Of all precious metals, gold is the most popular as an investment. Investors generally buy gold as a way of diversifying risk, mainly through the use of futures and derivatives contracts. The gold market is subject to speculation and volatility like other markets. Compared to other precious metals used for investment, gold has the most effective shelter and hedge properties in a number of countries.
Video Gold as an investment
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Gold has been used throughout history as money and has become a relative standard for currency equivalents specific to the economic or state areas, to date. Many European countries applied the gold standard in the later part of the 19th century until it was temporarily suspended in a financial crisis involving World War I. After World War II, the Bretton Woods system pegged the United States dollar with gold at the rate of US $ 35 per troy ounce. This system existed until Syok Nixon 1971, when the US unilaterally suspended the US dollar's direct convertibility into gold and made the transition to the fiat currency system. The last major currency separated from gold was the Swiss Franc in 2000.
Since 1919 the most common benchmark for gold prices is London gold, a twice-daily call to representatives of five bullion trading firms on the London bullion market. In addition, gold is traded continuously around the world based on the intra-day spot price, which comes from the worldwide over-the-counter gold trading market (code "XAU"). The following table sets the gold price for various assets and key statistics within the five year interval.
Influencing factor
Like most commodities, gold prices are driven by supply and demand, including speculative demand. However, unlike most other commodities, savings and disposal play a bigger role in influencing prices compared to their consumption. Much of the mined gold still exists in accessible form, such as gold and mass-produced jewelry, with a value slightly above its subtle weight - making it almost as liquid as bullion, and can return to the gold market. By the end of 2006, it was estimated that all the gold ever mined reached a total of 158,000 tonnes (156,000 tonnes long; 174,000 short tons). Investor Warren Buffett says that the total amount of gold in the world above ground can enter the cube with a side of only 20 meters (66 ft) (which is roughly consistent with 158,000 tonnes based on 19.3). However, estimates for the amount of gold that exists today vary significantly and some suggest the cube may be much smaller or larger.
Given the huge amount of gold deposited on the ground compared to the annual production, the price of gold is mainly influenced by changes in sentiment, which affect the supply and market demand equally, rather than changes in annual production. According to the World Gold Council, annual gold mine production over the past few years has been close to 2,500 tons. Around 2,000 tons went into jewelry or industrial/dental production, and about 500 tons went into retail investors and gold funds traded on the exchange.
Central banks
The central banks and the International Monetary Fund play an important role in the price of gold. At the end of 2004, central banks and official organizations hold 19% of all gold above the ground as official gold reserves. Washington's ten-year deal on Gold (WAG), dating from September 1999, limited gold sales by its members (Europe, United States, Japan, Australia, Bank for International Settlements and International Monetary Fund) to less than 500 tonnes a year. In 2009, the agreement was extended for the next five years, but with a smaller annual sales limit of 400 tons. European central banks, such as the Bank of England and the Swiss National Bank, have been major gold sellers during this period.
Although central banks generally do not announce gold purchases in advance, some, such as Russia, have expressed interest in growing their gold reserves again by the end of 2005. In early 2006, China, which holds only 1.3% of its gold reserves, they are looking for ways to increase returns from their official reserves. Some bulls hope that this indicates that China may change its position more than its ownership into gold, in line with other central banks. Chinese investors are beginning to pursue gold investments as an alternative to investment in the Euro after the start of the eurozone crisis in 2011. China has become the world's largest gold consumer in 2013.
It is generally accepted that the price of gold is strongly related to interest rates. When interest rates rise, the general trend is the price of gold, which is unattractive, falling, and vice versa. As a result, gold prices can be closely correlated with the central bank through their monetary policy decision on interest rates. For example, if a market signal indicates the possibility of prolonged inflation, the central bank may decide to raise interest rates, which could lower the price of gold. But this is not always the case: after the European Central Bank raised its interest rate slightly on April 7, 2011, for the first time since 2008, the price of gold went higher, and reached a new high one day later. Similarly, in August 2011 when interest rates in India were at their highest level in two years, gold prices also peaked.
The price of gold can be affected by a number of macroeconomic variables. Such variables include the price of oil, the use of quantitative easing, currency exchange movements, and yields on equity markets.
Hedging on financial pressures
Gold, like all precious metals, can be used as a hedge against inflation, deflation, or currency devaluation. The unique feature of gold is that it has no default risk. Like Joe Foster, portfolio manager of the New York-based Van Eck International Gold Fund, described in September 2010:
Currencies of all major countries are under heavy pressure due to massive government deficits. The more money pumped into this economy - the printing of money at the bottom - the less valuable the currency.
Deutsche Bank's view of the point at which the price of gold can be considered close to fair value (as of October 10, 2014)
Jewelry and industry demand
Jewelery has consistently accounted for more than two-thirds of the annual gold demand. India is the largest consumer in volume, accounting for 27% of demand in 2009, followed by China and the United States.
Industrial, dental and medical uses account for about 12% of gold demand. Gold has high thermal and electrical conductivity properties, along with high resistance to corrosion and bacterial colonization. Jewelery and industrial demand have fluctuated over the past few years due to a steady expansion in the middle class developing country market that aspires to the Western lifestyle, balanced by the 2007-2010 financial crisis.
Recycling gold jewelry
In recent years, the recycling of used jewelry has become a multibillion-dollar industry. The term "Cash for Gold" refers to an offer of cash to sell old, broken, or unsuitable gold jewelry for local and online gold buyers. There are many websites offering this service.
However, there are many companies caught taking advantage of their customers, by paying a fraction of what is truly valuable or gold worth, which causes distrust in many companies.
War, invasion, and national emergency
When the dollar can be fully converted into gold through the gold standard, both are considered money. However, most people prefer to carry paper money instead of heavier, less shareable gold coins. If people are afraid their bank will fail, chances are banks will pay off. This happened in the United States during the Great Depression of the 1930s, which caused President Roosevelt to impose a state of national emergency and issue a 6102 Executive Order that prohibits "hoarding" of gold by US citizens. There was only one prosecution under the order, and in this case the order was declared invalid by federal judge John M. Woolsey, on the technical basis that the order was signed by the President, not the Minister of Finance as required.
Maps Gold as an investment
Investment vehicle
Bar
The most traditional way to invest in gold is to buy bullion bars. In some countries, such as Canada, Austria, Liechtenstein and Switzerland, these can be easily purchased or sold in large banks. Alternatively, there is a bullion dealer that provides the same service. Bar is available in various sizes. For example, in Europe, the Good Delivery bar is about 400 troy ounces (12 kg). 1 kilogram (32 ozt) is also popular, although many other weights exist, such as 10 oz, 1 oz, 10 g, 100 g, 1 kg, 1 t tael, and 1 tola.
Bar generally carries lower price premiums than gold bullion coins. But larger bars carry an increased risk of counterfeiting due to less stringent parameters for appearance. While bullion coins can be easily weighed and measured against known values ​​to confirm the truth, most bars can not, and gold buyers often have re-tested bars. Larger trunks also have larger volumes to make partial forgery using tungsten-filled cavities, which may not be revealed by a test. Tungsten is ideal for this purpose because it is much cheaper than gold, but has the same density (19.3 g/cmÃ,³).
Good delivery bars held in the London bullion market (LBMA) system each have verifiable chain-of-custody, starting with refiners and assayers, and continuing through storage in a LBMA-recognized safe. The bars in the LBMA system can be bought and sold easily. If a bar is removed from the safe and kept outside the integrity chain, for example, stored at home or in a private safe, it must be retested before it can be returned to the LBMA chain. This process is described under "Good Delivery Rules" LBMA.
LBMA "trackable tracking" includes refiners and safes. Both must meet their strict guidelines. Bullion products from trusted refiners are traded on a face value by LBMA members without testing testing. By purchasing gold bars from LBMA member dealers and storing them at LBMA-recognized safes, customers avoid the need for retesting or inconvenience in the time and cost to be incurred. But this is not 100% certain, for example, Venezuela moved its gold because of political risks to them, and as shown in the past, even in countries deemed democratic and stable, for example in the United States in the 1930s, gold seized by government and legal steps are prohibited.
Attempts to combat counterfeiting of gold bars include kinebars that use unique holographic technology and are produced by the Argor-Heraeus refinery in Switzerland.
Coins
Gold coins are a common way to have gold. Bullion coins are priced according to their good weight, plus a small premium based on supply and demand (compared to numismatic gold coins, which are valued mainly by supply and demand based on scarcity and condition).
The size of bullion coins ranges from one-tenth of an ounce to two ounces, with the most popular and available one ounce size.
Krugerrand is the most widely held gold bullion coin, with 46 million troy ounces (1,400 tons) in circulation. Other common gold bullion coins include Australian Gold Nugget (Kangaroo), Austrian Philharmoniker (Philharmonic), Austria 100 Corona, Canadian Gold Maple Leaf, Chinese Golden Panda, Malaysian Golden Deer, Napoleon France or Louis d'Or, Mexican Gold 50 Pesos, Sovereign English, American Gold Eagle, and Buffalo America.
Coins can be purchased from various dealers both large and small. Fake gold coins are common and are usually made of gold-plated alloys.
Golden Round
Golden Round looks like a gold coin, but they do not have a currency value. They range in size to the same gold coins, including 0.05 troy ounce, 1 troy ounce, and larger. Unlike gold coins, golden rounds generally have no added metal added to them for endurance purposes and should not be made by government mints, which allows golden rounds to have lower overhead prices compared to gold coins. On the other hand, golden rounds are usually not collectible as gold coins.
Exchange-traded products
Products traded on the gold exchange may include exchange-traded funds (ETF), exchange-traded notes (ETN), and closed funds (CEF), which are traded like shares in major stock exchanges. The first gold ETF, Gold Bullion Securities (ticker symbol "GOLD"), was launched in March 2003 on the Australian Stock Exchange, and initially represents exactly 0.1 troy ounces (3.1 g) of gold. As of November 2010, SPDR Gold Shares is the second largest exchange-traded fund in the world by market capitalization.
Gold traded products (ETPs) are an easy way to gain exposure to gold prices, without the inconvenience of storing physical bars. But gold instruments traded on the stock, even those who hold physical gold for the benefit of investors, carry outside risks inherent in the precious metal itself. For example, the most popular gold ETP (GLD) has been heavily criticized, and even compared to mortgage-backed securities, due to its complex structure features.
Usually a small commission is charged for ETP gold trading and a small annual storage fee is charged. Annual expenses from funds such as storage, insurance, and management fees are charged by selling a small amount of gold represented by each certificate, so the amount of gold in each certificate will gradually decrease over time.
Exchange-traded funds, or ETFs, are investment companies that are legally classified as open-ended companies or unit investment trusts (UITs), but are different from traditional open companies and UITs. The main difference is that ETFs do not sell directly to investors and they are issuing their shares in so-called "Creation Units" (big blocks such as 50,000 stock blocks). Also, the Creation Unit can not be bought with cash but a basket of securities reflecting the ETF portfolio. Typically, the Unit of Creation is separated and resold in the secondary market.
ETF shares can be sold in two ways. Investors can sell individual shares to other investors, or they can sell the Creation Unit back to the ETF. In addition, ETFs generally redeem Creation Units by providing securities investors consisting of portfolios, not cash. Due to the limited exchange of ETF shares, ETFs are not considered and may not call themselves mutual funds.
Certificate
Gold certificates allow gold investors to avoid risks and costs associated with the transfer and storage of physical bullion (such as theft, spread of large bids, and metallurgical test costs) by taking a series of risks and costs associated with different certificates. (such as commissions, storage fees, and various types of credit risk).
Banks may issue gold certificates for gold that are allocated (fully reserved) or not allocated (collected). An unallocated gold certificate is a form of fractional banking reserves and does not guarantee an equivalent exchange of metal in the case of a gold deposit of the issuing bank. The allocated gold certificate must be correlated with a certain numbered bar, although it is difficult to determine whether the bank allocates one bar incorrectly to more than one party.
The first paper bank note is a gold certificate. They were first issued in the 17th century when they were used by goldsmiths in England and the Netherlands for customers who kept gold bullion deposits in their safes for safe keeping. Two centuries later, gold certificates began to be issued in the United States when the US Treasury issued certificates that could be exchanged for gold. The United States government first authorized the use of gold certificates in 1863. On 5 April 1933, the US Government restricted private gold holdings in the United States and, therefore, the gold certificates ceased to circulate as money (this restriction was canceled on 1 January). , 1975). Currently, gold certificates are still issued by gold pool programs in Australia and the United States, as well as by banks in Germany, Switzerland and Vietnam.
Account
Many types of gold "accounts" are available. Different accounts apply different types of intermediation between their clients and their gold. One of the most important differences between accounts is whether gold is held on the basis of allocation (fully protected) or unallocated (combined). Unallocated gold accounts are a form of fractional banking reserves and do not guarantee an equivalent exchange of metal in the case of an issuer's gold deposit. Another major difference is the strength of the account holder's claim to gold, in the case that account administrators face gold-denominated obligations (due to short positions or naked in gold for example), asset seizures, or bankruptcy.
Many banks offer gold accounts where gold can be bought or sold just as with foreign currency on a fractional basis. The Swiss Bank offers similar services on a full allocation basis. Pool accounts, such as those offered by some providers, facilitate very liquid claims but are not allocated to the gold owned by the company. The digital digital currency system operates like a pool account and also enables the transferable gold transferable between service members. Other operators, on the other hand, allow clients to make bailments on the allocated (non-equivalent) gold, which belongs to buyer law.
Another platform provides a market where physical gold is allocated to buyers at the point of sale, and becomes their legal property. These providers are just bullion client guards, which do not appear on their balance sheets.
Typically, a bullion bank deals only with the number of 1000 ounces or better in an allocated or unallocated account. For private investors, domed gold offers private individuals to gain ownership in professional vaulted gold ranging from minimum investment requirements of several thousand US dollars or denominations as low as one gram.
Derivatives, CFDs, and spread bets
Derivatives, such as gold forward, futures and options, currently trade in various worldwide and over-the-counter (OTC) exchanges directly in the private market. In the US, gold futures are mainly traded on the New York Commodities Exchange (COMEX) and Euronext.liffe. In India, gold futures are traded on National Commodity and Derivatives Exchange (NCDEX) and Multi Commodity Exchange (MCX).
In 2009 holders of COMEX gold futures have encountered problems in their metal shipments. Along with chronic delivery delays, some investors have received bar shipments not as per their contracts in serial numbers and weight. Delays can not be easily explained by slow warehouse movements, as daily reports of these movements show little activity. Due to this problem, there is concern that COMEX may not have a gold supply to support existing warehouse receipts.
Outside the US, some companies are trading on gold prices through contracts for difference (CFD) or allowing spread bets on gold prices.
Mining company
Instead of buying their own gold, investors can buy a company that produces gold as a stake in a gold mining company. If the price of gold rises, the profits of the gold mining company can be expected to rise and the value of the company will rise and apparently the stock price will also rise. However, there are many factors to be considered and it is not always the case that stock prices will rise when the price of gold increases. Mine is a commercial enterprise and is subject to problems such as flooding, land subsidence and structural failure, as well as mismanagement, negative publicity, nationalization, theft and corruption. These factors can reduce the stock price of mining companies.
The price of gold bullion is volatile, but stocks and funds of unprotected gold are regarded as a higher risk and even more unstable. This additional instability is due to the inherent influence on the mining sector. For example, if someone has a stake in a gold mine where the cost of production is $ 300 an ounce and the gold price is $ 600, the mine's profit margin will be $ 300. A 10% increase in the price of gold to $ 660 an ounce will push the margin up to $ 360 , representing a 20% increase in mine profitability, and a possible 20% increase in stock prices. Furthermore, at a higher price, more ounces of gold become economically viable to be mined, allowing companies to increase their production. Conversely, the movement of stocks also increase the price of gold. For example, a 10% drop in the price of gold to $ 540 would lower the margin to $ 240, which represents a 20% drop in mine profitability, and a 20% drop in stock prices.
To reduce this volatility, some gold mining companies hedged gold up to 18 months earlier. This gives mining companies and investors with less exposure to short-term gold price fluctuations, but reduces returns when gold prices rise.
Investment strategy
Fundamental analysis
Investors use fundamental analyzes analyzing the macroeconomic situation, including international economic indicators, such as GDP growth rates, inflation, interest rates, productivity and energy prices. They will also analyze global gold supply versus annual demand.
Gold versus stock
The performance of gold bars is often compared to stocks as different investment vehicles. Gold is considered by some to be a store of value (without growth) while stocks are perceived as return on value (ie, growth from anticipated real price increase plus dividends). Stocks and bonds perform best in a stable political climate with strong property rights and a bit of turmoil. The attached graph shows the Dow Jones Industrial Average divided by the price of an ounce of gold. Since 1800, stocks have consistently scored compared to gold in part because of the stability of the American political system. This appreciation has been cyclical to a long period of stock performance followed by long-term gold performance. Dow Industrials grabbed out the 1: 1 ratio with gold during the 1980s (late bear market of the 1970s) and continued to record gains throughout the 1980s and 1990s. The peak of gold prices in 1980 also coincided with the invasion of the Soviet Union to Afghanistan and the threat of global expansion of communism. The ratio peaked on Jan. 14, 2000, valued at 41.3 and has dropped sharply ever since.
One argument states that in the long run, high gold volatility when compared with stocks and bonds, means gold has no value compared to stocks and bonds:
- To take the extreme [price volatility] example, while the dollar invested in bonds in 1801 would be worth nearly a thousand dollars in 1998, a dollar invested in shares in the same year would be worth more than half a million dollars in real form. Meanwhile, a dollar invested in gold in 1801 in 1998 was worth only 78 cents.
Using leverage
Investors can choose to capitalize on their position by borrowing money against their existing assets and then buying or selling gold in accounts with borrowed funds. Leverage is also an integral part of the gold derivative trade and the stock of a gold mining company without any protection (see gold mining company). Leverage or derivatives can increase investment profits but also increase the risk of associated capital losses if the trend reverses.
Cryptocurrency
Some of the economic mechanics of gold have been compared with cryptocurrency. For example, they are scarce, interchangeable and not attached to debt. Nick Szabo created a digital currency call "bit gold" that mimics some of the gold features.
Some cryptocurrency and services are supported by gold.
Taxation
Gold maintains a special position in the market with many tax regimes. For example, in the European Union, trading of gold coins and bullion products are recognized free of VAT. Silver and precious metals or other commodities do not have the same benefits. Other taxes such as capital gains taxes may also apply to people who depend on their tax dwellings. US citizens may be taxed on their gold profits at the collection level or capital gain, depending on the investment vehicle used.
Fraud and scams
Gold draws a fair share of fraudulent activity. Some of the most common things to note are:
- Cash for gold - With the rise in gold values ​​due to the 2007-2010 financial crisis, there has been a surge in companies that will buy personal gold in exchange for cash, or sell investments in gold and coins. Some of them have productive marketing plans and high-value spokespeople, like previous vice presidents. Many of these companies are being investigated for various claims of securities fraud, as well as money laundering for terrorist organizations. Also, given that ownership is often unverified, many companies are considered receiving stolen property, and some laws are being considered as a method to mitigate this.
- High yield investment program - HYIPs usually only dress up pyramid schemes, with no real value underneath. Using gold in their prospectus makes them look more solid and trustworthy.
- Fraudulent fees upfront - Emails circulate on the Internet for buyers or sellers of up to 10,000 metric tons of gold (greater amount of US Federal Reserve holdings). Through the use of false legalistic phrases, such as "Swiss Procedures" or "FCO" (Full Corporate Offer), naive intermediaries are designed as hoping brokers. The final game of this scam varies, with some trying to extract a small amount of "validation" from an innocent buyer/seller (in the hope of reaching a big deal), and the other focusing on draining the bank account from their fraud target.
- Gold dust seller - This fraud persuaded the investor to buy a genuine gold trial quantity, then ultimately brings mixing brass or something similar.
- Fake gold coins.
- Shares in a mining company are cheating without gold reserves, or the potential to find gold. For example, the Bre-X scandal in 1997.
- There was a case of fraud when the seller kept the gold. In the early 1980s, when the price of gold was high, two major scams were the International Gold Bullion Exchange and the North American Bullion Reserve. Recently, fraud on e-Bullion has resulted in losses for investors.
See also
- Gold settings
- Gold repatriation
- Full backup banking
- Products traded on the gold exchange
- Gold is vaulted
- Gold tops
- Gold reserves
- Traditional investment
- Alternative investment
- List of bullion dealers
Rare materials as an investment
- Diamonds as an investment
- Palladium as an investment
- Platinum as an investment
- Silver as an investment
References
External links
- Gold as an investment in Curlie (based on DMOZ)
Source of the article : Wikipedia
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