As we all battle through tough economic times we try to help each other along in any way possible. As we all do our very best to keep our heads above water, sometimes the only help we can offer to each other is a piece of advice or information taken from a trusted source. One idea that has garnered some attention during this recent economic decline is to buy gold as an investment. For many of us this was an uncharted territory of finance and investment, and we sought as many resources for guidance as possible. Here is a basic breakdown of my own diligent research and what I used to make my own purchases based upon it.
Gold Bullion vs. Gold Bars
In the simplest format of due diligence, let’s start at the beginning: terminology. What is bullion and how is it different from bars? Gold Bars are the heavy, longer than they are wide, casts of large amounts of gold. These are most often used by national governments, international banks, or national repositories the United States’ Fort Knox in Kentucky. Gold bars are too heavy for everyday use and are typically only used for very large sums of money being traded. You might be imagining some familiar heist movie that has thieves using gold bars to illustrate the large amount of money they have been able to take in a small parcel. This is an example of the value held by gold in comparison to the currency we use for everyday exchanges. Gold bars are typically 400 ounces after being cast and imprinted by the casting facility.
Modern Gold Bullion
To answer the problem of gold bars’ inefficiency for everyday use or smaller sums, gold bullion was introduced specifically for trade by individuals. Gold bullion coins issued by governments for trade or collection purposes are referred to as “Modern Bullion” because the coins are still being issued into circulation. To add even more interest to the intrigue of individuals looking to buy gold bullion, the government mints commemorative coins, national coins of symbolism, and items of particular value to collectors.
By the nature of gold as an investment, the imprinted value is not representative of its fluctuating value. An example of this: the American Gold Eagle bullion coin, presented with an imprinted value of US$50; it is actually valued at the “spot price” of gold in the most recent market reports. Market reports for current “spot prices” are given in $ amount per troy ounce, where 1 troy ounce is equal to 30.103 grams.
Historic Gold Bullion
Not all gold bullion being traded is in the form of coins that are being issued by present-day governments. These may be in the form of coins from previous generations’ circulations, when the gold standard was used by nations throughout the world, or in a multitude of other forms dating much farther back. These gold bullion pieces are referred to as “Historic Bullion” or sometimes “Obsolete Bullion”, considered to be rare and valued for their rare status in addition to their inherent monetary value. Before paying any listed price for a piece that is termed “Historic” or “Obsolete” it’s very important to research the piece and verify that it is in fact of valuable gold weight. Gold is incredibly malleable and as a result was often mixed (or “alloyed”) with other more sturdy metals for circulation as currency.
If your purpose in buying a historic piece is for investment purposes, the amount of pure gold in it will be the priority basis to determine value. If you are a collector and your interest is in the context or significance of the piece, then the amount of actual gold by purity will be less important and your research for valuation will be based on contingencies to collection value.
24 Karats
Most of us are familiar with the karat system, if only by name. We’ve been conditioned to appreciate “24 karat” gold, but surprisingly not many of us understand why it is so valued. The term karat is a way to express the purity of gold. This is especially important when valuing gold bullion pieces; an example is given in our previous description of historic gold bullion being alloyed with other metals to stabilize the malleable traits of gold in purest form. The reason that 24 karat (24k) gold is so coveted is representation of 99.99% purity of the gold used, the most pure that a piece of gold can be attained. Pieces of 24k gold should be handled as infrequently as possible, due to their immense malleability. Examples of coins that can be purchased at 24k purity include:
- American Buffalo
- Canadian Maples
- Australian Kangaroos (stamped as “Nugget” with Kangaroo emblem)
- Chinese Pandas
22 Karats
At slightly less purity is 22 karat (22k) gold, rated at 91.6% pure gold and is most often alloyed with silver or copper. These pieces maintain the appearance of gold but aren’t subject to tarnishing or the damage that more pure gold pieces often incur as a result of gold’s malleable quality. Examples of coins that can be purchased at 22k purity include:
- American Eagles
- British Britannias
- South African Krugerrand
21.5 Karats
The lowest purity rate offered to gold bullion pieces is 21.5 karat (21.5k) gold, rated at 90% purity. This purity is most commonly seen with historical bullion pieces and maintains a muted yet pristine gold shiny hue. Examples of coins that can be purchased at 21.5k purity include:
- American Coronet Head Eagles & Half Eagles
- 19th & 20th Century Austrian & French Francs
- Austrian Corona 10’s
Gold is offered in less pure states, the most common example being jewelry which is most often rated at 75% purity, or 18 karat gold
These basic fundamentals of gold and how it values based on both the style it’s available and the purity can propel you earnestly into your “golden days.” Understanding how to fundamentally evaluate gold pieces based on market price will offer you a confidence when looking to buy gold for investment. You now have a discerning judgment ready to further research topics you might need to determine a personal value of collector pieces. When you are ready to buy gold remember that an old piece of gold is not an inherent piece of wealth, nor is a piece of gold in current circulation without investment value.