Don't get me wrong - I am certainly not against buying gold but as an asset class it is worthwhile seeing how it behaves differently to other investments such as stocks, bonds or real estate. When you buy a stock in IBM you receive a yearly dividend (hopefully) and (hopefully) the value of the stock goes up over time, the same when you buy real estate as an investment. With Gold it is a little bit different. The reason why gold is seen as a safe haven is that it is a store of value, it never loses its purchasing power. There is an oft quoted adage that an ounce of gold in Roman times would have bought an army officer a fine suit of clothes, that in Shakespeare's times an ounce of gold would have bought a good quality set of clothes and today with gold at just over $1000 this would buy you a good Armani Suit. BUT just as over time it does not lose purchasing power it does not increase purchasing power. The real long term nature of gold is as Insurance and not as an investment. As wars are fought, governments collapse, economies tumble people have rushed into gold because they know it is a place where they can preserve the wealth they have.
Yes you can point to gold's meteoric rise over the last 8 or so years and say what a great "investment" it has been but if you see gold as insurance and mainly buy it as that then you will be able to withstand volatile swings in price that often occur in the gold market, you will be less worried about day to day actions in price and you will perhaps see that the price of gold did not go up just the value paper money in your wallet went down.
<b>Gold Will Protect Me From Coming Super or Hyperinflation - Or Maybe Not</b>
Many gold commentators talk about excessive money printing by central banks, how it will inevitably lead to sky high inflation even hyperinflation and how gold will protect you. Well yes and no. Gold is not such a immediate hedge against inflation that everybody thinks as much as it a hedge against political risk. When Gold skyrocketed to $850 in 1980 it was not a reaction to high prices so much as to the uncertainty surrounding the future of the dollar. In the following years inflation still persisted but the gold price plummeted. Gold is a hedge against inflation really in the long term because in the long term it retains its purchasing power but will it rise 10% just because inflation rose 10% - history is unclear on that.
<b>There is A High Risk of a Worldwide Currency Collapse - So Gold is the Only Safe Haven????</b>
It is February 2010 and Greece is on the brink of bankruptcy with Portugal, Italy, Ireland and Spain all waiting in line to follow suit, if these countries go down then they will take many others with them. Countries like Germany will also be drastically effected because they lent the money, kept part of the debt and then sold the rest on to Insurance companies and Pension Funds along with insurance called Credit Derivatives. States in the USA like California and Illinois are in worse shape than Greece. The whole worldwide financial system is massively intertwined through a complex system of derivatives, there was massive over borrowing and someone will have to pay the piper. There is therefore a certain inevitability about a full on currency crisis making gold ever more attractive because it is no one's liability it cannot be printed ad infinitum. However much they try governments cannot corrupt it.
However inevitable a currency crisis or collapse may seem to you, for there to actually be one the majority of the market or at least the big players in that market have to agree with you. While the fundamentals are in place it can take a long time for the mass to catch on to those fundamentals. You may not be fooled by bailouts and government posturing but in the short term many people are. So for you to be proved right may take many years with lots of twists and turns.
What we face at the moment is a huge credit collapse never seen on such a magnitude before so who knows how it will play out. If you remember back to 2008 this particular crash caused the gold price to collapse and the dollar to strengthen -so in the short to medium term this could happen again. Once again if you see gold as insurance - the short to medium term does not matter so much.
<b>Gold as Protection during a Financial Crisis</b>
If gold is your only hedge against financial crisis then this could be playing with fire a little. Think that there are many scenarios where having gold will not help because no one has any use for it, no one wants to exchange their bag of wheat for your ounce of gold because well you cant really eat it. Gold is a great store of value but it is not the only one. Food, basic clothes, seeds, - essentials that people always need are also great stores of value with a much wider market so if you are motivated towards buying gold because you envision financial catastrophe then it may pay to have a good think about other stores of value. The great thing is about having a large store of food and essentials is that regardless what happens YOU will always need then. So it is never money down the drain!!!!
<b>Bartering with Gold Could Prove Very Expensive</b>
If you are investing in gold because you envision you may be bartering with it some day - well think on. I'm sure someone will swap a loaf for an ounce of gold but that will be a mighty expensive loaf!!!! Look at having precious metals in smaller denominations - junk silver coins - old US coins that have silver in them are a great alternative. They are easy to buy from any coin store and are very low denomination (a silver dime has less than$2 worth of silver in it )
Here are some links to articles that may be of use
<a target="_new" rel="nofollow" xhref="http://www.ehow.com/how_6000173_buy-junk-silver-coins.html"> How to Buy Junk Silver Coins</a> <i>This article is meant for informational and educational purposes only it does not constitute advice of any kind - financial or otherwise.</i><i><a target="_new" xhref="http://www.in-gold-we-trust.info"> In Gold We Trust</a> is a website offering information on buying and selling and collecting gold and other precious metals. <a target="_new" xhref="http://www.in-gold-we-trust.info"> The Scrap Gold Calculator</a> will give you up to the minute scrap gold prices,calculate the price of all your gold coins, junk silver coins, old US coins etc</i>
Over the last few year we have seen a meteoric rise in the price of gold and equally a rise in the number of people looking to take advantage of this by cashing in their old jewelry. Daytime TV seems jam packed with infomercials encouraging us to part with our gold rings and necklaces or you may have received invitations from friends to come to their gold party where your gold jewelry is valued on the spot and you are offered a price there and then.But are gold parties or mail in cash for gold companies the best and only real way you can sell your jewelry. This article seeks to outline some options you have in selling your gold and what information you might need.
Whichever way you decide to sell your gold jewelry it is important for you to know what the value of your gold is. The first thing you will probably realize is that when you originally bought your gold ring or necklace it had a huge mark up. For example a ring that may cost over $1000 retail may typically only have around $100 of gold in it. If you mail your gold in to a cash for gold company or sell it at a gold party, the purchaser is only interested in the gold content of your jewelry and is not going to turn around and sell it as a ring or necklace. Your gold is therefore referred to as scrap gold .Typically operators will get a bulk lot of scrap gold together and ship it off to a gold refiner where it will be melted back down to pure gold - so you really need to establish first of all what is the gold value of your items. If you know the karat value of your gold jewelry and its weight then you can easily find out the current value by going to sites such as The In Gold We Trust Scrap Gold Calculator
Once you know the scrap gold value of your items it will be easier for you to get the best price for your gold. It is highly unlikely that mail in cash for gold companies or gold party companies are going to give you the best deal for your scrap gold. I mentioned earlier that they will ship off the scrap gold the refiner who will melt it down to pure gold. The refiner takes a 5-10% cut for his efforts then the company need to cover its over heads and make a profit leaving a lot less to be paid to you for your gold jewelry.
Luckily these are not your only options. The best option would be to try to sell it as second hand jewelry rather than as scrap gold. Ebay is a great place for this and selling can be fun!!!.Taking the time to open an account and taking a picture of your gold ring may mean the difference between you getting $80 as scrap gold or getting $300 by sellling it as second hand.
If you don't have any luck selling it as second hand jewelry dont worry - there are many ways for you to sell it yourself as scrap gold - remember for every person looking to sell their gold jewelry there are many people looking to invest in gold and buying scrap gold can be an attractive way for them to do that. - Ebay is once again a great way to do this - you just need to advertise it as scrap and know the karat value and weight. You are more than likely going to get the spot gold value or higher for it. - You could also advertise it on Craigslist - there are many individual private buyers of scrap gold who frequently scour Craigslist for good deals. Because you do not have to pay any fees you could offer 95% of spot value and still be doing much better than other avenues. -
Your local coin dealer or second hand jeweler will also probably but it from you. Yes they will also send it off to the refiner but they are in a better position to give you a better price as their overheads are lower (they probably have not had to pay some B Movie Star or Soap Actor to appear on an infomercial!!!) The key to selling your scrap gold is to inform yourself of the price - so visit the Scrap Gold Calculator to get up to the minute scrap gold prices and good luck!!!!
Mailing in gold or selling your scrap gold to these companies is probably not the best way to sell your jewelry and certainly not the only one. You have to think that all the cash for gold company is going to do is ship sent in gold off to the refiner. The most the gold is ever going to be worth is the spot price of gold. The refiner takes their cut (between 5-10% typically) and you cash for gold company has to cover their costs ( getting Anne Diamond to appear on an advert amongst others) and make some profit meaning that what you get at the end is going to be a lot shy of the gold vlaue of your jewelry.
I am not sure that the Cash for Gold Companies are a rip off but that people have an over inflated idea of what their jewelry is worth based on what they paid for it. When you bought your ring etc your bought it for its utility and emotional value. A thick 14 karat wedding band may have set you back originally 600 pounds or $1000 but this ring that lets say weighs 6 grams only has about 80 pounds ($120) worth of gold in it and your cash for gold company will only pay you a fraction of this.
Other and perhaps better ways to liquidate your jewelry would be Ebay where you can easily get over the gold spot price or simply take your jewelry to a local second hand jewelers or coin shop who are likely also to ship it off to the refiners but have not had to pay Anne Diamond to convince you to part with your rings and necklaces therefore offering you a better price.
Before you do anything always make sure that you know how much your jewelry is worth - i.e the scrap gold value. <a xhref="http://www.in-gold-we-trust.info">www.in-gold-we-trust.info</a> has a scrap gold calculator allowing to easily calculate the value of any gold jewelry. Check out this You tube video explaining how to use it
James Turk from Gold Money Talks about the Risks of Paper Gold