Types Of Gold
Buying gold is another way to hedge against inflation or to hope to make a “killing” on the market for collectible precious metals. In an emergency situation, gold would be somewhat less liquid than silver due to its extremely concentrated value. More people are likely to have the money to exchange for some silver than to buy out gold from you. This should not deter you from buying gold if you have the means to do so, since it will still be highly valuable, but it is a fact to bear in mind.
Unlike silver, whose purity is measured as fineness, gold’s purity is measured in carats or karats, which are a unit of measure based on the weight of carob seeds. The carob is a tree which belongs to the same family as peas, and which bears its seeds in pods as well. These seeds were originally believed to be of extremely uniform weight, which is why they were used, though in fact their weight is no more uniform than that of sunflower seeds, millet seeds, or any other type of seed, for that matter.
Carats can be “translated” into millesimal fineness as an expression of the gold’s purity in percentage form, though it is perhaps fortunate that the carat is still used as a measure to help stave off the “creeping sameness” that is caused when all measures are simplified to the extreme. You are most likely to encounter 24 carat, 22 carat, or 18 carat gold, which have a fineness of 99.9%, 91.6%, and 75% (.999, .916, and .750) respectively.
You should note that 22 carat or 18 carat gold – or any gold less than 24 carat – is not necessarily a bad investment. Considering the case of the Krugerrand, which is 22 carat gold, it can be seen that the weight of the coin is modified to bring the actual weight of pure gold up to exactly 1 troy ounce. Most gold coins are minted to weigh more than 1 troy ounce by the amount that the alloying metal weighs, so that the purchaser obtains precisely the amount of gold they are looking to buy.
The alloying metals are added to increase the durability of the gold, which is otherwise extremely soft and is easily worn. Unalloyed gold has a medium yellow color. If it has been alloyed with silver, it acquires a pale sheen, while copper alloying – which produces an extremely hard, tough coin – gives the metal an orange or even red tint.
Varieties and Types of Gold Coins
Gold coins come in both bullion and commemorative form, just like silver coins. However, regardless of their exact character, their price is usually just a little above the current spot price for gold. This is, perhaps, because the price of gold is so astonishingly high – currently, a bit over $1,500 per ounce. This is in the case of uncirculated bullion coins, however – as usual, proofs are a different story, as are especially limited or rare runs of coins, such as those from mints that seldom produce mintage.
Just as with silver coins, proofs are worth quite a bit more than ordinary coins. Proofs are special coins which are struck in limited numbers for collectors, though they were originally struck for mint officials and other government functionaries to check on the quality of the coins being minted (in effect, these coins were to “prove” the quality of the coinage, hence the term “proofs”).
Proofs are struck with the dies specially polished and smoothed, which results in coin imagery of exceptional clarity and sharpness. The quality of the image is further enhanced by double striking each coin, ensuring that every detail is stamped fully into the metal. On rare occasions, this results in a slightly doubled image, but in most cases, there is no doubling, or at least none that is visible without a microscope.
Since the introduction of proofing as means of making coins more attractive to collectors, many mints have also begun to “frost” their proofs to make them more identifiable. Frosted proofs are created with chemical treatment, and are readily identifiable by the way they look – which is the whole point.
Gold rounds, which are gold “coins” struck with no monetary value by private companies who want to offer gold for sale in a readily collectible and portable form, but who cannot issue actual coinage or face charges of counterfeiting, are an excellent way to stockpile gold for its use as an intrinsic store of value. They sell for only a bit above the current spot price for gold, and are issued by such companies as APMEX (the American Precious Metals Exchange) and a handful of others.
Gold rounds are often beautifully made and contain 24 carat, 22 carat, 18 carat, or some other purity of gold, as specified and guaranteed by the manufacturer. They come in all weights, from tiny 1/10 ounce rounds which still cost close to $200, to full-sized one ounce rounds, to even larger examples, allowing them to fit into any budget.
Just as iconic as the gold coin is the gold bar, which can be used to buy this precious metal in bulk. Some of these bars are issued by banks, including the infamous and scandal-blotted Credit Suisse, while others are produced by various other manufacturers. Some gold bars are one troy ounce in weight, and provide much the same value as a gold bullion coin.
Other gold bars are considerably larger – and correspondingly more expensive. Credit Suisse and Pamp Suisse, among others, offer 10 ounce, 1 kilogram, 100 ounce, 400 ounce, and other sizes of gold bars. These are a very expensive investment – a 400 ounce gold bar would have a current spot value of approximately $610,000, for example, with an actual premium over spot which would be even higher – so these are clearly meant for only the most rarefied levels of precious metal purchasing.
More About Gold and it’s History as a Precious Metal
There are no other metals, belched forth from the mighty furnaces of the Earth’s mantle in the upheavals of ancient volcanoes, to compare with the storied fame of gold. The very word seems to ring with the promise of wealth, with the echo of peril and adventure, and with the shimmering but sometimes dangerous beauty of this noblest of metals. Eternal and essentially indestructible except with aqua regia, solutions of cyanide, or mercury, gold is prized for coinage, jewelry, and in its ingot form, with its current spot price exceeded only by that of palladium and platinum.
Gold is laden with symbolism and legend. The Aztecs, for example, believed that gold was the feces of the gods, and used much of their gold to adorn emblems of their religion, though its tenets were far from Apollonian. Gold has been used to make crowns, scepters, and the other emblems of regalia which represent power and command, and, in a more heartwarming fashion, for wedding rings to indicate the eternally imperishable, untarnished dedication of the couple to one another.
The history of gold is stained by frequent conflict, mayhem, and destruction, as humans struggle with one another to seize hoards of this precious substance from one another – or even traces of it, such as the occasional robber who has slain his victims just to acquire the gold fillings in their teeth. Gold is an excellent investment, but those who acquire it should always bear in mind that it is dangerous in a way that the other precious metals are not.
Its famous value produces an unseen but powerful aura of greed around it which distorts the thoughts of those who are aware of it, and if you purchase gold, you should tread carefully and keep your holdings as secret as possible, to avoid attracting unwanted attention.
Gold is the most ductile metal known, with its ability to flattened into sheets of incredible thinness or worked into fantastically intricate shapes. It is also the most corrosion-resistant metal known, and has a high melting point despite its extreme softness. Gold is too soft to be used for most metal objects that are subject to stresses, though it does have some high tech and industrial applications. For the most part, though, it remains a metal which is mostly valued for its speculative potential, and as a hedge against inflation.
The History of Gold as a Commodity
Gold, one of the most valuable metals as far as humans are concerned, has always been so scarce that it has been used as a currency only with great difficulty. For most of history, gold has been used alongside silver, being the preferred method of purchasing for the extremely powerful – kings, great lords, powerful temples, exceedingly rich banking families, and other members of the elite.
Its very value prevented it from being used in everyday transactions, since most people could not afford gold – and since it would be difficult to use gold to buy everyday, low cost items without the use of a molecule-sized coin. Gold was held to be worth around fifty times as much as an equivalent weight of silver for much of recorded history, with its actual value fluctuating around this norm.
The extraction of gold was carried out from the earliest days of human history, with gold ornaments already discovered that date from as long ago as 4,000 years before Christ. However, the early extraction methods left much to be desired, and production of the precious metal was highly problematic due to underdeveloped technology. Only the most readily accessible deposits could be exploited, with the mines in Nubia (whose very name comes from the ancient Egyptian word for gold, “nub”) being one of the more noteworthy production centers.
The Roman era was the period when gold production began in earnest, thanks to the Romans’ dedication to engineering and the resources they could bring to bear on it. They were the first to make use of sluice boxes and hydraulic mining, though on a typically grandiose scale, building aqueducts near the site of the gold bearing gravel and sand with a special design so that they could serve as a huge, permanent variation of the familiar sluice boxes of western gold prospectors during the Gold Rush.
The main Roman gold extraction areas were in Spain and Romania, and, the Romans being what they were, slaves were used to carry out most of the drudge work. Like silver coinage, gold coins could only be minted in Rome, under the direct supervision of the Emperor and his household. The coins produced, called first the aureus and then the solidus, were mostly 24 carat gold, meaning that they were quite soft and subject to wear.
The aureus was never debased, while the silver denarius was, leading the value of an aureus (and later on, a solidus) to change from twenty-five denarii to over four and a half million denarii – an astonishing loss of value for the silver coin as its silver content was steadily eroded by Imperial efforts to stretch a limited supply of the metal as far as possible.
Gold coins continued to be minted through the medieval, Renaissance, and Enlightenment periods, but one of the most interesting results of man’s hunger for this yellow metal during this era was the birth of chemistry out of failed efforts to transform ordinary metals into gold. The alchemists, in their zeal to produce the precious substance out of lead and other materials, added to the human store of knowledge and accidentally discovered many of the physical principles that would be used to found practical, applied chemistry slightly later in time.
The Gold Standard
Often lauded today by people who do not understand its limitations, the gold standard was adopted and abandoned several times in the nineteenth and early twentieth centuries. The effort to tie the supply of money to a fixed commodity – gold – proved to be a disaster in an era of technical advance and the flowering of economic expansion and diversification that accompanied it. Every time the economy built up to a certain point, the ball and chain of a fixed gold supply would halt it and bring it crashing down in ruins. The economic history of the 19th century is a series of crises and blighted expansions caused by reliance on the gold standard.
The limited money supply imposed by the gold standard came to a head in the 1929 stock crash and the Great Depression which followed. The United States suffered a collapse due to the economy being starved for money, and, as speculators sought to buy up the gold stocks of other countries, thus crippling their money supply as well, these nations either abandoned the gold standard or joined the Americans in ruin.
It is interesting that the countries which clung to the gold standard continued to suffer until they finally rid themselves of it, while those that abandoned it quickly were spared the worst brunt of the Depression and returned to normal very swiftly. China, which operated under a silver standard, came through the period without a ruffle in its economic life – and was, indeed, strengthened by the misfortunes of its economic rivals throughout the world.
The United States eventually saved itself by abandoning the gold standard and issuing large amounts of money, which finally got the stalled engine of commerce moving again. Gold was illegal to own for some time – though only one person was ever prosecuted for this “crime”, and the case was dropped almost immediately – and, when it returned, came back in today’s form: that of a bullion investment rather than a coinage meant mainly for legal tender.
The Gold Market Today
Gold is an exciting investment today because of its rich history, its timeless, imperishable qualities, and its scarcity-driven high price. Gold bullion coins, gold rounds, and gold bars share one trait that differentiates them from their silver equivalents – their price is almost always just slightly above spot, and they seldom or never claim a premium much above it.
Gold is an excellent store of value according to some, who note its high price, while others claim it is a poor store of value because its price fluctuates wildly, and does not change in response to inflation. Be that as it may, gold is a superb investment metal – you can buy it now, and cash in on its sale in a few years, when its prices are likely to be far higher even than they are today.