Friday, July 29, 2011


The desire to buy gold is not hard to understand; compared to other valuable substances, there is precious little gold in the world. And with its undeniably brilliant sheen and deep, rich tones, it's also easy to understand the appeal of owning gold as a tangible, physical investment.
At its best as an investment, gold is both physical and very liquid (it can be bought and sold fluidly). But you can buy gold in different forms, and these forms tend to differ in their liquidity.
Bullion Coins and Bars - Dealers sell gold bullion bars in various weights from 1 ounce to 100 ounces or larger. You can also buy gold coins such as the American Eagle through dealers, brokerages and some banks. The U.S. Mint has a list of authorized dealers. You'll pay a commission or premium, and most dealers have purchase minimums. Be sure to study the differences between bullion gold coins, which are valued according to the market price for an ounce of gold, versus coins that have a collector's value.
Mining Shares - Stocks are an investment in a publicly traded company. When it comes to gold stocks you're investing in a mining company. Gold mining stocks can be more volatile than the exchange-traded funds. Gold shares are potentially risky but simultaneously an exciting investment. They tend to be reasonably correlated to gold prices but typically much more volatile, and subject to many variations which are independent of bullion market forces.
Exchange-Traded Funds - Gold can carry concerns about authenticity and purity, as well as storage and insurance costs. But you can shed those worries and still own a chunk of gold by investing in exchange-traded funds that make buying and selling gold bullion as easy as buying and selling stocks.
Futures Trading - Futures trading is the basic action of entering into a legal contractual agreement with another (known or usually not known) individual to exchange money or assets of some value at some time in the future and with the pre-determined price (called a futures price) based on the underlying asset. Such an asset could be stock, an interest rate even or, in this case gold. It is an agreement to exchange the underlying asset, or equivalent cash flows, at a future date.
Jewellery - With the exception of gold chains, buying gold jewellery can be a risky investment. You are usually are buying the beauty of item, not the gold value of the item. Jewellery has two advantages and many big disadvantages. It is the form of gold which gives some benefit from ownership, namely the enjoyment of being worn and it is very easy to buy. The disadvantages are the acquisition costs are very, very high. Retail jewellery is often marked up by 300% or more in the shops. All pieces are different and their values are subjective. It is the most easily stolen form of gold.
E-Gold - The basis of e-gold is that international debts, and even some domestic debts, can be paid more efficiently in gold than in foreign currencies, which have to be converted back into host currency through the bank. So wherever a supplier and a customer both have an e-gold account they can transfer ownership of gold between themselves across the internet, and this constitutes payment. To get started you use your own currency to buy grams of gold. Real gold is delivered into a depository, and is credited to your own e-gold account. You then get a secure internet identity, and thereafter you can instruct your e-gold provider to debit your e-gold account in favour of your supplier - another account holder in the system. Whatever you have bought from them is delivered to you independently. It is primarily a payments system, but it doubles as a route for owning and storing gold.
The Gold 'FIX' - The Gold Fixing of London is where the standard price of gold is set twice daily. The Gold Fixing (also known as the London Gold Fixing or Gold Fix) is the procedure by which the price of gold is set on the London market by the five members of the London Gold Pool. It is designed to fix a price for settling contracts between members of the London bullion market, but informally the Gold Fixing provides a recognized rate that is used as a benchmark for pricing the majority of gold products and derivatives throughout the world's markets. The Gold Fixing is conducted twice a day by telephone, at 10:30 GMT and 15:00 GMT.

1 comment:

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