^ Data from 22nd of July 2009 are from the thebulliondesk.com^{[clarification needed (URL?)]} taken, except as noted.
8. ^ ^{a b c} The metal prices of gallium, germanium, and indium are taken from MinorMetals.com as examples of modern precious metals used for investment / speculation.

http://en.wikipedia.org/wiki/Precious_metal

 

Price

Gold price per troy ounce in USD since 1960, in nominal US$ and inflation adjusted in 2008 US$.

Like other precious metals, gold is measured by troy weight and by grams. When it is alloyed with other metals the term carat or karat is used to indicate the amount of gold present, with 24 carats being pure gold and lower ratings proportionally less. The purity of a gold bar or coin can also be expressed as a decimal figure ranging from 0 to 1, known as the millesimal fineness, such as 0.995 being very pure.
The price of gold is determined through trading in the gold and derivatives markets, but a procedure known as the Gold Fixing in London, originating in September 1919, provides a daily benchmark price to the industry. The afternoon fixing was introduced in 1968 to provide a price when US markets are open.
Historically gold coinage was widely used as currency; When paper money was introduced, it typically was a receipt redeemable for gold coin or bullion. In an economic system known as the gold standard, a certain weight of gold was given the name of a unit of currency. For a long period, the United States government set the value of the US dollar so that one troy ounce was equal to $20.67 ($664.56/kg), but in 1934 the dollar was devalued to $35.00 per troy ounce ($1125.27/kg). By 1961, it was becoming hard to maintain this price, and a pool of US and European banks agreed to manipulate the market to prevent further currency devaluation against increased gold demand.

Swiss-cast 1 kg gold bar

On March 17, 1968, economic circumstances caused the collapse of the gold pool, and a two-tiered pricing scheme was established whereby gold was still used to settle international accounts at the old $35.00 per troy ounce ($1.13/g) but the price of gold on the private market was allowed to fluctuate; this two-tiered pricing system was abandoned in 1975 when the price of gold was left to find its free-market level. Central banks still hold historical gold reserves as a store of value although the level has generally been declining. The largest gold depository in the world is that of the U.S. Federal Reserve Bank in New York, which holds about 3%^{[citation needed]} of the gold ever mined, as does the similarly laden U.S. Bullion Depository at Fort Knox.
In 2005 the World Gold Council estimated total global gold supply to be 3,859 tonnes and demand to be 3,754 tonnes, giving a surplus of 105 tonnes.^[69]
Since 1968 the price of gold has ranged widely, from a high of $850/oz ($27,300/kg) on January 21, 1980, to a low of $252.90/oz ($8,131/kg) on June 21, 1999 (London Gold Fixing).^[70] The period from 1999 to 2001 marked the "Brown Bottom" after a 20-year bear market.^[71] Prices increased rapidly from 1991, but the 1980 high was not exceeded until January 3, 2008 when a new maximum of $865.35 per troy ounce was set (a.m. London Gold Fixing).^[72] Another record price was set on March 17, 2008 at $1023.50/oz ($32,900/kg)(am. London Gold Fixing).^[72] In the fall of 2009, gold markets experience renewed momentum upwards due to increased demand and a weakening US dollar. On December 2, 2009, Gold passed the important barrier of US$1200 per ounce to close at $1215.^[73] Gold further rallied hitting new highs in May of 2010 after the European Union debt crisis prompted further purchase of gold as a safe asset.^[74][75]
Since April 2001 the gold price has more than tripled in value against the US dollar,^[76] prompting speculation that this long secular bear market has ended and a bull market has returned.^[77]

Symbolism

Gold bars at the Emperor Casino in Macau

Gold has been highly valued in many societies throughout the ages. In keeping with this it has often had a strongly positive symbolic meaning closely connected to the values held in the highest esteem in the society in question. Gold may symbolize power, strength, wealth, warmth, happiness, love, hope, optimism, intelligence, justice, balance, perfection, summer, harvest and the sun.
Great human achievements are frequently rewarded with gold, in the form of gold medals, golden trophies and other decorations. Winners of athletic events and other graded competitions are usually awarded a gold medal (e.g., the Olympic Games). Many awards such as the Nobel Prize are made from gold as well. Other award statues and prizes are depicted in gold or are gold plated (such as the Academy Awards, the Golden Globe Awards, the Emmy Awards, the Palme d'Or, and the British Academy Film Awards).
Aristotle in his ethics used gold symbolism when referring to what is now commonly known as the "golden mean". Similarly, gold is associated with perfect or divine principles, such as in the case of Phi, which is sometimes called the "golden ratio".
Gold represents great value. Respected people are treated with the most valued rule, the "golden rule". A company may give its most valued customers "gold cards" or make them "gold members". We value moments of peace and therefore we say: "silence is golden". In Greek mythology there was the "golden fleece".
Gold is further associated with the wisdom of aging and fruition. The fiftieth wedding anniversary is golden. Our precious latter years are sometimes considered "golden years". The height of a civilization is referred to as a "golden age".
In Christianity gold has sometimes been associated with the extremities of utmost evil and the greatest sanctity. In the Book of Exodus, the Golden Calf is a symbol of idolatry. In the Book of Genesis, Abraham was said to be rich in gold and silver, and Moses was instructed to cover the Mercy Seat of the Ark of the Covenant with pure gold. In Christian art the halos of Christ, Mary and the Christian saints are golden.
Medieval kings were inaugurated under the signs of sacred oil and a golden crown, the latter symbolizing the eternal shining light of heaven and thus a Christian king's divinely inspired authority. Wedding rings have long been made of gold. It is long lasting and unaffected by the passage of time and may aid in the ring symbolism of eternal vows before god and/or the sun and moon and the perfection the marriage signifies. In Orthodox Christianity, the wedded couple is adorned with a golden crown during the ceremony, an amalgamation of symbolic rites.
In popular culture gold holds many connotations but is most generally connected to terms such as good or great, such as in the phrases: "has a heart of gold", "that's golden!", "golden moment", "then you're golden!" and "golden boy". Gold also still holds its place as a symbol of wealth and through that, in many societies, success.

History

The Turin Papyrus Map

Funerary mask of Tutankhamun

Jason returns with the golden fleece on an Apulian red-figure calyx krater, ca. 340–330 BC.

Gold has been known and used by artisans since the Chalcolithic. Gold artifacts in the Balkans appear from the 4th millennium BC, such as that found in the Varna Necropolis. Gold artifacts such as the golden hats and the Nebra disk appeared in Central Europe from the 2nd millennium BC Bronze Age.
Egyptian hieroglyphs from as early as 2600 BC describe gold, which king Tushratta of the Mitanni claimed was "more plentiful than dirt" in Egypt.^[31] Egypt and especially Nubia had the resources to make them major gold-producing areas for much of history. The earliest known map is known as the Turin Papyrus Map and shows the plan of a gold mine in Nubia together with indications of the local geology. The primitive working methods are described by Strabo and included fire-setting. Large mines also were present across the Red Sea in what is now Saudi Arabia.
The legend of the golden fleece may refer to the use of fleeces to trap gold dust from placer deposits in the ancient world. Gold is mentioned frequently in the Old Testament, starting with Genesis 2:11 (at Havilah) and is included with the gifts of the magi in the first chapters of Matthew New Testament. The Book of Revelation 21:21 describes the city of New Jerusalem as having streets "made of pure gold, clear as crystal". The south-east corner of the Black Sea was famed for its gold. Exploitation is said to date from the time of Midas, and this gold was important in the establishment of what is probably the world's earliest coinage in Lydia around 610 BC.^[32] From the 6th or 5th century BC, the Chu (state) circulated the Ying Yuan, one kind of square gold coin.
The Romans developed new methods for extracting gold on a large scale using hydraulic mining methods, especially in Spain from 25 BC onwards and in Romania from 150 AD onwards. One of their largest mines was at Las Medulas in León (Spain), where seven long aqueducts enabled them to sluice most of a large alluvial deposit. The mines at Roşia Montană in Transylvania were also very large, and until very recently, still mined by opencast methods. They also exploited smaller deposits in Britain, such as placer and hard-rock deposits at Dolaucothi. The various methods they used are well described by Pliny the Elder in his encyclopedia Naturalis Historia written towards the end of the first century AD.
The Mali Empire in Africa was famed throughout the old world for its large amounts of gold. Mansa Musa, ruler of the empire (1312–1337) became famous throughout the old world for his great hajj to Mecca in 1324. When he passed through Cairo in July 1324, he was reportedly accompanied by a camel train that included thousands of people and nearly a hundred camels. He gave away so much gold that it depressed the price in Egypt for over a decade.^[33] A contemporary Arab historian remarked:

“	Gold was at a high price in Egypt until they came in that year. The mithqal did not go below 25 dirhams and was generally above, but from that time its value fell and it cheapened in price and has remained cheap till now. The mithqal does not exceed 22 dirhams or less. This has been the state of affairs for about twelve years until this day by reason of the large amount of gold which they brought into Egypt and spent there [...]	”
—Chihab Al-Umari[34]

The European exploration of the Americas was fueled in no small part by reports of the gold ornaments displayed in great profusion by Native American peoples, especially in Central America, Peru, Ecuador and Colombia. The Aztecs regarded gold as literally the product of the gods, calling it "god excrement" (teocuitlatl in Nahuatl).^[35]
Although the price of some platinum group metals can be much higher, gold has long been considered the most desirable of precious metals, and its value has been used as the standard for many currencies (known as the gold standard) in history. Gold has been used as a symbol for purity, value, royalty, and particularly roles that combine these properties. Gold as a sign of wealth and prestige was made fun of by Thomas More in his treatise Utopia. On that imaginary island, gold is so abundant that it is used to make chains for slaves, tableware and lavatory-seats. When ambassadors from other countries arrive, dressed in ostentatious gold jewels and badges, the Utopians mistake them for menial servants, paying homage instead to the most modestly dressed of their party.
There is an age-old tradition of biting gold to test its authenticity. Although this is certainly not a professional way of examining gold, the bite test should score the gold because gold is a soft metal, as indicated by its score on the Mohs' scale of mineral hardness. The purer the gold the easier it should be to mark it. Painted lead can cheat this test because lead is softer than gold (and may invite a small risk of lead poisoning if sufficient lead is absorbed by the biting).
Gold in antiquity was relatively easy to obtain geologically; however, 75% of all gold ever produced has been extracted since 1910.^[36] It has been estimated that all gold ever refined would form a single cube 20 m (66 ft) on a side (equivalent to 8000 m³).^[36]
One main goal of the alchemists was to produce gold from other substances, such as lead — presumably by the interaction with a mythical substance called the philosopher's stone. Although they never succeeded in this attempt, the alchemists promoted an interest in what can be done with substances, and this laid a foundation for today's chemistry. Their symbol for gold was the circle with a point at its center (☉), which was also the astrological symbol and the ancient Chinese character for the Sun. For modern creation of artificial gold by neutron capture, see gold synthesis.
During the 19th century, gold rushes occurred whenever large gold deposits were discovered. The first documented discovery of gold in the United States was at the Reed Gold Mine near Georgeville, North Carolina in 1803.^[37] The first major gold strike in the United States occurred in a small north Georgia town called Dahlonega.^[38] Further gold rushes occurred in California, Colorado, the Black Hills, Otago, Australia, Witwatersrand, and the Klondike.
Because of its historically high value, much of the gold mined throughout history is still in circulation in one form or another.

Many holders of gold store it in form of bullion coins or bars as a hedge against inflation or other economic disruptions. However, some economists do not believe gold serves as a hedge against inflation or currency depreciation.^[11]
The ISO 4217 currency code of gold is XAU.
Modern bullion coins for investment or collector purposes do not require good mechanical wear properties; they are typically fine gold at 24k, although the American Gold Eagle, the British gold sovereign, and the South African Krugerrand continue to be minted in 22k metal in historical tradition. The special issue Canadian Gold Maple Leaf coin contains the highest purity gold of any bullion coin, at 99.999% or 0.99999, while the popular issue Canadian Gold Maple Leaf coin has a purity of 99.99%. Several other 99.99% pure gold coins are available. The Australian Gold Kangaroos was first coined in 1986 as the Australian Gold Nugget. Its kangaroo theme appeared in 1989. In addition, there are several coins of the Australian Lunar Calendar series, and the Austrian Philharmonic. In 2006, the United States Mint began production of the American Buffalo gold bullion coin with a purity of 99.99%.

Gold as an investment

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For the physical properties and applications of gold, see gold.

Reserves of foreign exchange and gold

Of all the precious metals, gold is the most popular as an investment. Investors generally buy gold as a hedge or safe haven against any economic, political, social or currency-based crises. These crises include investment market declines, burgeoning national debt, currency failure, inflation, war and social unrest. Speculators also buy gold early in a bull market and aim to sell it before a bear market begins, in an attempt to gain financially.

Contents [hide] 1 Gold price 2 Factors influencing the gold price 3 Investment vehicles 3.1 Bars 3.2 Coins 3.3 Exchange-traded funds 3.4 Certificates 3.5 Accounts 3.6 Derivatives, CFDs and spread betting 3.7 Mining companies 4 Investment strategies 4.1 Fundamental analysis 4.2 Gold versus stocks 4.3 Technical analysis 4.4 Using leverage 5 Taxation 6 Scams and frauds 7 See also 8 References 9 External links

[edit] Gold price

Price of one troy ounce of gold in US Dollars 1968–2008. (Note that this graph in nominal USD terms may mislead. In real terms, the peak value was 1981 by some margin).

Gold has been used throughout history as a form of payment and has been a relative standard for currency equivalents specific to economic regions or countries. Many European countries implemented gold standards in the later part of the 19th century until these were dismantled in the financial crises involving World War I. After World War II, the Bretton Woods system pegged the United States dollar to gold at a rate of US$35 per troy ounce. The system existed until the 1971 Nixon Shock, when the US unilaterally suspended the direct convertibility of the United States dollar to gold.
Since 1919 the most common benchmark for the price of gold has been the London gold fixing, a twice-daily telephone meeting of representatives from five bullion-trading firms of the London bullion market. Furthermore, gold is traded continuously throughout the world based on the intra-day spot price, derived from over-the-counter gold-trading markets around the world. The following table sets forth the gold price versus various assets and key statistics:

Year	Gold USD/ozt[1]	DJIA USD[2]	World GDP USD tn[3]	US Debt USD bn[4]	Trade Weighted US dollar Index[5]
1970	37	839	3.3	370
1975	140	852	6.4	533	33.0
1980	590	964	11.8	908	35.7
1985	327	1,547	13.0	1,823	68.2
1990	391	2,634	22.2	3,233	73.2
1995	387	5,117	29.8	4,974	90.3
2000	273	10,787	31.9	5,662	118.6
2005	513	10,718	45.1	8,170	111.6
2008	865	8,776	54.6	10,700	96.1
1970 to 2008 net change, %
	2,238	946	1,555	2,792
1975 (post US off gold standard) to 2008 net change, %
	518	930	753	1,908	191

In March 2008, the gold price exceeded US$1,000,^[6] achieving a nominal high of US$1,004.38. In real terms, actual value was still well below the US$599 peak in 1981 (equivalent to $1417 in U.S. 2008 dollar value). After the March 2008 spike, gold prices declined to a low of US$712.30 per ounce in November. Pricing soon resumed on upward momentum by temporarily breaking the US$1000 barrier again in late February 2009 but regressed moderately later in the quarter.
After fluctuation returned near the US$1,000.00 mark in mid-September 2009, international gold markets peaked at US$1,023.30. Pricing later declined moderately again in late September 2009, falling back to US$991.70 for the week ending on September 25, 2009.
Later in 2009, the March 2008 intra-day spot price record of US$1,033.90 was broken several times in October, as the price of gold entered parabolic stages of successively new highs when a spike reversal to $1226 initiated a retrace of the price to the mid-October levels.
Financial commentator Jim Rogers predicts that gold will reach US$2000 per troy ounce without citing a time frame.^[7] Some analysts attribute this to central banks diverting their reserves away from US dollars.^[8] However, economics professor Nouriel Roubini sees another investment bubble that will burst spectacularly.^[9]

[edit] Factors influencing the gold price

Today, like all investments and commodities, the price of gold is ultimately driven by supply and demand. Unlike most other commodities, the hoarding and disposal plays a much bigger role in affecting the price, because most of the gold ever mined still exists and is potentially able to come on to the market for the right price.^[10][11] At the end of 2006, it was estimated that all the gold ever mined totaled 158,000 tonnes.^[12] This can be represented by a cube with an edge length of just 20.2 meters.
At the end of 2004 central banks and official organizations held 19 percent of all above-ground gold as official gold reserves.^[13] Given the huge quantity of gold stored above-ground compared to the annual production, the price of gold is mainly affected by changes in sentiment, rather than changes in annual production.^[14] According to the World Gold Council, annual mine production of gold over the last few years has been close to 2,500 tonnes.^[15] About 2,000 tonnes goes into jewellery or industrial/dental production, and around 500 tonnes goes to retail investors and exchange traded gold funds.^[15] This translates to an annual demand for gold to be 1,000 tonnes in excess over mine production which has come from central bank sales and other disposal.^[15]
Central banks and the International Monetary Fund play an important role in the gold price. The Washington Agreement on Gold (WAG), which dates from September 1999, limits gold sales by its members (Europe, United States, Japan, Australia, Bank for International Settlements and the International Monetary Fund) to less than 400 tonnes a year.^[16] European central banks, such as the Bank of England and Swiss National Bank, have been key sellers of gold over this period.^[17] Although central banks do not generally announce gold purchases in advance, some, such as Russia, have expressed interest in growing their gold reserves again as of late 2005.^[18] In early 2006, China, which only holds 1.3% of its reserves in gold,^[19] announced that it was looking for ways to improve the returns on its official reserves. Some bulls hope that this signals that China might reposition more of its holdings into gold in line with other Central Banks. India has recently purchased over 200 tons of gold which has led to a surge in prices.^[20]

Bank failures

When dollars were fully convertible into gold, both were regarded as money. However, most people preferred to carry around paper banknotes rather than the somewhat heavier and less divisible gold coins. If people feared their bank would fail, a bank run might have been the result. This is what happened in the USA during the Great Depression of the 1930s, leading President Roosevelt to impose a national emergency and to outlaw the ownership of gold by US citizens.^[21]

Low or negative real interest rates

If the return on bonds, equities and real estate is not adequately compensating for risk and inflation then the demand for gold and other alternative investments such as commodities increases. An example of this is the period of Stagflation that occurred during the 1970s and which led to an economic bubble forming in precious metals.^[22][23]

War, invasion, looting, crisis

In times of national crisis, people fear that their assets may be seized and that the currency may become worthless. They see gold as a solid asset which will always buy food or transportation. Thus in times of great uncertainty, particularly when war is feared, the demand for gold rises.^[24][25]

[edit] Investment vehicles

[edit] Bars

One troy ounce gold bar with certificate

The most traditional way of investing in gold is by buying bullion gold bars. In some countries, like Argentina, Austria, Liechtenstein and Switzerland, these can easily be bought or sold "over the counter" of the major banks. Alternatively, there are bullion dealers that provide the same service. Bars are available in various sizes, for example in Europe these would typically be in 12.5kg or 1kg bars (1kg = 32.15072 Troy ounces), although many other weights exist, such as the Tael, 10oz, 1oz bar, 10g, or 1 Tola.
Gold bars can be held either directly (i.e. held directly by you or in your own safe) or indirectly (held in a safe deposit box or bank vault on your behalf). Because of the many difficulties of transporting, storing and verifying pure gold bars, an increasingly popular method of investing in gold bars for the small investor is via allocated holdings using a gold account - see 'Accounts' below.
Bars are increasing in popularity as investment vehicles, as they carry lower premiums than gold bullions. It is estimated that the premiums on kilo gold bars can be at least $50 per ounce less than the premiums on bars such as the American Gold Eagles.
Gold bars for sale include 1-oz gold bars, 10-oz gold bars, kilo gold bars, and 100-gram gold bars. All these gold bars are .9999 fine (99.99 pure.). ^[26] It seems that the gold bars are primarily sold as kilo bars rather than 1-oz gold bars, due to the fact that they are much easier to store.
Kilo gold bars are .9999 fine (99.99% pure) and contain 32.15 troy ounces each. The most commonly available kilo gold bars are the PAMP and the Royal Canadian Mint (RCM) gold bars. PAMP kilo gold bars usually come with certificates. RCM bars do not come with either protective cases or certificates. ^[27] The PAMP certificate actually consists of the PAMP hallmark on the gold bars.

[edit] Coins

Buying gold coins is a popular way of holding gold. Typically bullion coins are priced according to their weight, plus a premium above the gold spot price. Again, the large Swiss and Liechtenstein banks buy and sell these coins over the counter.
One of the most popular gold coins is the American Eagle bullion coin, which is guaranteed by the United States Government and has been in circulation for over 300 years. The American Eagle coins contain a stated amount of pure gold and are made in four denominations, by the Department of Treasury.
The standard gold eagle coins have a fineness of 0.916 and have a face value of $50. The actual gold content of these coins is 1.0 troy ounce (31.103 grs). These US gold eagle coins are also minted in ½, ¼ and 1/10 ounce sizes. ^[28]

[edit] Exchange-traded funds

Gold exchange-traded funds (or GETFs) are traded like shares on the major stock exchanges including London, New York and Sydney. The first gold ETF, Gold Bullion Securities (ticker symbol "GOLD"), was launched in March 2003 on the Australian Stock Exchange, and originally represented exactly one-tenth of an ounce of gold.
Gold ETFs represent an easy way to gain exposure to the gold price, without the inconvenience of storing physical bars. Typically a small commission is charged for trading in gold ETFs and a small annual storage fee is charged. The annual expenses of the fund such as storage, insurance, and management fees are charged by selling a small amount of gold represented by each certificate, so the amount of gold in each certificate will gradually decline over time.
Exchange-traded funds, or ETFs, are investment companies that are legally classified as open-end companies or Unit Investment Trusts (UITs), but that differ from traditional open-end companies and UITs. ^[29] The main differences are that ETFs do not sell directly to investors and they issue their shares in what are called "Creation Units" (large blocks such as blocks of 50,000 shares). Also, the Creation Units may not be purchased with cash but a basket of securities that mirrors the ETF's portfolio. Usually, the Creation Units are split up and re-sold on a secondary market.
ETF shares can be sold in basically two ways. The investors can sell the individual shares to other investors, or they can sell the Creation Units back to the ETF. In addition, ETFs generally redeem Creation Units by giving investors the securities that comprise the portfolio instead of cash. Because of the limited redeemability of ETF shares, ETFs are not considered to be and may not call themselves mutual funds. ^[30]

[edit] Certificates

A certificate of ownership can be held by gold investors, instead of storing the actual gold bullion. Gold certificates allow investors to buy and sell the security without the inconvenience associated with the transfer of actual physical gold.
Gold certificates may be described as the first paper bank notes. They were first issued in the 17th century when they were used by goldsmiths in England and The Netherlands for customers who kept deposits of gold bullion into their safe-keeping. Two centuries later, the gold certificates began being issued in the United States when the US Treasury issued such certificates that could be exchanged for gold. The United States Government first authorized the use of the gold certificates in 1863. In the early 1930s the US Government restricted the private gold ownership in the United States and therefore, the gold certificates stopped circulating as money. Nowadays, gold certificates are still issued by gold pool programs in Australia and the United States, as well as by banks in Germany and Switzerland.

[edit] Accounts

Most Swiss banks offer gold accounts where gold can be instantly bought or sold just like any foreign currency. Digital gold currency accounts and the BullionVault gold exchange work on a similar principle. Gold accounts are typically backed through unallocated (fungible or pooled) or allocated (also known as non-fungible) gold storage. Different accounts impose varying levels of intermediation between the client and their gold, for example through bailment or within a trust. Bailment is the legal action of a client entrusting their physical property to another party for safekeeping, and paying for the service.

[edit] Derivatives, CFDs and spread betting

Derivatives, such as gold forwards, futures and options, currently trade on various exchanges around the world and over-the-counter (OTC) directly in the private market. In the U.S., gold futures are primarily traded on the New York Commodities Exchange (COMEX), a division of the New York Mercantile Exchange (NYMEX), and NYSE Liffe US. In India, gold futures are traded on the National Commodity and Derivatives Exchange (NCDEX) and Multi Commodity Exchange (MCX).^[31]
Firms such as Cantor Index, CMC Markets, IG Index and City Index, all from the UK, provide contract for difference (CFD) or spread bets on the price of gold.

[edit] Mining companies

These do not represent gold at all, but rather are shares in gold mining companies. If the gold price rises, the profits of the gold mining company could be expected to rise and as a result the share price may rise. However, there are many factors to take into account and it is not always the case that a share price will rise when the gold price increases.
Unlike gold bullion, which is regarded as a safe haven asset, unhedged gold shares or funds are regarded as high risk and extremely volatile. This volatility is due to the inherent leverage in the mining sector. For example, if you own a share in a gold mine where the costs of production are $300 per ounce and the price of gold is $600, the mine's profit margin will be $300. A 10% increase in the gold price to $660 per ounce will push that margin up to $360, which actually represents a 20% increase in the mine's profitability, and potentially a 20% increase in the share price. Conversely, a 10% fall in the gold price to $540 will decrease that margin to $240, which actually represents a 20% fall in the mine's profitability, and potentially a 20% decrease in the share price. The amplification of gold mining profits during periods of rising prices can cause a gold rush in mining exploration.
To reduce this volatility, many gold mining companies hedge the gold price up to 18 months in advance. This provides the mining company and investor with less exposure to short term gold price fluctuations, but reduces potential returns when the gold price is rising.

[edit] Investment strategies

[edit] Fundamental analysis

Investors using fundamental analysis analyze the macroeconomic situation, which includes international economic indicators, such as GDP growth rates, inflation, interest rates, productivity and energy prices. They would also analyze the yearly global gold supply versus demand. Over 2005 the World Gold Council estimated yearly global gold supply to be 3,859 tonnes and demand to be 3,754 tonnes, giving a surplus of 105 tonnes.^[32] While gold production is unlikely to change in the near future, supply and demand due to private ownership is highly liquid and subject to rapid changes. This makes gold very different from almost every other commodity.^[10][11] Identifiable investment demand for gold, which includes gold exchange-traded funds, bars and coins, was up 64 percent in 2008 over the year before.^[33]

[edit] Gold versus stocks

Dow/Gold Ratio 1968-2008

In the last century, major economic crises (such as the Great Depression, World War II, the first and second oil crisis) lowered the Dow/Gold ratio, an indicator of how bad a recession is and whether the outlook is deteriorating or improving, to a value well below 4. The ratio fell on February 18, 2009 to below 8.^[33] During these difficult times, many investors tried to preserve their assets by investing in precious metals, most notably gold and silver.
The performance of gold bullion is often compared to stocks due to their fundamental differences. Gold is regarded by some as a store of value (without growth) whereas stocks are regarded as a return on value (i.e., growth from anticipated real price increase plus dividends). Stocks and bonds perform best in a stable political climate with strong property rights and little turmoil. The attached graph shows the value of Dow Jones Industrial Average divided by the price of an ounce of gold. Since 1800, stocks have consistently gained value in comparison to gold in part because of the stability of the American political system.^[34] This appreciation has been cyclical with long periods of stock outperformance followed by long periods of gold outperformance. The Dow Industrials bottomed out a ratio of 1:1 with gold during 1980 (the end of the 1970s bear market) and proceeded to post gains throughout the 1980s and 1990s. The gold price peak of 1980 also coincided with the Soviet Union's invasion of Afghanistan and the threat of the global expansion of communism. The ratio peaked on January 14, 2000 a value of 41.3 and has fallen sharply since.
On November 30, 2005, Rick Munarriz of The Motley Fool posed the question of which represented a better investment: a share of Google or an ounce of gold. The specific comparison between these two very different investments seems to have captured the imagination of many in the investment community and is serving to crystallize the broader debate.^[35][36] At the time of writing, a share of Google's stock was $405 and an ounce of gold was one day from breaking the $500 barrier, which it did December 1. On January 4, 2008 23:58 New York Time, it was reported that an ounce of gold outpaced the share price of Google by 30.77%, with gold closing at $859.19 per ounce and a share of Google closing at $657 on U.S. market exchanges. On January 24, 2008, the gold price broke the $900 mark per ounce for the first time. The price of gold topped $1,000 an ounce for the first time ever on March 13, 2008 amid recession fears in the United States.^[37] Google closed 2008 at $307.65 while gold closed the year at $866. Leading into 2010, Google had doubled off that (100%), whereas gold had risen 40%.

[edit] Technical analysis

As with stocks, gold investors may base their investment decision partly on, or solely on, technical analysis. Typically, this involves analyzing chart patterns, moving averages, market trends and/or the economic cycle in order to speculate on the future price.

[edit] Using leverage

Bullish investors may choose to leverage their position by borrowing money against their existing assets and then purchasing gold on account with the loaned funds. Leverage is also an integral part of buying gold derivatives and unhedged gold mining company shares (see gold mining companies). Leverage or derivatives may increase investment gains but also increases the corresponding risk of capital loss if/when the trend reverses.

[edit] Taxation

See also: Taxation of precious metals

Gold maintains a special position in the market with many tax regimes. For example, in the European Union the trading of recognised gold coins and bullion products are free of VAT. Silver, and other precious metals or commodities, do not have the same allowance. Other taxes such as capital gains tax may also apply for individuals depending on their tax residency. U.S. citizens may be taxed on their gold profits at 15, 23, 28 or 35 percent, depending on the investment vehicle used.^[38]

[edit] Scams and frauds

Gold attracts its fair share of fraudulent activity. Some of the most common to be aware of are:

• High-yield investment programs - HYIPs are usually just pyramid schemes dressed up with no real value underneath. Using gold in their prospectus makes them seem more solid and trustworthy.
• Advance fee fraud - Various emails circulate on the Internet for buyers or sellers of up to 10,000 metric tonnes of gold. This is more gold than the US Federal Reserve owns. Often naive middlemen are drafted in as hopeful brokers, and usually mention mythical terms like 'Swiss Procedure' or 'FCO' (Full Corporate Offer). The end-game of these scams is unknown, but they probably just attempt to extract a small 'validation' sum out of the innocent buyer/seller from their hope of getting the big deal.^[39]
• Gold dust sellers - This scam persuades an investor there is real gold with a trial quantity, then eventually delivers brass filings or similar.
• Counterfeit gold coins.
• Shares in fraudulent mining companies with no gold reserves, or potential of finding gold,^[40] as per the American saying, attributed to Mark Twain but unsourced, that "A gold mine is a hole in the ground with a liar on top."^[41]

Production

Main articles: Gold prospecting, Gold mining, and Gold extraction

World gold production trend

Gold output in 2005

The entrance to an underground gold mine in Victoria, Australia

Pure gold precipitate produced by the aqua regia refining process

Gold extraction is most economical in large, easily mined deposits. Ore grades as little as 0.5 mg/kg (0.5 parts per million, ppm) can be economical. Typical ore grades in open-pit mines are 1–5 mg/kg (1–5 ppm); ore grades in underground or hard rock mines are usually at least 3 mg/kg (3 ppm). Because ore grades of 30 mg/kg (30 ppm) are usually needed before gold is visible to the naked eye, in most gold mines the gold is invisible.
Since the 1880s, South Africa has been the source for a large proportion of the world's gold supply, with about 50% of all gold ever produced having come from South Africa. Production in 1970 accounted for 79% of the world supply, producing about 1,000 tonnes. However by 2007 production was just 272 tonnes. This sharp decline was due to the increasing difficulty of extraction, changing economic factors affecting the industry, and tightened safety auditing. In 2007 China (with 276 tonnes) overtook South Africa as the world's largest gold producer, the first time since 1905 that South Africa has not been the largest.^[46]
The city of Johannesburg located in South Africa was founded as a result of the Witwatersrand Gold Rush which resulted in the discovery of some of the largest gold deposits the world has ever seen. Gold fields located within the basin in the Free State and Gauteng provinces are extensive in strike and dip requiring some of the world's deepest mines, with the Savuka and TauTona mines being currently the world's deepest gold mine at 3,777 m. The Second Boer War of 1899–1901 between the British Empire and the Afrikaner Boers was at least partly over the rights of miners and possession of the gold wealth in South Africa.
Other major producers are the United States, Australia, Russia and Peru. Mines in South Dakota and Nevada supply two-thirds of gold used in the United States. In South America, the controversial project Pascua Lama aims at exploitation of rich fields in the high mountains of Atacama Desert, at the border between Chile and Argentina. Today about one-quarter of the world gold output is estimated to originate from artisanal or small scale mining.^[47]
After initial production, gold is often subsequently refined industrially by the Wohlwill process which is based on electrolysis or by the Miller process, that is chlorination in the melt. The Wohlwill process results in higher purity, but is more complex and is only applied in small-scale installations.^[48][49] Other methods of assaying and purifying smaller amounts of gold include parting and inquartation as well as cupellation, or refining methods based on the dissolution of gold in aqua regia.^[50]
At the end of 2006, it was estimated that all the gold ever mined totaled 158,000 tonnes^[51] and its January 2009 issue, National Geographic magazine writes: "In all of history, only 161,000 tons of gold have been mined, barely enough to fill two Olympic-size swimming pools."^[1] This can be represented by a cube with an edge length of about 20.28 meters. The value of this is very limited; at $1000 per ounce, 161,000 tons of gold would have a value of only 5.2 trillion dollars.
The average gold mining and extraction costs were about US$317/oz in 2007, but these can vary widely depending on mining type and ore quality; global mine production amounted to 2,471.1 tonnes.^[52]
Gold is so stable and so valuable that it is always recovered and recycled. There is no true consumption of gold in the economic sense; the stock of gold remains essentially constant while ownership shifts from one party to another.^[53]

Digital gold currency

Digital gold currency (or DGC) is a form of electronic money based on ounces of gold. It is a kind of representative money, like a US paper gold certificate at the time (from 1873 to 1933) that these were exchangeable for gold on demand. The typical unit of account for such currency is the gold gram or the troy ounce, although other units such as the gold dinar are sometimes used. DGCs are backed by gold through unallocated or allocated gold storage.
Digital gold currencies are issued by a number of companies, each of which provides a system that enables users to pay each other in units that hold the same value as gold bullion. These competing providers issue independent currency, which normally carries the same name as their company. In terms of the most popular providers, e-gold has the greatest number of users and GoldMoney holds the greatest quantity of bullion as of 2007.^{[dated info][citation needed]}

Contents [hide] 1 Features 1.1 Universal currency 1.2 Asset protection 1.3 Bullion investing 1.4 Exchanging national currency 1.5 Non-reversible transactions 2 Risks 2.1 Management and political risks 2.1.1 OS-Gold, Standard Reserve and INTGold 2.1.2 e-gold and 1mdc 2.1.3 e-Bullion 2.2 Data security 2.3 Exchange risk 3 Providers 4 Criticisms 5 Cultural references 6 See also 7 References 8 External links

[edit] Features

[edit] Universal currency

Proponents claim that DGC offers a truly global and borderless world currency system which is independent of exchange rate variations and political manipulation. Gold, silver, platinum and palladium each have recognized international currency codes under ISO 4217. In addition to digital gold currency, GoldMoney and eLibertyDollar also provide digital currency backed by silver.

[edit] Asset protection

Unlike fractional-reserve banking, DGCs (such as e-gold and GoldMoney) hold 100% of clients' funds in reserves with a store of value. Proponents of DGC systems contend that deposits are protected against inflation, devaluation and other possible economic risks inherent in fiat currencies. These risks include the monetary policy of countries or territories, which are perceived by proponents to be harmful to the value of paper currency.

[edit] Bullion investing

Main articles: Gold as an investment and Silver as an investment

For example, GoldMoney is accessible and approved for U.S. self-directed Individual Retirement Accounts through The Entrust Group^[1].
All of the other digital gold currency systems can be used to buy, hold, and sell precious metals, but do not promote themselves as an "investment", as this implies an anticipated return.

[edit] Exchanging national currency

Some providers, like e-gold, Pecunix, Liberty Reserve do not sell DGC directly to clients. For those DGCs, e-currency must be bought and sold via a digital currency exchanger such as GoldNow or London Gold Exchange.
Currency exchangers accept payment in national currencies by a variety of methods, including Bank Wire, Direct Deposit, Cheque, Money Order. Some exchangers also sell and fund pre-paid debit cards to make it easier for their clientele to convert DGC into an easily spendable form of national currency.
According to the DGC issuers^[who?] that do not directly sell DGC to clients, this keeps their system free of any exchange risk, which is instead taken by the independent exchange providers.^{[citation needed]} DGCs are known as private currency as they are not issued by governments.

[edit] Non-reversible transactions

Unlike the credit card industry, DGC issuers generally do not bundle services such as repudiation. Thus having transactions involuntarily reversed, even in case of a legitimate error, unauthorized spend, or failure of a vendor to supply goods is not possible. In this respect, a DGC spend is more akin to a cash transaction while PayPal transfers, for example, could be considered more similar to credit card transactions.
The advantage of this arrangement is that the operating costs of the digital currency system are greatly reduced by not having to resolve payment disputes. Additionally, it allows DGC transactions to clear instantly making the funds immediately available to the recipient. By contrast credit cards, checks, ACH and other reversible payment methods generally have a "clearing time" of 72 hours or more.
The lack of payment repudiation in DGCs leaves an opportunity for third-parties to provide payment escrow services to buyers and sellers in untrusted environments, such as internet auction websites.

[edit] Risks

As with all financial media, there are several types of risk inherent to the use of DGCs: management risk, political risk, data security and exchange risk.

[edit] Management and political risks

DGCs, like all financial institutions and public securities, have a layer of risk in the form of the management of the issuing institution. Controls aimed to limit management risk are called "governance".
GoldMoney is the only DGC that is a government registered and financially regulated money service business.^[2] All other DGC providers operate under self-regulation. DGC providers are not banks and therefore not subject to many bank regulations that pertain to fractional reserve lending. However, DGCs do provide a method for transferring currency from one person to another, and therefore may fall under regulations pertaining to money transmitting in various jurisdictions.
The Global Digital Currency Association (GDCA), which was founded in 2002, is a non-profit association of online currency operators, exchangers, merchants and users. The GDCA is an example of the DGC industry's attempt at self-regulation. On their website they claim their goal is to "further the interests of the industry as a whole and help with fighting fraud and other illegal activities, arbitrate disputes and act as escrow agent when and where required."^[3] Of the current DGC providers, Pecunix, Liberty Reserve and eight others have become members of the association. It costs one gram of gold to file a complaint if you are not a member, and the list of filable complaints is not exhaustive. Their domain name is registered anonymously through domains by proxy, see whois.

[edit] OS-Gold, Standard Reserve and INTGold

Several companies claiming to be Digital Gold Currencies sprang up and failed between 1999 and 2004, such as OS-Gold^[4], Standard Reserve^[5] and INTGold^[6]. All these companies failed because the principals diverted deposits for other purposes instead of holding them in the form of gold. In each of these cases, account holders lost several million dollars worth of gold when the "institution" failed.

[edit] e-gold and 1mdc

Following April 27, 2007, the United States Department of Justice forced e-gold to liquidate some 10 to 20 million dollars worth of e-gold, and is attempting to bring a case against e-gold.^[7] e-gold has committed to counter what its founders have declared to be groundless allegations.^[8]
1mdc was backed by e-gold, so events that affected e-gold also affected 1mdc. Once e-gold Ltd. was instructed by the US government to freeze and liquidate all 1mdc accounts, 1mdc became insolvent by default along with all other e-gold accounts seized in the April 27 action.
The indictment and gold seizure by the Justice Department led to a run on e-gold, as many account holders liquidated, the largest being the court-ordered liquidation of Omnipay's entire gold balance. Defenders of e-gold argue the fact that e-gold was able to satisfy the court order to liquidate the gold and fill all the liquidation orders of account holders is strong evidence that their governance system works.^{[citation needed]}

[edit] e-Bullion

As of August 2008 Jim Fayed of e-Bullion is in United States Federal custody where he faces felony charges of conducting unlicensed money transactions and the murder of his business partner. As of January 2010 e-Bullion is closed for business and the website unavailable.

[edit] Data security

Digital Gold Systems are completely dependent on electronic storage and transmission of account ownership information. Therefore the security of a given digital currency account is dependent upon the security of the Issuer as well as the security of the Account Holder's computer.
While the Digital Gold Issuers employ data security experts to protect their systems, the average account holder's computer is poorly protected against malware (trojans, worms, and viruses) that can be used to intercept information that could be used to access the user's DGC account. Therefore the most common attacks on digital currency systems are directed against account holder's computer through the use of malicious spam, phishing and other methods.
Issuers have taken quite different approaches to this problem. E-gold basically places the entire responsibility on the shoulders of the user, and uses a user-name and password authentication system that is weak and highly vulnerable to interception by malware. (Though it is the most common authentication method used by online banks.) The "not our problem" approach to user security has negatively contributed to e-gold's public image, as not a few e-gold accounts have been hacked and swept clean by attackers.
e-Bullion offers account holders a "Cryptocard" security token that changes the passphrase with each logon, but charges the account holder USD $99.50 for the token. E-bullion does not require customers to use the Cryptocard, so account holders who choose not to get one may suffer from the same security issues as e-gold customers.
GoldMoney allows the user to login with user-name and passphrase, but sends an email with a unique personal identification number (PIN) that the user must enter in the form to complete the transaction. This reduces the likelihood of a successful attack because the attacker must gain control of the user's email account in addition to his login information, and must further prevent the user from receiving the email with the PIN, which would alert the user that someone is attempting to transfer gold out of his holding.
Pecunix devised a unique rotating key system that provides many of the benefits of a security token without requiring the user to buy one. Pecunix also supports the use of PGP signatures to access an account, which is probably the strongest of all authentication methods.

[edit] Exchange risk

Digital gold currency is a form of representative money as it directly represents gold metal on deposit or in custody^[9], and denominated in units of mass (grams or troy ounces). Just as the exchange rates of national currencies fluctuate against each other, the exchange rates of DGCs fluctuate against national currencies, which is reflected by the price of gold in a particular currency. This creates exchange risk for any account holder, in the same way one would experience exchange risk by holding a bank account in a foreign currency.
Some DGC holders make use of the digital currency for daily monetary transactions, even though most of their normal income and expenses are denominated in the national currency of their home country. Fluctuations in the value of gold against their national currency can create some confusion and difficulty for new users as they see the "value" of their DGC account fluctuate in terms of their native currency.
In contrast to exchange risk, caused by gold's fluctuation against national currency, the purchasing power of gold (and therefore DGCs) is measured by its fluctuation against other commodities, goods and services. Since gold has historically been the refuge of choice in times of inflation or economic hardship, the purchasing power of gold becomes stronger during times of negative sentiment in the markets^[10]. Due to this speculative interference, there are times when purchasing power has also declined. For example, in 2007–2008, gold volatility closely tracked the run-up in oil prices.^[11]

[edit] Providers

This section does not cite any references or sources. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. (May 2009)

Comparison of DGCs (as of January 2007^[update]):

Digital gold currency	Date founded	Financially regulated	GDCA member	Bullion stored	Number of user accounts	DCE transfers accepted	Wire transfers accepted	Annual storage fee	Processing fee (when receiving from another user)
c-gold	2007	N	Y	1,367 oz gold (as of June 5th 2008[update])	11,669	Y	N	1%	1 - 5% (with min. 5% plus 0.0002 grams - max. 0.05 grams)[citation needed]
e-dinar	2000	N	N	Undisclosed	Undisclosed	N	Y	1%	1% (with max. 0.015 gold dinar)
e-gold	1996	N	N	111,779 oz gold, 138,567 oz silver, 400 oz platinum, 396 oz palladium	3,571,496	Y	N	1%	1 - 5% (with min. 5% plus 0.0002 gold grams - max. 0.05 gold grams)
GoldExchange	2006	N	N	Undisclosed	Undisclosed	N	Y	1%	$0.35 USD[citation needed]
GoldMoney	2001	Y	N	427,221 oz gold, 15,802,907 oz silver	13,316	N	Y	0.15 - 0.18%	1% (with min. 0.01 - max. 0.1 gold grams)
Liberty Reserve	2005	N	Y	Undisclosed	Undisclosed	Y	N	0%	1% (min. $0.01 - max. $0.25 USD)[citation needed]
Pecunix	2002	N	Y	2,375 oz gold	Undisclosed	Y	N	0%	0.15 - 0.50% (with min. 0.0001 - max. 3.0 gold grams)[citation needed]
SupraGold	2006	N	N	7,531 oz gold	1,533	Y	N	1%	5% + AUG 0.0002, up to AUG 0.75[citation needed]
VirtualGold	2006	N	N	Undisclosed	Undisclosed	N	Y	0%	1% (with min. $0.10 - max. $2.00 USD)[citation needed]

[edit] Criticisms

 

DGC providers and exchangers have been accused of being a medium for fraudulent high-yield investment program (HYIP) schemes. In January 2006, BusinessWeek reported that ShadowCrew, an online gang, used the e-gold system in a massive identity theft and fraud scheme.^[12] Traditional banks are also used frequently for such fraud. Allegations that e-gold is a safe medium for crime and fraud are strongly denied by its Chairman and founder, Dr. Douglas Jackson.^[13]
Many DGC providers do not disclose the amount of bullion stored (see table), or do not allow independent external bullion audits, raising concerns that such companies do not maintain a 100% reserve ratio, or that their currency is entirely virtual and not backed by physical gold at all.

Digital currency exchanger

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Digital currency exchangers (DCEs, independent exchange providers or e-currency exchangers) are market makers which exchange fiat currency for electronic money, such as digital gold currency (DGC), and/or convert one type of digital currency (DC) into another, such as Liberty Reserve into pecunix. Exchangers apply either a commission or bid/offer spread to transactions.
Some digital gold currency accounts, such as e-gold, do not provide an in-house service to purchase their private currency so it is necessary to use a third-party digital currency exchanger. According to e-gold's website the reason they do not provide an in-house exchange service is so there can be no debt or contingent liabilities associated with the business, making e-gold Ltd. absolutely free of any financial risk. They claim e-gold Ltd. does not possess currency of any nation or even have a bank account.

Contents [hide] 1 Risks 2 Exchangers 3 Regulatory issues 4 See also 5 External links

[edit] Risks

There are no specific financial regulations governing DCEs, so they operate under self-regulation. However the Global Digital Currency Association (GDCA), founded in 2002, are a non-profit association of online currency operators, exchangers, merchants and users. On their website they claim their goal is to "further the interests of the industry as a whole and help with fighting fraud and other illegal activities, arbitrate disputes and act as escrow agent when and where required." [1] GDCA is a privately owned organization and not an association of its members per se. Its views and opinions are highly subjective. It is completely irrelevant whether or not any of the exchange companies are members of GDCA.^{[citation needed]}
It is possible for clients to purchase DGC by credit card, and therefore receive consumer protection from their credit card company. Various exchangers offer this service, although the exchange fees are typically higher than using a wire transfer. [2]

[edit] Exchangers

Comparison of Digital Currency Exchangers (DCEs) as of 18 April 2010:

Digital Currency Exchanger	Year founded	GDCA member	Telephone	Telefax	email	Digital currencies (DC) accepted	Fiat currencies accepted	Fee buying DC	Fee selling DC	Fee exchanging DC to DC
e-forexgold.com	2000					7	any	2–5%	2–7.5%	3–7.5%
PlanetWM.com	2009					7	3	1–5%	1–5%	1–8%
Money Central Market	2007					2	3	2.99%-4.99%	4.99%-6.99%	0–5%
CurrEx	2007					3	0	N/A	N/A	0–5%
SaveChange.ru	2007					5	0	3%–5%	5%	0–5%
Euro Gold Sales	2004					2	3	2.5%–4%%	1.9%	N/A
ExchEngine	2004					5	?	?	?	?
GoldExchange.eu	2005					3	2	1.9–2.9%	1.9%	N/A
ecardone.com	2009					3	2	1.9–2.9%	4.0%	-5%+5%
GoldNow	1999					4	9	5%	5%	5%
goldtotem	2005					4	3	3–5%	0.75–1.5%	1.5–3%
IntlExchange.com	2005					9	10	2%	1%	1.5%
citichanger.com	2010					5	5	US$2.00	US$2.00	US$2.00
NetPay	2001					?	?	?	?	?
ROBOXchange	2002					14	0	N/A	N/A	1–5%
SpeedyExchange	2003		(answerphone)			7	3	8–13%	1.5–9%	0.3–4.4%
Webmoney.co.nz	2004					3	1	5–7%	3%	0–5%
Wm-center.com	2005					11	3	1.5–6%	1–8%	0–10%

[edit] Regulatory issues

In September 2004 several Australian based e-gold currency exchangers voluntarily ceased operation as they did not hold an Australian Financial Services licence (AFSL) [3]. Australian based DCEs that elected to close, due to the Australian Securities and Investments Commission (ASIC) licencing requirements, included:

• goldex.net
• sydneygoldsales.com
• ozzigold.com

In July 2006 Gold Age was closed down by US government authorities following the arrest of the owners, Arthur Budovsky and Vladimir Kats, on account of not having a New York state "money transmitters" licence.
In April 2007, the US government ordered e-gold administration to lock/block approximately 58 e-gold accounts, owned and used by The Bullion Exchange, AnyGoldNow, IceGold, GitGold, The Denver Gold Exchange, GoldPouch Express, 1MDC (a Digital Gold Currency, based on e-gold), and others, and forced G&SR (owner of OmniPay) to liquidate the seized assets [4]. In addition, a few weeks later, e-gold themselves were indicted with 4 indictments. However, e-gold are still in business, and are growing at the rate of approximately 95,000 new accounts per month [5]. Here is the DoJ release [6] and here is the rebuttal by Douglas Jackson, CEO [7].
In July 2008, Webmoney changed its rules, that affected many exchangers. Since that time it became prohibited to exchange Webmoney to most popular e-currencies like e-Gold, Liberty Reserve and others: https://newsblog.wmtransfer.com/asp/messages.asp?date=2008-7-23&blogID=6


http://en.wikipedia.org/wiki/Digital_currency_exchanger

Gold exchange-traded fund

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A Gold Exchange-Traded Product (or GETP) is an Exchange-Traded Product (ETP) that aims to track the price of gold. Gold Exchange-Traded Products are traded on the major stock exchanges including Zurich, Mumbai, London, Paris and New York. Gold ETPs are offered in various forms in different countries, including trusts, certificates, notes and funds. There is little economic difference between these formats – the most significant differentiating feature is that some of these products are backed by physical gold and others are not. As of October 2009, gold ETPs held 1,750 tonnes of gold in total for private and institutional investors.^[1]

Contents [hide] 1 History 2 Fees 3 Products 3.1 Exchange Traded Gold 3.2 iShares COMEX Gold Trust 3.3 ZKB Gold ETF 3.4 Central Fund of Canada and Central Gold Trust 3.5 ETFS Gold, ETFS Physical Gold and ETFS Physical Swiss Gold 3.6 Gold Benchmark Exchange Traded Scheme 3.7 UTI Gold Exchange Traded Fund 3.8 Gold-Price-Linked Exchange Traded Fund 3.9 PowerShares DB Gold ETF and ETNs (PowerShares/Deutsche Bank) 3.10 Julius Bär Physical Gold Fund 3.11 Claymore Gold Bullion Trust 3.12 Source T-ETCs and P-ETCs 4 See also 5 References 6 External links

[edit] History

The idea of a gold ETF was first officially conceptualised by Benchmark Asset Management Company Private Ltd in India when they filed a proposal with the SEBI in May 2002. However it did not receive regulatory approval at first and was only launched later in March 2007.^[2]
The first gold exchange-traded fund actually launched was in March 2003 on the Australian Stock Exchange under Gold Bullion Securities (ticker symbol "GOLD"). Gold Bullion Securities (GBS) are fully backed by gold which is both deposited and insured. GBS was launched to give financial institutions and private investors the ability to own gold and gain exposure to the price, without the inconvenience of storing physical bars or opening a futures trading account. Investors now have a wide range of gold backed, exchange traded products to choose from, and there is increasing differentiation in terms of fees (see below)

[edit] Fees

Typically a commission of 0.4% is charged for trading in gold ETFs and an annual storage fee is charged. U.S. based transactions are a notable exception, where most brokers charge only a small fraction of this commission rate. The annual expenses of the fund such as storage, insurance, and management fees are charged by selling a small amount of gold represented by each certificate, so the amount of gold in each certificate will gradually decline over time. In some countries, gold ETFs represent a way to avoid the sales tax or the VAT which would apply to physical gold coins and bars.
Until recently, the annual charge for most gold products was in the range of 0.40% per annum, and there was little competition amongst product providers in terms of price. Recently, however, Source has launched a gold backed product on the London Stock Exchange with an annual fee of 0.29%. ^[3]
In the United States sales of a gold ETF are treated as sales of the underlying commodity and thus are taxed at the 28% capital gains rate rather than the 15% long-term capital gains rate for non-collectibles.^[4]

[edit] Products

[edit] Exchange Traded Gold

Following the launch of Gold Bullion Securities on 28 March 2003 in Australia, a number of associated GETPs were soon launched on other stock exchanges. These GETPs are grouped under the name Exchange Traded Gold.^[5]
Exchange Traded Gold securities are listed on multiple exchanges worldwide, including:

• Germany, Netherlands, Italy, Belgium, UK, France
  
  • ETF Securities "Gold Bullion Securities" (previously marketed by Lyxor Asset Management) (LSE: GBS, LSE: GBSS, FWB: GG9B, Euronext: GBS)
• United States, Japan, Hong Kong, Singapore
  
  • SPDR Gold Trust (formerly streetTRACKS Gold Shares) (NYSE: GLD, TYO: 1326, SEHK: 2840, SGX:GLD 10US$)
• Dubai Gold Securities (Sharia compliant) (NASDAQ Dubai:GOLD)
• Gold Bullion Securities Australia (also known as ETFS Metal Securities Australia) (ASX:GOLD)
• ABSA "NewGold" debentures (JSE: NewGold)

The Exchange Traded Gold funds are sponsored by the World Gold Council, and as of June 2009 held 1,315.95 tonnes of gold in storage.^[5] SPDR Gold Trust marketed by State Street Global Markets LLC, an affiliate of State Street Global Advisors, accounts for over 85 percent of this gold. As of 2009, SPDR Gold Trust is the largest and most liquid GETP on the market.
The SPDR Gold Trust has been criticized for having a complex multi-tiered structure, lengthy prospectuses, lack of transparency in operations, lack of audits of holdings, and decentralized storage and reporting of its gold holdings. Its prospectus has also been criticized for allowing the fund to lease its gold holdings to third parties, and even failing to require that fund hold any gold at all.^[6][7][8][9]

[edit] iShares COMEX Gold Trust

The iShares COMEX Gold Trust was launched by iShares on 21 January 2005 and is listed on the New York Stock Exchange (NYSE: IAU) and Toronto Stock Exchange (TSX: IGT). As of April 28, 2009 the fund held 62.32 tonnes of gold in storage.^[10] As of 2009, doubts have been raised about the gold which COMEX claims to store in its vaults.^[11]

[edit] ZKB Gold ETF

The ZKB Gold ETF was launched on 15 March 2006 by Zürcher Kantonalbank and is listed in Switzerland under the symbol ZGLD. The fund invests exclusively in physical gold. The ETF has three unit classes traded in different currencies: USD, EUR, and CHF.^[12] Shares are sold in 1 ounce gold units, with a minimum purchase of one unit (one ounce).
Units are normally bought and sold for cash. For payment in kind, only integral 12.5 kg ingots are assured (subject to the total holding). The NAV is based on closing prices on the New York exchange according to Bloomberg Golds Comdty HP^[13]
The gold bars used are not LBMA good delivery and thus investors can not sell in the spot market. The ETFs only have one market maker which is ZKB and there is no verifiable bar list or independent audit of the gold.^{[citation needed]}

[edit] Central Fund of Canada and Central Gold Trust

The Central Fund of Canada (TSX: CEF.A, TSX: CEF.U, NYSE: CEF) and the Central Gold Trust (TSX: GTU.UN, TSX: GTU.U, NYSE: GTU) are closed-end funds headquartered in Calgary, Alberta, Canada, mandated to keep the bulk of their net assets in precious metals, with a small percentage of cash. The Central Fund of Canada holds primarily a mix of gold and silver, while the Central Gold Trust holds primarily gold.
The custodian of the precious metals assets of both funds is the main Calgary branch of CIBC. Both funds are considered especially safe because of their published codes of governance and ethics, the Central Fund's history of operation since 1961, and the funds' simple prospectuses which equate shares of the closed-end funds with real units of ownership in the trusts. As of October 2009, the Central Fund of Canada held 42.6 tonnes of gold and 2129.7 tonnes of silver in storage, and the Central Gold Trust held 13.6 tons of gold in storage.

[edit] ETFS Gold, ETFS Physical Gold and ETFS Physical Swiss Gold

In September 2006 ETF Securities launched ETFS Gold (LSE: BULL) which tracks the DJ-AIG Gold Sub-Index. Later they launched ETFS Physical Gold (LSE: PHAU) and ETFS Physical Swiss Gold (LSE: SGBS) which are both backed by allocated gold bullion.
ETF Securities’ physical gold ETCs - ETFS Physical Gold (PHAU), ETFS Physical Swiss Gold (SGBS) and Gold Bullion Securities (GBS) - are all backed by “allocated” gold bars – uniquely identifiable bars which carry no bank credit risk. The precious metal bars are held in trust in London by the Custodian HSBC Bank USA N.A., the world’s leading Custodian for ETCs. The metal held with the Custodian must conform to the rules for Good Delivery of the London Bullion Market Association (LBMA). Securities are only issued once metal is confirmed as being deposited into the Company’s bullion account with the Custodian. Consistent with allocated gold, no precious metal is borrowed, loaned out nor does it earn any income.

[edit] Gold Benchmark Exchange Traded Scheme

On 19 March 2007 Benchmark Asset Management Company Private Ltd, a Mumbai-based mutual fund house, launched Gold BeES (NSE: GOLDBEES) on the National Stock Exchange of India. Shares are sold in approximately 1 gram gold units. The scheme's assets are 90-100% physical gold, and up to 10% money market instruments, securitised debts (up to 5%), and bonds.^[14]

[edit] UTI Gold Exchange Traded Fund

On 17 April 2007 UTI Mutual Fund listed Gold Exchange Traded Fund (NSE: GOLDSHARE) on the National Stock Exchange of India. The fund states that its objective is "to provide investment returns that, before expenses, closely correspond to the performance and yield of the gold prices or gold related instruments."^[15] Every unit of UTI Gold Exchange Traded Fund approximately represents one gram of pure gold. Units allotted under the scheme will be credited to investors’ demat accounts.

[edit] Gold-Price-Linked Exchange Traded Fund

On 10 August 2007, Gold-Price-Linked Exchange Traded Fund (code "1328") listed on the Osaka Securities Exchange, Japan. Shares are sold in 1 gram gold units, with a minimum purchase of ten units. This GETP is not backed by physical gold but by special bonds traded in London which are linked to the gold price.

[edit] PowerShares DB Gold ETF and ETNs (PowerShares/Deutsche Bank)

Tracks the performance of certain index moves inside the Deutsche Bank Liquid Commodity Index - Optimum Yield Gold [2]. ETNs are exchange-traded notes, which differ from exchange-traded funds (ETFs).

• DB Gold (NYSE: DGL) (gold ETF)
• DB Gold Double Long (NYSE: DGP) (long leveraged gold ETN)
• DB Gold Short (NYSE: DGZ) (short gold ETN)
• DB Gold Double Short (NYSE: DZZ) (short leveraged gold ETN)

[edit] Julius Bär Physical Gold Fund

In October 2008 Swiss-based Julius Bär Group launched JB Physical Gold Fund (JBGOCA) which invests in physical 12.5 kg gold bars (around 400 ounces). As of December 2009 the fund held 60.8 tonnes in gold assets.^[16]

[edit] Claymore Gold Bullion Trust

In May 2009 Canadian-based Claymore Investments completed an initial public offering for Claymore Gold Bullion Trust. As of December 2009 the fund held 22.3 tonnes in gold assets.^[16]

[edit] Source T-ETCs and P-ETCs

On 30 June 2009 ^[17], Source UK Services Limited launched its Physical Gold ETC (Source P-ETC) on the London Stock Exchange. Source’s Gold P-ETC (LSE: SGLD) is backed by gold bullion, thereby tracking the performance of gold spot price. Each Gold P-ETC trades in the form of a certificate and in US Dollars. Source’s Gold P-ETC offers one of the most efficient gold backed tracking products currently on the market, with one of the lowest fees in the industry.

References

1. ^ Daily Gold ETF Monitor
2. ^ "Benchmark, UTI MF get Sebi nod for gold ETFs". The Economic Times. 2007-01-18. http://economictimes.indiatimes.com/Money_Matters/Mutual_Funds/MF_News/Benchmark_UTI_MF_get_Sebi_nod_for_gold_ETFs_/articleshow/1261674.cms. 
3. ^ Source Press Release, Source, April 20, 2009
4. ^ "SPDR Gold Trust Prospectus", SPDR Gold Shares, page 32
5. ^ ^{a b} Exchange Traded Gold, Official website
6. ^ Bob Landis (2007), "Musings on the Realms of GLD", The Golden Sextant, http://www.goldensextant.com/GLD.html 
7. ^ J.S. Kim (2009-07-16), "Are GLD and SLV Legitimate Investment Vehicles?", Seeking Alpha, http://seekingalpha.com/article/149209-are-gld-and-slv-legitimate-investment-vehicles 
8. ^ Dave Kranzler (2009-02-12), "Owning GLD Can Be Hazardous to Your Wealth", Rapid Trends, http://www.rapidtrends.com/2009/02/13/owning-gld-can-be-hazardous-to-your-wealth/ 
9. ^ RunToGold.com (2009-02-19), Is the GLD ETF Really Worth Its Metal?, http://seekingalpha.com/article/121456-is-the-gld-etf-really-worth-its-metal 
10. ^ Exchange Traded Funds, iShares.com, retrieved November 21, 2007
11. ^ Nathan Lewis (26 June 2009), "Where's the gold?", The Huffington Post, http://www.huffingtonpost.com/nathan-lewis/wheres-the-gold_b_216896.html 
12. ^ ZKB Gold ETF, Simplified Sales Prospectus, December 2008
13. ^ ZKB Gold ETF Simplified sales prospectus See page 3 for bar description
14. ^ Scheme Information Document, Gold BeES
15. ^ [1]
16. ^ ^{a b} http://www.kitco.com/reports/Goldessential_dec172009.pdf Gold Report
17. ^ Source Press Release, Source, June 30, 2009

http://en.wikipedia.org/wiki/Gold_exchange-traded_fund

Peak gold

From Wikipedia, the free encyclopedia

  (Redirected from Peak Gold)

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Peak gold is the point in time when the maximum rate of global gold extraction is reached, after which the rate of production enters terminal decline. The term 'peak' refers to the Hubbert peak of a resource. Unlike resources such as petroleum, which are destroyed in use, gold can be reused and recycled. Thus peak gold and peak oil cannot be compared directly.

[edit] Supply and demand

World gold demand (defined in terms of total consumption excluding central banks) in 2007 was 3,519 tonnes.^[1] Gold demand is subdivided into central bank reserves, jewellery, industrial consumption (including dental), and investment (bars, coins, ETFs, etc.).
The supply of gold is provided by mining, official sales (typically gold by central banks), de-hedging and old gold scraps and total world supply in 2007 was 3,497 tonnes.^[2] Gold production (mining) does not need to make up for gold demand because gold is a reusable resource. Currently, yearly gold mining produces 2% of the existing above-ground gold which is 158,000 tonnes (as of 2006).^[3] In 2008 gold mining produced 2,400 tonnes of gold, official gold sales close to 300 tonnes, and dehedging close to 500 tonnes.^[4]

[edit] Timing of peak production

In 2009, Barrick CEO Aaron Regent claimed that global production had peaked in 2000.^[5] Barrick's production costs have been "trending down" despite this peak, reaching $465 per ounce.
In 2006, with gold at $650 per ounce, Roland Watson claimed that gold production had peaked in 2001 due to falling exploration in the 1990s, when gold prices were low. He predicted that higher prices and new technologies would boost gold production to higher levels in the future.^[6]

References - Peak Gold

1. ^ "Supply and Demand Statistics". World Gold Council. November 2008. http://www.research.gold.org/supply_demand/. Retrieved 2009-02-10. 
2. ^ "Gold Demand Trends". World Gold Council. November 2008. http://www.gold.org/deliver.php?file=/value/stats/statistics/pdf/Supply_Demand.pdf. Retrieved 2009-02-10. 
3. ^ "Gold Survey 2007". GFMS Ltd. April 2007. http://www.gfms.co.uk/Market%20Commentary/Gold%20Survey%202007%20Launch%20Presentation.pdf. Retrieved 2009-02-11. 
4. ^ "Gold Survey 2008 - Update 2". GFMS Ltd. January 2009. http://www.gfms.co.uk/Market%20Commentary/Gold%20Survey%202008%20Update%202%20Toronto%20Launch%20Presentation.pdf?videoId=92028. Retrieved 2009-02-11. 
5. ^ Barrick shuts hedge book as world gold supply runs out; Telegraph Media Group, November 11, 2009
6. ^ In Defense of Peak Gold: Evidence Gold Production Peaked in 2001; Seeking Alpha, September 10, 2006

http://en.wikipedia.org/wiki/Peak_Gold

References - Digital Gold Currency

1. ^ GoldMoney - Company News - 10 March 2008
2. ^ GoldMoney regulation
3. ^ Global Digital Currency Association Ltd.
4. ^ "OS-Gold", The Gold Economy Magazine, September 2002
5. ^ "Why Standard Reserve Failed", The Gold Economy Magazine, May 2003
6. ^ "INTGold", The Gold Economy Magazine, September 2003
7. ^ "Digital Currency Business E-Gold Indicted for Money Laundering and Illegal Money Transmitting". US Department of Justice. April 27, 2007. http://www.usdoj.gov/opa/pr/2007/April/07_crm_301.html. Retrieved 2008-01-22. 
8. ^ "e-gold Founder Denies Criminal Charges". e-gold. April 30, 2007. http://www.e-gold.com/letter3.html. Retrieved 2008-01-22. 
9. ^ This depends on the issuer. Most issuers have the gold on deposit - ie, the issuer will redeem the digital currency obligation with physical metal. GoldMoney holds the gold in a trust owned by the account holders. Therefore they claim that it is not a "deposit", nor an "account", but a custodial "holding".
10. ^ http://www.reuters.com/article/oilRpt/idUSN2238876720080122
11. ^ "TedBits", Ty Andros, Trader View, April, 2008, http://news.goldseek.com/GoldSeek/1207289100.php
12. ^ "Gold Rush". Business Week. January 9, 2006. http://www.businessweek.com/magazine/content/06_02/b3966094.htm. Retrieved 2008-01-22. 
13. ^ "Letter from Dr. Douglas Jackson; Chairman, e-gold, Ltd.". 6 January 2006. http://www.e-gold.com/letter.html. Retrieved 2008-01-22. 
14. ^ Murphy, Robert P. (2004). "Minerva". strike-the-root.com. http://www.strike-the-root.com/content/minerva-chapter-9.

http://en.wikipedia.org/wiki/Digital_gold

 

^{============================================================}

References - Gold

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5. ^ Pelouze, Jules and Fremy, Edmond (1854). General notions of chemistry. Lippincott, Grambo & Co.. p. 280. http://books.google.com/books?id=C8UHAAAAIAAJ&pg=PA280. 
6. ^ "Relativity in Chemistry". Math.ucr.edu. http://math.ucr.edu/home/baez/physics/Relativity/SR/gold_color.html. Retrieved 2009-04-05. 
7. ^ Schmidbaur, Hubert; Cronje, Stephanie; Djordjevic, Bratislav; Schuster, Oliver (2005). "Understanding gold chemistry through relativity". Chemical Physics 311 (1–2): 151–161. doi:10.1016/j.chemphys.2004.09.023. 
8. ^ ^{a b} Audi, G. (2003). "The NUBASE Evaluation of Nuclear and Decay Properties". Nuclear Physics A (Atomic Mass Data Center) 729: 3–128. doi:10.1016/j.nuclphysa.2003.11.001. 
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40. ^ "Formation of Lode Gold Deposits". arizonagoldprospectors.com. http://arizonagoldprospectors.com/formation.htm. Retrieved 2009-05-23. 
41. ^ "Environment & Nature News - Bugs grow gold that looks like coral - 28/01/2004". http://www.abc.net.au/science/news/enviro/EnviroRepublish_1032376.htm. Retrieved 2006-07-22.  This is doctoral research undertaken by Frank Reith at the Australian National University, published 2004.
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79. ^ Alaska Statutes (see§ 44.09.110)

http://en.wikipedia.org/wiki/Gold

Reference - Gold as an investment

1. ^ LBMA Gold Fixings yearly close, rounded to nearest $
2. ^ Dow Jones Industrial Average yearly close, rounded to nearest point
3. ^ The UN Statistics Division world GDP
4. ^ Historical Debt Outstanding - Annual 1950 - 1999, The Debt to the Penny and Who Holds It, rounded to nearest billion $
5. ^ Nominal broad dollar index US Federal Reserve. Gives the comparative international value of the USD against a basket of the currencies of the US's major trading partners. Base date for index (100.0000) was Jan 1997. Index value shown as at June of the relevant year, rounded to nearest 1/10 of a point
6. ^ "2008 London Gold Fixings". Lbma.org.uk. 2008-12-31. http://www.lbma.org.uk/2008dailygold.htm. Retrieved 2010-03-16. 
7. ^ Jim Rogers "Quite Sure" Gold Will Hit $2000, Dollar Will Lose Reserve Status Yahoo! Finance
8. ^ Gold hits a fresh high as dollar falters Thisismoney.co.uk, 2009.11.11
9. ^ Mother of all carry trades faces an inevitable bust an OpEd article for the Financial Times
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14. ^ [http://www.gold.org/discover/knowledge/faqs World Gold Council > discover > gold knowledge > frequently asked questions
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16. ^ "400 tonnes/year". Gold.org. 1999-09-26. http://www.gold.org/pr_archive/html/Wr991006.htm. Retrieved 2010-03-16. 
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19. ^ A Gold Play on the Dollar's Demise Seeking Alpha
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21. ^ The Roosevelt Gold Confiscation Order Of April 3 1933. The-Privateer.com
22. ^ Rogers, Jim (2004). Hot Commodities : How Anyone Can Invest Profitably in the World's Best Market. New York: Random House. ISBN 1-4000-6337-X. OCLC 56559347. ^{[page needed]}
23. ^ Wiggin, Addison; Justice Litle (2006). Gold: The Once and Future Money. New York: Wiley. ISBN 0-470-04766-6. OCLC 70173338. ^{[page needed]}
24. ^ London Stock Exchange - Article^{[dead link]}
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30. ^ "Exchange-Traded Funds (ETFs)". http://www.sec.gov/answers/etf.htm. Retrieved 2010-05-05. 
31. ^ http://www.ncdex.com/products/products_precious_gold100gms.aspx?Type=Gen
32. ^ "Supply and demand statistics > World Gold Council, gold market research, reserve asset and investment statistics". Gold.org. http://www.gold.org/value/stats/statistics/gold_demand/index.html. Retrieved 2010-03-16. 
33. ^ ^{a b} "COMMODITIES-Oil, metals fall on inflation, fear; gold up | Markets | Reuters". Uk.reuters.com. 2009-02-18. http://uk.reuters.com/article/oilRpt/idUKLI45711020090218. Retrieved 2010-03-16. 
34. ^ Investments (7th Ed) by Bodie, Kane and Marcus, P.570-571
35. ^ Aristotle, Rick (2005-11-30). "Google or Gold?". Fool.com. http://www.fool.com/investing/high-growth/2005/11/30/google-or-gold.aspx?source=mppromo. Retrieved 2010-03-16. 
36. ^ Simon Constable (2007-11-12). "Google Vs. Gold". Us.rd.yahoo.com. http://us.rd.yahoo.com/finance/external/video/ts/SIG=125nv35km/*http://www.thestreet.com/_yahoo/video/strategysession/10389569.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA. Retrieved 2010-03-16. 
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38. ^ Knepp, Tim (2010-01-01). "Gold taxes". Onwallstreet.com. http://www.onwallstreet.com/ows_issues/2010_1/many-ways-to-gain-exposure-to-gold-2665039-1.html. Retrieved 2010-03-16. 
39. ^ Article on Scam Baiting^{[dead link]}
40. ^ [1]^{[dead link]}
41. ^ mine quote at Wikiquote

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I have to shake my head when these people spout “BUY GOLD BUY GOLD”! I don’t know about anyone else but I sure can’t afford to buy It. I’m glad some folks can buy It and sit on It as for me I need my money to live day to day. If predictions are correct and America Implodes like Russia did, there will be nothing on the shelves to buy especially food. Try spending gold at your local businesses and you put yourself at the mercy being attacked and robbed. If martial law is enforced you won’t be able to go anywhere you may as well hunker down with what you have.
Grow a garden and be prepared to stand guard over It day and night. I have a camp stove that I got at walmart and plenty of propane so I can cook anything that I have. Fires attract attention.
I’m preparing to hunker down and protect my family from all the have-nots that will be pillaging for food. Right now I’m good for a family of four for 1 year maybe more. I will take care of my own and to hell with everyone else. No camps for my family and by the way, don’t tell anyone what you’re doing, the’ll be the first to visit because they have failed to heed the warning. Besides food could be just as good as gold as a barter Item.

If currencies take a dump, people will look at their gold investments as a back up. Are they gonna trade gold in for a new & improved currency ? Or what control mechanisms will be set in place for people to jump thru to get access to their gold investments ?
The powers-that-be can set up all kinds of control mechanisms into play to bring people onto the new grid. In other words, they can make one do as they say IF ya want access to yer gold investments.
I doubt that if all the persons invested in gold. made a run on it, that the actual gold reserves would be enough to satisfy the customers.

Gold has value because people have chosen to make it valuable for centuries, no, millenia. Same with precious gems. They’re valuable because people want them.
Now, personally, when the Big Crisis really does come, I would prefere to have canned/dryed/ect foods, gun and ammunition, a fresh water source




The final stage of evolution in their monetary system would witness the universal embrace of electronic money, the brightest jewel of their evil monetary crown, which would totally replace today’s fraudulent paper currencies. Indeed this final stage has already commenced, and all that the international monetary bandits now need is a world crisis (such as a nuclear
attack on Iran which has not as yet occurred but which is expected at any time) that would result in a total collapse of the US dollar and a consequent mass stampede away from paper
currencies.
Already the impending collapse of the US dollar is reflected in the rising price of gold, now close to the record of US$850 an ounce set in January 1980. The world can expect to see the price of gold escalate to US$3000 or more per ounce.
The same thing would happen to the price of oil. Perhaps the psychological shock of the collapse of the US dollar would produce the stampede through which electronic money would effortlessly replace paper money as the new cashless money system of the world.
Eventually these countries would be trapped with debts they could never repay, and would thus be at the mercy of those whose suspiciously large loans to them were meant to deliver precisely such control over them. (See John Perkins, ‘Confessions of an Economic Hit-
Man’).
They have a grand design to so financially enslave the masses as to permit them to impose their
dictatorship over the whole world. Their dictatorship would, in turn, pave the way for the Euro-Jewish State of Israel to become the ruling state in the world.

1933, The US Government enacted legislation at that time prohibiting American residents from keeping gold coins, bullion or gold certificates in their possession. Gold coins were demonetized,
and were no longer permitted as legal tender. They could not be used as money. If anyone was caught with such gold after a certain date, he could be fined $10,000 and/or be imprisoned for
six months. In exchange for the gold coins and bullion, the Federal Reserve Bank, which is a private bank, offered paper currency (i.e., US dollars) with an assigned numerical value of
$20 for every one ounce of gold. Most Americans rushed to exchange their gold for paper
currency, but those who were aware of the rip off that was about to take place bought gold with their paper currency and then shipped the gold away to Swiss banks.
It is significant that the British government also demonetized gold coins in the same year as the US. They did so through the simple expedient of suspending the redeemability
of the sterling paper pound into gold.
After all the gold in USA had been exchanged for paper currency, the US Government then proceeded in January 1934 to arbitrarily devalue the US paper dollar by 41% and to then
rescind the law of prohibition concerning gold that was previously enacted. The American people rushed back to exchange their paper currency for gold at the new exchange value of $35 per ounce of gold. In the process, they were robbed of 41% of their wealth. The reader can now easily recognize the legalized theft that takes place when paper
currency is devalued.
In other words, the Great Depression was artificially contrived in order to justify the imposition of an international monetary system that would bring order to a chaotic world of
money.
In April 2002, US Congressman Ron Paul sent the following letter to both the US Treasury Department and the Federal Reserve Bank (which, incidentally, is a privately owned
bank) asking why the IMF prohibits gold-backed currencies for its member states:
Dear Sirs:
I am writing regarding Article 4, Section 2b of the
International Monetary Fund (IMF)’s Articles of Agreement. As
you may be aware, this language prohibits countries who are
members of the IMF from linking their currency to gold. Thus,
the IMF is forbidding countries suffering from an erratic
monetary policy from adopting the most effective means of
stabilizing their currency. This policy could delay a country’s
recovery from an economic crisis and retard economic growth,
thus furthering economic and political instability.
I would greatly appreciate an explanation from both the
Treasury and the Federal Reserve of the reasons the United
States has continued to acquiesce in this misguided policy.
Please contact Mr. Norman Singleton, my legislative director, if
you require any further information regarding this request.
Thank you for your cooperation in this matter.
Ron Paul
U.S. House of Representatives

As a result Individuals in certain segments / agencies of the ‘government’ are implementing ‘laws’ that were established in the books a long time ago. While some other laws were placed onto the backs of these existing laws. Theyve been fine-tuning their control.
With all these control mechanisms being implemented, these people are not over-looking the gold issue. They know people are investing in gold and they probably knew this a long time ago. They are moving step by step and I would bet that they too have a plan for gold, those that have invested, those that have not and when the time comes that people will want o cash out on their gold investments.
If the World Bank, BIS or IMF pushes thru a standard of a world currency …or even just a digital – electronic system of credit & debit…they will set the price of gold or ….who can have access to this investment. Ifone doesnt play by their rules and jump thru the hoops, I can see them closing the door until you get ‘updated’.



Thus we will be eventually going completely to electronic-digital form of buying / selling / debt / credit. And along the same lines, there being a difference between having actual gold in hand and ‘having’ gold investments purely as an entry into a computer system. But both ways, their control mechanisms ( laws / rules / regulations over the herd ) are in place. Establishing central banks into countries seems to act as a vehicle for control over countries…and once established, that country gets entangled into the network. I can see that after this network of central banks gets to a point in this worldwide ‘bailout’ scheme, that the central banks role will go thru a change. This change will be in pace with establishing a more controling supreme world bank, with a form of global taxation. The chip may be heavily enforced about this same time.
Already, talk is being carried out about a cyber attack. I believe this cyber attack will be a false flag operation but, it will give the International ‘government’ their justification to carry out certain, targeted responses…the same types of responses that took place after 9/11. They are looking to gain further control over the Internet as part of the electronic control system too.

Furthermore How did gold save the millions in world war 2, also if the govt is going to control food etc if someone had 10 bars of gold and you had a bucket of rice when you swap it? The world govts want to control the masses and those that do not obey will be taken away, I cannot see them allowing people to make deals. The Scriptures also so they will through their gold and silver into the street and weep. Think about it

once the money collapses and they gain control they will not let anyone deal in any currentcy as they want to chip the people to make them slaves. I can see that gold is valuable now and you can buy and sell it and make a profit but storing it up I cannot see how it will work.