Gold Investments

By Bruce Tintelnot

Gold has always been sought after throughout the ages due to it's beauty, and scarcity; it's always valuable.  The gold markets today are interesting and diverse, ranging from the actual physical ownership of gold to to owning shares of stock in gold producing companies, and mutual funds.

Jewelry

Jewelry is the most common form of gold ownership. Most jewelry is purchased for personal adornment, and accounts for seventy five percent of the gold purchases worldwide. The purity of most jewelry is 14 karat to 18 karat with 24 karat being .999 fine gold. It can be purchased in retail stores, estate auctions, or in shops that deal in antiques and collectibles. Prices can vary on the jewelry market for a particular item, and depends quite a bit on the fineness of the workmanship, the collectability, or uniqueness, of the piece, and the price of gold on the gold market.

Gold Coins and Bullion

Gold bullion coins are another form of gold that can be purchased for investment purposes and physically held by the buyer. Governments produce these as legal tender, which means that they, and the buyer, don't have to go through international trade legalities. The purity of gold can vary among nations. The American Gold Eagle at .9167 (22 karat), is the long held English standard for gold coins that were originally intended for circulation as currency. The Mexican Libertad is .999 fine (24 karat). These coins are valued for investment purposes using their gold content. Bullion coins can be purchased at the Central Banks of most nations that offer them, the U.S. Mint, and coin dealers (storefronts, or online),

Numismatic proof coins are not bullion coins. These coins are usually historic collectible coins, and are valued by their rarity, design, and the fineness of a finish, rather than their gold content. The numismatic coin market is quite different from the gold bullion market. Don't get the two confused, especially if your dealing with a coin dealer.

Gold Bullion Bars

Gold bullion is another form of gold that is the most economical way to purchase it. It's usually used in large transactions that involve the physical delivery of gold; most common among Central Banks where it"s stored as gold reserves. Most bars of bullion are 1,000g, or larger, and the purity varies among nations from .995 to .999. Bullion bars cast from gold coins are called coin bullion, and their purity can vary more than standard bullion bars.

Small gold bars are much smaller than bullion bars, and are commonly used for sale to the public by gold and coin dealers, mints, or some governmental outlets. The metal is stretched into strips when it's firm enough to do so during the casting process, and cut and stamped with necessary information. The purity of a gold bar is about the same as for bullion bars, .995 to .999. Their size is flat, and weighs 1000g, or less. They are usually purchased by jewelers, and investors who like the small premium in relation to the fine gold that they contain.

Gold Funds

Shares of various kinds of gold related funds, such as Mutual Funds and Exchange Traded Funds (ETFs),  can be purchased around the world on various exchanges. Gold investors can buy shares of gold mining companies, gold futures (spot gold), gold bullion, and similar investments. These investments usually include the risks of investing in their prices which usually adds to their volatility.

Buying shares of Mutual Funds or Exchange Traded Funds (ETFs) are a way of actually physically owning gold without having to assume storage costs. The amount of gold that they represent varies with required minimum purchases. The share price of an ETF is expected to closely follow the price of gold itself.

Gold Certificates

Gold certificates can be purchased at banks that offer them around the world. Each certificate represents ownership of a designated amount of gold that the bank actually holds.

Gold Accounts

Gold accounts are offered by bullion banks (banks that lease gold from Central Banks). There are two kinds of accounts: Allocated and unallocated accounts. The allocated account allows the investor to own a large amount of gold that is specifically designated to him, and restricts the banks actions regarding the leasing of it to other banks. An unallocated account does not carry that kind of restriction.

Structured Products

The Structured Products Market is a market for large investors. A Forward is an investment like a future, but is directly negotiated between the two parties involved in the transaction. Forwards can't be transferred to someone else.

Gold Linked Bonds are sold by the largest bullion dealing institutions. They're like other bonds, but their value is backed by gold.

Structured Notes are used to customize an investor's portfolio to their risk tolerance, and the market conditions. It's not unusual for the investment to be divided between options, depending on the market, and fixed income products that generate a yield.

Gold ownership presents many choices for a potential investor. The most direct and simplest form of ownership is the actual physical possession of this commodity. Ownership can become more indirect, as one enters the world of market transactions; utilizing the services of a financial advisor can be very helpful. Also, as with any investment, one should keep in mind the ancient Roman saying regarding business transactions, "To the buyer goes the risk."