Should you buy 22 & 24 karat gold jewelry?

US-PDGov

 By Sarah Kumar

 

Pure gold is too soft for making jewelry that will actually be worn.  It is too easily bent and damaged.  For this reason, most jewelry is 14 to 18 karat, and is alloyed with base metals such as silver, copper, nickel, and zinc to make it stronger, and more durable.  Copper is the most commonly used base metal, yielding gold with a redder color, or rose gold.  White gold is made with palladium or nickel.

Coins made of pure gold are generally only for investments or collectors and would be displayed, but not handled, as the gold will wear down too readily.

Carrots, carats, karats

Carrots are a crunchy orange vegetable, Carats are units of weight for gemstones, and Karats, when talking about gold, are a measure of its purity, not it’s weight.  Each karat is 1/24th of the whole, so 24 karat is 100% or pure gold.  Legally, in the United States, to be called gold, it must be a minimum of 10 karat, even though that is less than half.

The reason you are more likely to find jewelry made from 14kt gold, it that it is much more durable than purer forms of gold and is more suitable for high wear situations.  Rings are more often made of 10kt because softer gold worn on the hands will be damaged to easily.

Shopping for gold jewelry in India

Just like shopping in the Gold Souk in Dubai, gold in India is sold by weight in grams, plus an additional charge for workmanship, they call this “making charges” depending on the intricacy of the jewelry.  The making charge will be an amount in rupees multiplied by the weight in grams of the piece.  Most jewelry will be made of 22 karat gold, as this is the quality preferred by Indians.  You will find pieces made in yellow or white gold, though the white is still not as popular there.  

The price of gold fluctuates from day to day, so you can find out the price that day before you go shopping.  Normally, shopkeepers will not budge on the price per gram, that is set internationally, but you can haggle over the making charge.  In fact, the first amount a shopkeeper will offer is set higher, sometimes even double, because it is assumed you will negotiate for a lower price.  You’ll see a vast difference in the making charge, with simple items like bangles having a lower price than jewelry set with stones.

How to identify hallmarked jewelry

According to the Bureau of Indian Standards, there should be five visible marks on all jewelry indicating that it is hallmarked.  These are, the logo of the Bureau, the year of hallmarking, the purity of the gold, a mark identifying the jeweler, and the logo of the lab that hallmarked the piece.  The purity is represented by the number 916 for 22 kt.  Jewelers will provide you with a magnifying glass so you can see the markings on the back of the jewelry.

Always insist on a bill of sale which will breakdown the price of the jewelry into the price of the gold content and the making charge.

About the author: Sarah Kumar is a writer with a passion for Hindi culture and luxury. She writes about fashion, hospitality and accesories.

The benefits of converting part of your 401(k) to gold

By David Matthews

Using your 401(k) funds wisely will allow you to have the most ideal retirement possible. After a few successful investments you could earn enough profit to make a down payment on a beautiful property and take an amazing vacation as soon as you’re able to walk away from your job. On the other hand, if you leave your 401(k) funds untouched and let them depreciate along with the value of the dollar, you’ll probably have a lacklustre retirement, living month to month off of a substandard income that isn’t much better than the revenue you were generating as part of the workforce. Make your retirement worth the wait by taking advantage of the following 3 benefits of converting part of your 401(k) to gold.

Cashing in on the Gold Boom

As the global economy continues to struggle more inventors are buying gold to safeguard their assets, resulting in a higher demand. Mining companies are expanding their operations in order to keep up with the supply, increasing their cost of operations, and since gold is finite resource the supply is ever-dwindling. Rising demand and decreasing supply is contributing to gold’s continual rise in value and is setting up a situation that will probably make thousands of smart investors very rich. If your current 401(k) plan with your employer allows for gold investments you can initiate the process very easily. If not, all you need to do is open an IRA and rollover some of the funds in your 401(k) into the new IRA account to begin investing.

Increased retirement funding

At the moment your 401k fund is a bit like a fireplace mantle, it is sitting there collecting dust until you’re able to use it. If you choose to withdraw it early you’ll have to pay a 10 percent early withdrawal fee, and you’ll also have to face other taxes and penalties depending on the situation. However, you can choose to put those funds to good use right now without withdrawing them by investing in gold and capitalizing on the inevitable gold boom. Imagine being able to buy whatever you want and living like you’re permanently on vacation! This is the type of lifestyle you can have during retirement if you take advantage of the gold boom and buy a large amount of gold before the price peak occurs during the next decade.

Portfolio protection

Instead of investing in risky instruments like stocks, exchange-traded funds (ETFs), or mutual funds, consider the advantages of securing a portion of your retirement investment portfolio by purchasing gold with it. Once you have the gold bullion in your possession, or stored in an online holdings account, you can be sure that those assets will not depreciate over time. In fact, your funds will most likely continue to grow until the price of gold peaks between 2015 and 2020. Essentially, investing in gold lets you protect your retirement form mediocrity by safeguarding a percentage of your portfolio from depreciation and facilitating optimal returns.

David Matthews is a 401(k) investment specialist and retirement advisor who conducts market analysis and writes for Gold-401k.org.

Investing in gold coins

Gold coins are an investment that can and do appreciate, depreciate or keep a steady value depending on when they are invested in and liquidated. Gold coins are a dynamic investment that have a reputation for being 'safe' and 'stable' because gold traditionally holds value, and gold is by virtue of its rarity, in short supply. In other words, there are some reasons to invest in gold coins, however there are also good reasons not to.

Gold coins experience price fluctuations as does the spot gold price, and they are subject to inflation that is the very thing some investors buy gold for in the first place. This is because gold offers inflation protection when its price rises due to the weakening of major currency such as the U.S. Dollar. Gold coins are also a more complex investment than they appear on the surface due to elaborate global economics, historical asset diversification, and market mechanisms. This article will discuss the dynamics of gold coin investing in terms of advantages and disadvantages.

Advantages of investing in gold coins

Global gold coin demand increased 40% from 137 tons to 191 tons between 2007 and 2008 as per the World Gold Council's gold statistics. Since demand is a driver of price when supply is limited, the increased demand in relation to price is positively correlated. In recent years, gold has appreciated in value a great deal. There is a lot of analysis and thought in to the reasons why this has happened. Among those reasons are those listed below:

Image source: Petr Kratochvil

Reasons to invest in gold coins

• Gold supply is limited
• Gold prices rise during and with inflation
• Traditionally gold is a safe asset
• Lower currency values mean higher gold prices
• Gold coins may have aesthetic and collector appeal
• Gold is forecasted to continue rising (2)

In addition to the reasons for buying gold coins are the types of gold coins on the market. This is an important aspect in gold coin purchasing as the type of coin can affect its value, liquidity, and availability. Some gold coins are only partially gold with other metals within the coin, other gold coins are almost 100% gold. Gold bullion coins are considered investment grade and are 99.9% gold and between 22-24Karats.(3) Being aware of the percentage and authenticity of gold within a gold coin is an important aspect in its valuation, as gold is valued by weight so a mixed gold coin trader may charge more or less for gold depending on their skill and objectives in assessing and valuing gold.

Types of gold coins

• Rare and historical gold coins
• Collectible gold coins
• Gold bullion coins
• Gold and base metal coins

Disadvantages of investing in gold coins

The disadvantages of investing in gold coins are reasons why investing in gold coins is not a simple decision if one is expecting a guaranteed large profit. The very fact that reasons exist not to invest in gold is a sign that gold is not necessarily as safe an investment as some investors may like to believe. These disadvantages of investing in gold are presented below and are not few and far between. Three of these points are elaborated upon to illustrates the complexity of gold investment.

Reasons not to buy gold coins:

• Gold coins are subject to premiums and taxes
• The global recession is ending
• Gold prices are not historically constant
• Gold is subject to inflation just like currency
• Gold is one of many valuable assets
• Control of gold supply affects prices
• Historical reasons for buying gold are invalid

The type of gold affects its worth

The type of investment in gold may not be as profitable as investment in other types of gold such as gold futures, gold exchange traded funds (ETF's), gold mining company stocks and non-coin gold bullion. This is because of dynamic business, economic and market variables that compete against other types of assets.

Gold is one of many valuable assets

Back in 1500 C.E., gold may have indeed been a good investment, however times do change and gold is no longer the only precious metal on the planet, nor is it only one of few assets to invest in. In the modern era, gold constitutes a mere fraction of global worth and investment choices. Additionally, gold is no longer used as a common currency so the gold has no common purchasing power. In other words, gas pumps, automated teller machines, internet shops and online brokerages don't except gold as currency so you can't use it.

Gold coins are subject to inflation:

The same logic that tells investors to buy gold coins can also be a reason not to buy gold coins. For example, inflation adjusted gold prices indicate the true value of gold reached a peak in 1980, this was a time when inflation was high, so naturally the price of gold became high.

To buy a lot of things gold has to be converted back to cash that has inflated. So, if an ounce of gold purchased in 1970 cost in the vicinity of $30 USD, however, those $30 USD adjusted for inflation would be worth $164.58 2008 U.S. dollars using an online inflation calculator. This means, $1000.00 estimated 2009 gold price per ounce/$164.58=6.07 X $30=$182.28. Thus gold has only increased $17.70 or 11% per inflation adjusted ounce within the last four decades.

Another competing investment such as 10 shares of International Business Machines (IBM) cost approximately $169.20 in 1970. Those same 10 shares would be are worth around $1,200.00 USD in the middle of September 2009 or $708.80 in 2008 inflation adjusted dollars. Adjusted for inflation using the same inflation calculator, those 10 shares of IBM would be worth $92.82 in 2008 dollars when the price per IBM share fluctuated between $83-$130 USD per share. of about $1200/$708.8=1.693 X $169.20=$286.456. Thus 10 shares of IBM have increased in value by about $117.256 or around 69.4% in inflation adjusted dollars.

Sources:

1. http://www.inflationdata.com/inflation/Inflation_Rate/Gold_Inflation.asp
2. http://libertyvalley.com/rough_projection_gold_and_silver_prices
3. http://www.taxfreegold.co.uk/22carator24carat.html
4. http://catalog.usmint.gov/
5. http://www.goldprice.org/

Safest Way to Buy Gold

The safest way to buy gold addresses value, transportation and storage of the gold. This is because the amount of gold, how its price changes over time, and the market, political and economic conditions in which the gold is bought all affect the relative safety of the gold purchased.

The safest way to buy gold depends on more than one factor, specifically the objective of buying gold, the length of time the gold is to be held, the amount of gold that is to be purchased and the aforementioned purchasing environments. Ideally the safest way to buy gold is when the price is at its lowest and in bullion form either through exchange or physically, and via a safe and stable banking or dealing medium.

Image source: Petr Kratochvil

• Buying gold when prices are low

In terms of value, a safe way to buy gold is often during an economic boom and rising 'secular' market when the value of currency is rising. The reason being, gold prices tend to rise when currency declines in value and when the strength of an economy weakens. In societies where the value of money is unstable, gold is often purchased for its ability to hold value relatively well.

Buying gold when prices are low is a safer long-term gold buying strategy as the price of gold could continue to decline and hold at a low price for several years before rising again. For example, if an ounce of gold were purchased in 1947 it wouldn't have begun recovering significant value until the late 1960's to early 1970's.(2) Similarly, if gold were purchased in 1984, its value would not have appreciated until approximately two decades later.

In the United States the value of gold has experienced a tremendous incline since 2002 when the value of dollar began to decline.(1) A similar pattern took place in the 1970s, when the price of gold also rose. A part of the reason for this rise in the price of gold was the dropping of the gold standard in the U.S. and instituted by President Nixon. The trend didn't reverse until approximately 1983, when the value of the dollar again began to rise.

• Storage and issuance of gold ownership

When storage, record of purchase and transportation are a matter of concern, a safe way to buy gold is to purchase gold stock. Gold stock is a share position in a company that is involved with gold production and distribution. For example, Barrick Gold (GLD) and Newmont Mining (NEM). If the company is a risky investment however, and one chooses to diversify that risk, a gold exchange traded funds such as the Spider Gold Fund ETF (GLD) may be a safer option. When buying gold through stocks, other factors come into play such as the company's financial solvency, strategic planning, annual revenue etc. If the companies aren't safe investments, neither is the gold which they mine.

• Economic and political instability

To safely buy gold during times of economic and/or political instability, physical purchase and possession of gold may be safer than through a national institution. Gold bullion is authentic refined gold either in coin or bar form. This type of gold is sold by 'bullioners' and in some cases is minted by the Government. Gold bullion is 99.5% or a higher percentage.(3) 24 karat gold is the highest percentage of gold available.

Purchasing gold bullion coins with a numerical face value adds value and cost to the price of the coin. Physical gold bullion may also be a little higher in cost than the commodity form. Buying gold bullion through 'bullioners' and accredited dealers is safe as long as the gold being shipped is insured and cost reimbursed should the gold be lost. When investing in gold bullion, an issuing stamp certifying the gold's authenticity ensures one is safely buying gold.

• Buying gold through commodities exchange

Another safe way to buy gold is through a secure, regulated and stable commodities exchange such as the Chicago Board of Trade (CBOT) when the spot price of gold is at long term low value. Commodities are traded by producers, and for commercial reasons. This method avoids transportation and delivery of gold if the gold commodities futures are not delivered. These financial instruments are used more to hedge prices in the short term and are not always held for long periods of time.

Sources:

1. http://www.investortrip.com/images/dollarindex
2. http://www.measuringworth.org/datasets/gold/result.php
3. http://www.monex.com/