Gold is often used to hedge against inflation or used as a measure of the US dollar. Gold coins are seen to impact the US economy in terms of the stock market, inflation and the US GDP.
Gold is not just for the American’s investment portfolio as statistics show only an 11% demand in America between 2004 and 2008 whereas the rest of the world accounts for the balance. Gold demand for jewelry is 68% globally with at least 50% from China, Middle East and Turkey. Gold in other forms, like bars or coins, gives 20% by US, Europe and India. Japan demands 12% for industrialization.
One cannot just correlate gold to the US economy only, for inflation, velocity of money and the supply of money affect the whole world with gold in the forefront. The demand of gold by the big players will give a better understanding of how gold prices will move in the future.
Gold and Money Supply
Historically, gold has proven to be quite stable during adverse or favorable market conditions. But there are important correlations that can affect gold prices and its trend over the short and long terms.
Foremost in the correlations is the dollar; it seems to correlate negatively to gold which means an increase in the dollar value shows a decrease in gold prices. Nevertheless, gold has proven to be the better performer over stocks and bonds during inflation or economic crisis, as seen in 2007 when gold prices increased. Currently gold prices have kept increasing for 9 consecutive years since 2001.
Hence, one measure from the monetary policies is to increase the supply of money to stimulate the economy. But when liquidity is increased, the chances of inflation also increase. Global economies face this major issue fearfully as it is impossible to predict the intensity of inflation.
In reality, gold prices move in its own momentum despite the supply of money factor. Good economic growth will see more wealth with more demand in gold whereas an economic recession will have gold considered an asset and a hedge against inflation as well as the lowered worth of paper currencies. The value of gold has never dropped to zero due to its demand at all times.
While the economy changes unpredictably, understanding gold better in relation to monetary policies will help you decide that it is a great time to buy gold.
Monday, January 10, 2011
Monday, December 6, 2010
The shifting of US dollar in today’s economy
If you keep an open ear and a keen eye on today’s economy, you will be sure to find some very unhealthy signs. For example, take the cases of big commerce conglomerates like Fannie Mae, Freddie Mac, FDIC, Wall Street and even the newly formed Health Care. Everything points to the ailing health of the economy as these once esteemed entities have sunk deeply into murky financial waters.
It is true that it is impossible to borrow to get out of debt which is precisely what the US Treasury is doing; it is essentially getting a loan to pay off a debt.
The Middle East
President Nixon cut a deal with the Saudis to supply US with a continuous flow of cheap oil paid in US dollars. This demand caused others to pay for oil from OPEC in US dollars which was fine when the US economy was strong as that made the US dollar strong. But when the economy slumped, as in the 2008 financial meltdown, the nation’s lenders were clamoring for repayments of the debts.
As the other parties, they got together with OPEC to discuss the possibility of moving over to using Euros rather than the US dollar. That happened at the 2009 and 2010 OPEC meetings behind closed doors. There will be more meetings to bring on the total changeover from Petro-Dollars to Petro-Euros soon as the US economy spirals further into greater debt.
World Reserve Currency
For many years, US has had a very strong and firm control over the world currency and economy but with its recent poor performance and decreasing standing in economy and currency value, the IMF came out with a Special Drawing Rights which is basically an international lending house with varying currencies to be lent. This makes IMF a more palatable lender than the US as not all focus is on one particular currency. It is just a wise business move of not having every egg in one basket.
This became tough competition and it became difficult for the US Treasury to hold its fort, much less of the top position in the financial standing of the world today. And the competition is looking good with all its fringe benefits and frill offerings.
Sooner or later, the players in IMF will be pushing for the SDR to be the new world reserve currency instead of the US Dollar. Signs are set in place as big guns like China, India, Japan and Russia are boosting up their gold reserves through the sale of the treasuries.
It is true that it is impossible to borrow to get out of debt which is precisely what the US Treasury is doing; it is essentially getting a loan to pay off a debt.
The Middle East
President Nixon cut a deal with the Saudis to supply US with a continuous flow of cheap oil paid in US dollars. This demand caused others to pay for oil from OPEC in US dollars which was fine when the US economy was strong as that made the US dollar strong. But when the economy slumped, as in the 2008 financial meltdown, the nation’s lenders were clamoring for repayments of the debts.
As the other parties, they got together with OPEC to discuss the possibility of moving over to using Euros rather than the US dollar. That happened at the 2009 and 2010 OPEC meetings behind closed doors. There will be more meetings to bring on the total changeover from Petro-Dollars to Petro-Euros soon as the US economy spirals further into greater debt.
World Reserve Currency
For many years, US has had a very strong and firm control over the world currency and economy but with its recent poor performance and decreasing standing in economy and currency value, the IMF came out with a Special Drawing Rights which is basically an international lending house with varying currencies to be lent. This makes IMF a more palatable lender than the US as not all focus is on one particular currency. It is just a wise business move of not having every egg in one basket.
This became tough competition and it became difficult for the US Treasury to hold its fort, much less of the top position in the financial standing of the world today. And the competition is looking good with all its fringe benefits and frill offerings.
Sooner or later, the players in IMF will be pushing for the SDR to be the new world reserve currency instead of the US Dollar. Signs are set in place as big guns like China, India, Japan and Russia are boosting up their gold reserves through the sale of the treasuries.
Tuesday, October 12, 2010
How to invest in gold
Gold has proven to be a very valuable commodity, especially when it comes to investing. The purchasing power of this commodity has remained constant over the years, causing the demand to increase rapidly. Since more and more individuals understand now more than ever the advantage of having a good portfolio, the buying demand for this precious commodity has shot up with time.
However, not all buyers know about the various methods of buying gold. This applies to both the buyers who want to get exposure to the price movements of gold and those who want to buy gold to protect their assets. It is important to know all the available options for you since there is more than one way to acquire gold.
The various methods for procuring gold depend on the outlook and requirements of the individual investor. It is therefore important to come up with an investment strategy to help you in deciding which method is best for you and meets your needs. Some of the most common methods are rare coins, bullion coins and small bars of gold, gold accounts, exchange traded funds and gold certificates. Structured products and gold-oriented funds are other methods one can use when investing in this commodity.
Having any of the above will enable you to invest just the way you want and give you the possibity of great returns in the end. However, it is very important to consider all the facts you would normally consider when making any other form of investment. Work through the same guidelines when deciding which gold investing route to take.
Evaluate why you have decided to buy gold. Evaluate factors such as whether your reasons for buying gold are based on a desire to obtain a profit using the varying price of gold or to have it as a real physical asset that you can have available at all times. It is also of importance to know whether you would rather have your gold with you or have it kept in a vault in addition to verifying that you are dealing with a trustworthy and reliable person or company.
Another very important thing is to ensure that you have all the necessary information about the costs involved such as premiums, commissions, insurance, storage and taxes. Ensure that your gold acquisition fits well with all your other investments to support your overall investment strategy.
However, not all buyers know about the various methods of buying gold. This applies to both the buyers who want to get exposure to the price movements of gold and those who want to buy gold to protect their assets. It is important to know all the available options for you since there is more than one way to acquire gold.
The various methods for procuring gold depend on the outlook and requirements of the individual investor. It is therefore important to come up with an investment strategy to help you in deciding which method is best for you and meets your needs. Some of the most common methods are rare coins, bullion coins and small bars of gold, gold accounts, exchange traded funds and gold certificates. Structured products and gold-oriented funds are other methods one can use when investing in this commodity.
Having any of the above will enable you to invest just the way you want and give you the possibity of great returns in the end. However, it is very important to consider all the facts you would normally consider when making any other form of investment. Work through the same guidelines when deciding which gold investing route to take.
Evaluate why you have decided to buy gold. Evaluate factors such as whether your reasons for buying gold are based on a desire to obtain a profit using the varying price of gold or to have it as a real physical asset that you can have available at all times. It is also of importance to know whether you would rather have your gold with you or have it kept in a vault in addition to verifying that you are dealing with a trustworthy and reliable person or company.
Another very important thing is to ensure that you have all the necessary information about the costs involved such as premiums, commissions, insurance, storage and taxes. Ensure that your gold acquisition fits well with all your other investments to support your overall investment strategy.
Monday, August 30, 2010
Opportunities in the Gold Market
There are many claims that gold is an investment. This could be true that the price of gold may rise and increase in value though it is better to look at gold as an asset. Gold truly is the most bare form of money as gold is the one form of money that if all paper money collapsed you would be able to barter with.
The main role of gold is as a safe haven from economic stress more than purely just a return on your money. That is not to say gold will not go up. Past performance doesn't means their will be future gains though it can be the best way to understand the value.
The opportunities in the gold market are going to be based on your risk level. This post is not to be an expert on how to buy and sell gold. The goal is to open your eyes to the possibility that now may be a good time to buy gold and for you to learn more from a trusted brokerage firm.
Considered by many as the best way to own gold is numismatic gold coins or what is called rare gold coin. Rare gold coins have two values. First, the gold content gives them inherit value with the price of gold. Second, the rarity of numismatic gold coins has potential for greater gains in profit. The gold content in rare gold coins is the same as bullion coins though rare gold coins are not minted any more and now thousands and thousands of gold bullion coins are minted each year.
As it stands today there is an estimate that a few hundred thousands numismatic gold coins are in existence in what is called mint condition. On the contrast there are literally tens of millions of gold bullion coins in existence right now circulating.
Due to the scarcity rare gold coins have typically out performed gold bullion coins. This is a generality and there have been exceptions to that rule. Rare gold coins still have the same gold content as gold bullion coins which adds to them being a safe haven.
Other advantages of rare gold coins is that they are exempt from the federal government ever confiscating your private gold collection. You may not think this would ever happen though it happened in 1933.
Rare gold coins are considered a private collection of collectibles which doesn't make the sale or purchase subject to the same rules as gold bullion coins.
The best way to understand if rare gold coins is right for your portfolio is to talk to a certified brokerage firm that has years of service. A plus ratings at the better business bureau is a good place to start.
The main role of gold is as a safe haven from economic stress more than purely just a return on your money. That is not to say gold will not go up. Past performance doesn't means their will be future gains though it can be the best way to understand the value.
The opportunities in the gold market are going to be based on your risk level. This post is not to be an expert on how to buy and sell gold. The goal is to open your eyes to the possibility that now may be a good time to buy gold and for you to learn more from a trusted brokerage firm.
Considered by many as the best way to own gold is numismatic gold coins or what is called rare gold coin. Rare gold coins have two values. First, the gold content gives them inherit value with the price of gold. Second, the rarity of numismatic gold coins has potential for greater gains in profit. The gold content in rare gold coins is the same as bullion coins though rare gold coins are not minted any more and now thousands and thousands of gold bullion coins are minted each year.
As it stands today there is an estimate that a few hundred thousands numismatic gold coins are in existence in what is called mint condition. On the contrast there are literally tens of millions of gold bullion coins in existence right now circulating.
Due to the scarcity rare gold coins have typically out performed gold bullion coins. This is a generality and there have been exceptions to that rule. Rare gold coins still have the same gold content as gold bullion coins which adds to them being a safe haven.
Other advantages of rare gold coins is that they are exempt from the federal government ever confiscating your private gold collection. You may not think this would ever happen though it happened in 1933.
Rare gold coins are considered a private collection of collectibles which doesn't make the sale or purchase subject to the same rules as gold bullion coins.
The best way to understand if rare gold coins is right for your portfolio is to talk to a certified brokerage firm that has years of service. A plus ratings at the better business bureau is a good place to start.
Thursday, August 5, 2010
Types of Gold Coins: The Popular Ones
There are several types of gold coins that are sought after by both collectors and investors alike.
Types of Gold Coins: Popular Series
The American Gold Eagle: This is the official gold bullion coin of the United States, first minted in 1986 by the US Mint. The obverse of the coin features a full figure of Lady Liberty holding a torch in her right hand and an olive branch in her left hand. The reverse of the coin portrays a male eagle holding an olive branch, flying above a nest enclosing a female eagle and hatchlings. The coin is available in the denominations of $5, $10, $20, and $50. For coin collectors, a proof version of this gold coin is produced by the US Mint.
Krugerrand: Krugerrand is among the most popular gold coins produced by the South African Mint Company in 1967. It was minted to be used as currency. The coin is a durable alloy of gold and copper, with 91.67% gold and 8.33% copper. The obverse of the coin features the face of Paul Kruger, former president of the old South African Republic, while the reverse features a springbok, one of the national symbols of South Africa. Very few proofs of Krugerrand neeeproduced by the company for collectors.
Russian Golden Chevronets: These gold coins were introduced by Russia in 1701 and were minted until 1757, after which they were replaced by the ruble. However, their production was restarted in 1925, after the end of Russian Revolution and the Civil War. Only five chevronets coins are known today, three are housed in the Museum of Goznak and the other two in the Pushkin State Museum of Fine Arts in Russia. These coins have great value as collector’s items.
Chinese Gold Panda: This series of gold coins was introduced by the People’s Republic of China in 1982. These coins are made of 99.9% gold. The design of these coins changes every year. The obverse of the coin depicts the Temple of Heaven with Chinese inscriptions “Zhonghua Renmin Gongheguo” and the year of mint. The reverse of the coin features different images of the Panda, and are changed every year. These coins come in different denominations of 25, 50, 100, 200, and 500 Yuan.
Types of Gold Coins: Popular Series
The American Gold Eagle: This is the official gold bullion coin of the United States, first minted in 1986 by the US Mint. The obverse of the coin features a full figure of Lady Liberty holding a torch in her right hand and an olive branch in her left hand. The reverse of the coin portrays a male eagle holding an olive branch, flying above a nest enclosing a female eagle and hatchlings. The coin is available in the denominations of $5, $10, $20, and $50. For coin collectors, a proof version of this gold coin is produced by the US Mint.
Krugerrand: Krugerrand is among the most popular gold coins produced by the South African Mint Company in 1967. It was minted to be used as currency. The coin is a durable alloy of gold and copper, with 91.67% gold and 8.33% copper. The obverse of the coin features the face of Paul Kruger, former president of the old South African Republic, while the reverse features a springbok, one of the national symbols of South Africa. Very few proofs of Krugerrand neeeproduced by the company for collectors.
Russian Golden Chevronets: These gold coins were introduced by Russia in 1701 and were minted until 1757, after which they were replaced by the ruble. However, their production was restarted in 1925, after the end of Russian Revolution and the Civil War. Only five chevronets coins are known today, three are housed in the Museum of Goznak and the other two in the Pushkin State Museum of Fine Arts in Russia. These coins have great value as collector’s items.
Chinese Gold Panda: This series of gold coins was introduced by the People’s Republic of China in 1982. These coins are made of 99.9% gold. The design of these coins changes every year. The obverse of the coin depicts the Temple of Heaven with Chinese inscriptions “Zhonghua Renmin Gongheguo” and the year of mint. The reverse of the coin features different images of the Panda, and are changed every year. These coins come in different denominations of 25, 50, 100, 200, and 500 Yuan.
Wednesday, June 30, 2010
Numismatic Gold Coin Pricing: the US Mint’s Response
The US Mint adopted its numismatic gold coin pricing policy on January 12, 2009. The policy categorically states that the Mint can align the prices of gold and platinum pieces with the prevailing market prices of these metals, adjustable on a weekly basis. Earlier, the price adjustment used to be a long drawn process with the requirement for issuing a public notice before any such move. This procedure effectively took weeks, during which the trading in coins would remain suspended. Since the adoption of the policy, the Mint has adhered to it. Taking the procedure charted out in a notification published in the Federal Register, the average of London Fix prices over a week is used to determine the price adjustment for the collector’s pieces. However, on May 27, 2010, the authorities did not reduce the price of the gold coins in response to the decline in the London Fix gold prices.
Four days later, the Mint explained its action in a statement released on May 31, 2010. The official communication revealed that the price fixation of the coins is determined ‘primarily’ based on the Fed Register method, but not solely on it. Reiterating the mission of the pricing policy, the statement mentioned, “The new policy was adopted to ensure that the United States Mint is able to recover all costs associated with gold and platinum products, while keeping changes in prices to a minimum.” Apparently, the internal policy that comes into play only in some exceptional circumstances was invoked this week.
As per this rule, the Wednesday PM Fix is used as a reference point for assessing the trend with the view to keep the change in valuations to the least. If the average falls above the existing range, while the Wednesday Fix falls within the range, the prices will remain untouched. On the other hand, if the average is lower than the range, while the Wednesday Fix remains within the range, the prices do not fall. Such was the point in the case for the week ending with the AM Fix on Wednesday, May 26. The Mint also clarified that there exists yet another parameter for consideration. “Additional criteria based on the Wednesday PM fix address changes of more than one range, as well as spikes in the market, which could cause the average to be above the existing range, while the Wednesday PM fix is below the existing range, or vice-versa,” the statement mentioned.
Four days later, the Mint explained its action in a statement released on May 31, 2010. The official communication revealed that the price fixation of the coins is determined ‘primarily’ based on the Fed Register method, but not solely on it. Reiterating the mission of the pricing policy, the statement mentioned, “The new policy was adopted to ensure that the United States Mint is able to recover all costs associated with gold and platinum products, while keeping changes in prices to a minimum.” Apparently, the internal policy that comes into play only in some exceptional circumstances was invoked this week.
As per this rule, the Wednesday PM Fix is used as a reference point for assessing the trend with the view to keep the change in valuations to the least. If the average falls above the existing range, while the Wednesday Fix falls within the range, the prices will remain untouched. On the other hand, if the average is lower than the range, while the Wednesday Fix remains within the range, the prices do not fall. Such was the point in the case for the week ending with the AM Fix on Wednesday, May 26. The Mint also clarified that there exists yet another parameter for consideration. “Additional criteria based on the Wednesday PM fix address changes of more than one range, as well as spikes in the market, which could cause the average to be above the existing range, while the Wednesday PM fix is below the existing range, or vice-versa,” the statement mentioned.
Sunday, June 6, 2010
Analysts Predict Gold Prices Reach New Records in Third Quarter
Speakers at a precious metals conference put together by ETF Securities believe that gold prices are set for even more record highs do to the current monetary policy and issues over the current status of the euro.
HSBC analyst James Steel expects gold prices to exceed the present high of $1,248.95 with in the third quarter of 2010.
"If the issues that are affecting euro zone debt shift across the Atlantic ... that is when we would look for the dollar to weaken and for gold to (break higher)," Steel said.
Steel will on to say the the current US monetary policy is good for gold with supporting global commodities demand. The US monetary policy has reduced the opportunity cost of holding non interest bearing gold.
The euro has lost 15 percentage points to the US dollar in 2010 which has also increased the demand for gold, says Nicholas Brooks, head of research at ETF Securities.
"It seems across the board to be Europeans who are buying gold, whether it is coins or bars or ETFs," Brooks said. "The clear logic is that European investors are worried about the euro.
"The concern is what happens to the euro in the next three to five to 10 years," he added. "A lot of investors (are) looking at gold and commodities generally as an alternative."
"I don't think they are selling all their euros and buying gold, but a lot of conservative investors, very large investors, who before had never held any gold are now looking at gold."
Steele continued to add that, as long as, there are concerns about the euro than the strength of the dollar which usually impacts gold prices will not have any effect.
HSBC analyst James Steel expects gold prices to exceed the present high of $1,248.95 with in the third quarter of 2010.
"If the issues that are affecting euro zone debt shift across the Atlantic ... that is when we would look for the dollar to weaken and for gold to (break higher)," Steel said.
Steel will on to say the the current US monetary policy is good for gold with supporting global commodities demand. The US monetary policy has reduced the opportunity cost of holding non interest bearing gold.
The euro has lost 15 percentage points to the US dollar in 2010 which has also increased the demand for gold, says Nicholas Brooks, head of research at ETF Securities.
"It seems across the board to be Europeans who are buying gold, whether it is coins or bars or ETFs," Brooks said. "The clear logic is that European investors are worried about the euro.
"The concern is what happens to the euro in the next three to five to 10 years," he added. "A lot of investors (are) looking at gold and commodities generally as an alternative."
"I don't think they are selling all their euros and buying gold, but a lot of conservative investors, very large investors, who before had never held any gold are now looking at gold."
Steele continued to add that, as long as, there are concerns about the euro than the strength of the dollar which usually impacts gold prices will not have any effect.
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