The first paper bank notes were gold certificates. 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 in their vault for 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. On April 5, 1933 the US Government restricted the private gold ownership in the United States and therefore, the gold certificates stopped circulating as money (this restriction was reversed on January 1, 1975). Nowadays, gold certificates are still issued by gold pool programs in Australia and the United States, as well as by banks in Germany, Switzerland and Vietnam.
The real problem: Futures contracts are usually bought with only a small fraction of the total contract cost. For example, an investor might only have to put down 20% of the full cost of the gold controlled by the contract. This creates leverage, which increases an investor's potential gains -- and losses. And since contracts have specific end dates, you can't simply hold on to a losing position and hope it rebounds. Futures contracts are a complex and time-consuming way to invest in gold that can materially amplify gains and losses. Although it's good to know that futures contracts exist, they are high-risk and not recommended for beginners.
As alluded to above, investors often make the mistake of buying so-called rare coins. These numismatic or semi-numismatic coins are meant for collectors, speculators, and hobbyists rather than people looking to reliably preserve and build wealth. Rare coin buying is exceedingly risky and often buyers pay inordinately high premiums and do not recoup their value. Rare coins are not really a gold investment… they are more akin to artwork. Some collectors buy coins for pleasure, because of their history or beauty, or because they have excess money to tie up in illiquid assets. Gold coins that are priced close to their actual melt value is a more prudent way to invest in precious metals.
And then there are operational issues, since mining is expensive, time-consuming, and often dangerous. A problem at a mine, a major exploration success, or any number of other operational issues can cause a miner's stock performance to diverge materially from the price of gold. Small miners, meanwhile, often provide the most upside opportunity and downside risk, since tiny moves in the price of gold can sometimes be the difference between these miners making a profit or losing money. And then there are companies like Northern Dynasty Minerals, where the only asset is a mine under development. The stock is cheap today, making it something of an option on the price of gold since the value of the mine (called the Pebble Project) won't be realized for years. But if the Pebble Project gets built, Northern Dynasty could see material stock-price gains.
A. Over the past few years, as concern about a financial and economic breakdown spread, there were periods of gold coin bottlenecks and actual shortages. In 2008-2009 at the height of the financial crisis, demand was so great that the national mints could not keep up with it. The flow of historic gold coins from Europe was also insufficient to meet accelerating demand both there and in the United States. Premiums shot-up on all gold coins and a scramble developed for what was available. There is an old saying that the best time to buy gold is when everything is quiet. I would underline that sentiment.
Now that you understand why buying Gold is a good use of your investment dollar, you may need guidance regarding how to buy physical Gold. Luckily, buying physical Gold is simple. If you choose an established, well-regarded Precious Metals company, you can buy with confidence. Buying physical Gold should be an enjoyable part of your investment journey. Consider working with APMEX to experience the thrill of buying physical Gold free from worry. A common first purchase is the Gold American Eagle, one of the most popular Gold bullion items with investors.
Gold shows typically deal more in numismatic, or collector coins, which have high markups, are illiquid, and are valued based more on rarity or historical significance than gold content. If a dealer does have any bullion, it is likely to be a limited selection. While numismatics can be a good investment, it takes a tremendous amount of research to avoid being taken advantage of by an unscrupulous dealer.
Gold coins price is based on the weight of the precious metal and the scarcity of the coin itself. The scarcity arises from the fact that once a mintage of a coin is done for a specific year there will never be another coin of that year produced. Minted coins also offer the guarantee that comes from a reputable mint like the U.S. Mint. Gold coins are generally legal tender in the country that the coin was minted.
Arguably, gold has the freest market value mechanism of all assets in the world. As such, economic factors determine the price of gold, mainly the decline of the U.S. dollar, or other fiat currencies which it is measured by. Decreases in the value of ones currency leads to higher prices of gold and greater appreciation for its value as true, honest money. Also, uncertainty in the financial markets such as interest rates, stock prices and political uncertainties generally lead to greater demand for gold and a greater appreciate in the price of gold.
Though this interview will help you start safely on the road to gold ownership, it is just an overview. If you would like more detailed information, I would recommend my book, The ABCs of Gold Investing: How to Protect and Build Your Wealth With Gold, which covers the who, what, when, where, why and how of gold ownership in detail. You can also shortcut the learning curve by contacting our offices and asking to speak with one of our expert client advisors who will be happy to answer your questions and help you get off to a solid start.
Silver is produced in the form of Silver coins, Silver bars and Silver rounds from mints and Precious Metal refiners around the world. Silver is one of the world’s most important commodities and an affordable Precious Metal investment option. For thousands of years, Silver bullion has served as a primary monetary metal, but today it is most commonly used as an industrial commodity. As an investment, Silver can play an important role in a modern diversified portfolio. Silver prices generally move independent of stocks and can provide a bright spot in your investment portfolio during an economic downturn.
There are thousands of gold products on the market, but the list of well-known bullion products from reputable mints and refineries is short. Generally, you want to buy gold coins or bars from one of the major national mints or larger private refineries. You will notice these are the only products we feature on the SchiffGold website. (Read more about our product policies here.)
Investment Grade Coins are higher quality and more rare than bullion coins. These coins are also graded and are enclosed in a protective slab to ensure and preserve the condition of the coin. A study commissioned by the U.S. Congress has proven that certain Investment Grade Coins are shown to have an annual return of 15%. Investment Grade Coins are for investors planning to hold onto their investment for at least 3 years.
Proof coins are special editions struck for collectors and often mounted in a special case. The dies used to make them are often finely polished and yield particularly pretty coins with mirror finishes. Proof editions are usually valued more highly than regular coins -- by collectors. The premium you pay for proof coins may be inflated and may disappear, depending on the market. So, for investment purposes, stick with regular coins.