Gold Bullion versus Gold Coins versus Gold jewelry

In times of financial crisis and uncertainty Gold has for centuries been a haven for wealth, particularly where inflation eats away at the value of paper money. A graphic example of this is when gold was valued at $35 an ounce you could buy a really good suit for $35 today that good suit could cost you over $800 and where is the price of gold...........$850

As the current gloom gets worse, many people have started to buy gold coins to hold as an asset as it is obvious that governments around the world who a borrowing heavily to support the failing banking system are going to have to print masses more currency to pay those loans, of course printing more money just reduces the value of the money in circulation.

The average British household now owes nearly £9,000 of government debt (almost $18,000), and that's before you account for their mortgage debt! The US government has run up $9 trillion in debt, much of it owed to fast-growing Asian economies like China and all of it waiting for US taxpayers to make the repayments.

Gold supply is in a competition with demand. Currently the two main players are mined supply at 2600 tonnes and jewellery demand at 3200 tonnes. An important balance has been Central Bank sales, which provide about 800 tonnes a year

Gold Jewelry

There are three main ways to hold gold, the first is as jewelry, while it is very easy to buy gold in this way it has major drawbacks, they are

• The cost, because jewelry is a manufactured item the work involved in creating the piece is added to the cost of the gold and then a profit margin for both the manufacturer, the wholesaler, and the retailer are all added to the make the price you pay.

• When you want to sell the jewelry, unless it is a rare or special piece it is unusual to be offered more than scrap value, which will be the gold content value calculated by taking the weight and dividing by 24 then multiplying by the carat of the gold, usually 14, 18 and 22

• Keeping your gold at home can attract unwelcome visitors, so insurance costs are a burden, or if you use a bank safety deposit box the costs are even higher.

The upside of holding Jewelry is that asthetically it is pleasing.

There is a ready market in scrap gold, and you will be very popular with your significant other.

Gold Coin

Come July of last year – and driven by the sharp drop in prices from March's all-time dollar-highs above $1,000 an ounce – many of these existing gold owners, especially coin buyers, snapped up more gold as the world economy slowed and financial markets went into dive. But the leading metals refineries weren't expecting a rush until the usual autumn-time spree. That caught the big gold-coin mints napping as well. So their clients – meaning your local coin shop – hit a genuine shortage of gold coins and bars thanks to this summer's frenzy. Come August and Sept., the global meltdown in stocks sparked by the collapse of Lehman Bros. then sent in a flood of new buyers. And standing in long queues outside big-city coin shops, these new buyers proved a god-send for financial journalists needing bullish copy to file. Gold was the only bull market running – and so a third wave of buyers cleared out what little inventory the coin-shops had left, sparking in turn a fresh wave of "Sold Out" signs worldwide. First the US Mint and then even the Rand Refinery in South Africa – the world's biggest gold mint – were forced to suspend shipments, unable to keep up with demand. The big online gold dealers were all out emptied too, leaving would-be coin buyers stuck with nowhere to turn. Even now, according to German-based giant Heraeus, furnaces worldwide are still booked solid to try and catch up. But with the stock market crash gathering pace yet again, demand from new buyers has only raced on again. "Production [of one-ounce retail gold coins] has dramatically increased since the middle of the year," agrees Bernhard Schnellmann, director at fellow refinery Argor-Heraeus in Switzerland, but "we cannot cope with demand." The result for prices? Still greater mark-ups and premiums than coin dealers usually charge. Even Krugerrand gold coins, typically the cheapest gold coins compared to the wholesale "spot" gold price, now carry a 10% or even 15% mark-up – two or three times the normal premium to their actual gold-content value – according to the Coin Dealer Newsletter. On the other side of the trade, some gold-coin owners now looking to sell are being offered more than the spot price when they go back to their dealers...just so the dealer can secure new supplies, ready to sell on to new buyers for a still wider margin.

The disadvantages of buying Gold Coins are

• Security, again if you keep the gold at home you are vunerable to theft, and high insurance costs, and if at a bank higher storage costs

• The spread between the buying price and selling price although much lower than jewelry is still quite high.

• Unless you are in a country like the UK or the US finding a reputable coin dealer is not alway easy.

The advantages of holding Gold Coins are.

• Portable Wealth

• Recognized quality worldwide.

Gold Bullion

There are two levels to the gold bullion market, the first is essentially the same as the gold coin market with the same advantages as the coins but with the added disadvantage of not being recognized as pure gold without testing, so it is relatively easy for the buyer to make a serious error in the quality of the gold purchased, although this is reduced where recognized hallmarking is present.

The other level of gold bullion is called "good delivery gold" that is cast in 400 oz bars and held in internationally recognized vaults under the highest security. It is called good delivery gold because once the quality, usually 99.5% or higher pure gold is stored in a vault its history is recorded and if moved physically from the vault it has to be done by certified security companies.

Accredited gold refiners produce large bar bullion for the professional market. It is stored continuously in accredited bullion vaults, and traded between member financial institutions. This market trades at what is known as the 'spot' price, which you see published widely in the financial press. But a condition of selling at the 'spot' price is that you must be able to make delivery in a large bar of gold with a complete history of professional vault storage.

If your bar has been in private hands it loses its integrity and will not be automatically accepted as a good delivery to the buyer.

This means private sellers do not benefit from either the highly competitive spot market price, or the depth of the professional market's liquidity. Firstly they usually lack the funds to buy large bars. Secondly they usually don't have access to professional vault storage.

So smaller bars tend to world of the professionals and be traded via small retail traders.

Sadly too many people go and buy a small bar without fully appreciating the difficulty of later selling it. But it's easy to see the problem. If someone you didn't know offered you a gold bar from their pocket would you buy it? I hope not - for your sake!

This is why the retail market extra costs cause private buyers to lose a minimum of 5% on each coin or small bar trade. This is more than 10 times the cost of dealing professionally.

To deter people from storing their gold in bank vaults which earns the banks small returns they invented a product called "unallocated gold" which lumps everyones gold together, and reduces the gold buyer from owner of the gold to creditor of the bank, and because the gold earns no interest you are effectively giving the bank an interest free unsecured loan that is not even covered but the banks deposit protection scheme because it is not currency.

Do Not Do This.

Fortunately There is a company that has the resources to buy gold on the international markets and who make it possible for the small investor to participate in quantities as small as 1 gram.

BullionVault acts as a bridge for the individual into the professional gold market. They buy several large bars at a time which makes gold dealing economic, and have them sent to Via Mat - a fully accredited bullion market vault operator. So the gold retains its professional market integrity and all its resale value. They then let people buy and sell this warranted gold, both to the company, and to each other, via their website. This means all the storage issues are taken care of and they can deal in smaller sums, without the loss of spot market integrity and pricing.

There are simple and transparent safeguards - like the Daily Audit - which give people the absolute confidence that their gold is safely stored, and insured, in one of the safest places on Earth.

Many of their customers take advantage of remote storage in Switzerland - Their most popular location the others being London and New York. I think they have worked out that there's not much point in storing gold at home if their national economy is stumbling into financial crisis. Switzerland of course runs healthy surpluses in both budget and trade

The company is set up to allow trading in Dollars, GB Pounds, and Euros, and the security of your investment is ensured by the way that any payment to you is sent back to the bank that origionally funded your account. This way even if the wrong person gained access to your account they could not get their hands on your money. Your privacy is also protected by the use of a user name, the daily audit lists the holding of each customer by user name.

If you are thinking of buying gold, to save the value of your savings, please do your home work, this company is good and honest and I have used it myself but there may be a better option for you