SD Friday Wrap: It has been a rough week, but it’s not over yet. Here’s where we’ve been, and why we’re still not in the clear…Continue reading
Industry leading gold analysis from the world’s foremost gold market experts. Daily coverage for the latest gold price market action to keep you informed on what the price of gold is today. Stay informed of the latest information on gold.
The History of Gold and Gold Facts
Gold unlike paper money has real, inherent value. It’s a hard asset and can’t be reproduced. Silver Doctors frequently receives questions on how gold prices are determined, how to invest in gold, and why to invest in physical gold rather than gold etfs or gold mining stocks.
Gold Spot Prices vs Futures Prices – How is the Price of Gold determined?
The price of Gold trades nearly 24/7 across global exchanges similarly to any publicly traded stock or bond via futures markets. There is also a daily global benchmark for the price of gold called the London Gold Price. The London Gold Price auction takes place twice daily by ICE Benchmark Administration (IBA) at 10:30 and 15:00 London time, with the price set in US dollars per fine troy ounce. The London Gold Price auction replaced the London Fix in 2015, which had served as the industry benchmark for over 100 years.
Futures trading in gold has been called the tail that wags the dog, as paper futures contracts leverage to physical gold bullion has soared to over 300 to 1 – meaning there are outstanding paper claims for over 300 ounces of paper gold to every actual troy oz of gold available in COMEX inventories, leading to rampant speculation among the gold investing community that the COMEX will be forced to default on delivery of paper gold, and will settle contracts with paper.
The London Gold Price is mainly used by precious metals mining firms and large mints and wholesalers to settle the day’s price of gold.
At a retail level, gold is traded via the gold spot price. Golds spot price can often vary several dollars from gold futures price, and is determined by gold bullion banks via Ask and Bid prices.
Similar to any publicly traded stock, Bid prices represent the current highest offer to buy in the market, and ask prices reflect the current minimum offer to sell in the market.
If you are a buyer, you will pay the Ask price, and if you are a seller, you will receive the Bid price. The difference between the two prices is the bid-ask spread.
Often mis-understood as a dealer spread, the, Bid-Ask spread is paid by customers and retail dealers alike in the spot gold market.
As with any market, the more liquid the product, the tighter the spread.
Silver Doctors uses a live data-feed from Xignite.com to display the most live and accurate gold spot prices in the industry.
Is Gold Money?
Despite a 5,000 year history as the ultimate currency, today gold is derided by the mainstream financial media as a “barbaric relic”.
Those who study history however, are keenly aware that the value of all paper fiat currencies eventually falls to their intrinsic value – zero.
In an age of bank failures, quantitative easing, negative interest rates, asset hypothecation, and bank depositor bail-ins, physical gold– along with silver- held in your own possession- serves as the only asset with zero counter-party risk.
While the price of gold fluctuates based on the value of the fiat currency one is choosing to use as a reference, gold cannot be debauched and printed into existence by desperate central bankers.
In the famous words of John Pierpont “J.P.” Morgan, “Gold is Money. Everything else is credit.”
Has Gold Production Peaked?
According to industry expert Steve St. Angelo (SRSRocco), production of both gold and silver has peaked, as evidenced by significant production declines in Canada, Mexico, and Australia in 2015.
Global gold production reached 3,114 metric tonnes in 2014, and many in the industry expect 2015 will ultimately prove to be the peak in physical gold production with supply declining across the precious metals mining industry in the wake of a 5 year consolidation of the price of gold and silver.
Are the Rumors of Fake Gold or Counterfeit Gold a Legitimate Concern?
Fears of counterfeit bullion or fake gold exploded onto the market in 2012, when a Manhattan jeweler discovered over a dozen bullion gold bars from the Swiss firm Pamp were tungsten filled fakes, along with claims that over 60 metric tonnes of tungsten filled gold were discovered in an Asian depository in 2009.
As gold prices went parabolic to nearly $2,000 an ounce, over 300 counterfeit Perth Mint gold bars were discovered in Australia, allegedly counterfeited by the Chinese.
Industry rumors indicate the gold and silver counterfeiting problem reached such an extent on the online garage sale trading platforms Ebay and Craigslist, that Ebay executives took measures to launch their own precious metals division in an attempt to regain buyers’ confidence.
The increasing quality of counterfeit gold and silver coins and bars makes concerns over authenticity of gold and silver bullion not only legitimate, but an extremely crucial concern for investors.
Major government mints such as the Royal Canadian Mint have responded with high-tech anti counterfeiting measures such as micro-engraving on Silver Maple Leaf coins and Gold Maple Leaf coins, and private mints such as the Sunshine Mint and the Elemetal Mint now include anti-counterfeitting features on many of their silver and gold rounds and bars.
The Doc recommends purchasing physical gold and silver bullion directly from reputable retail dealers such as SD Bullion who source their coins directly from the Major Mints and their Authorized Purchasers, such as Amark and CNT.
With gold plated tungsten counterfeits now on the market, simply weighing a coin is not enough to verify its authenticity.
To truly authenticate a gold or silver coin or bar as pure, your precious metals dealer must conduct a UV density scan such as the Sigma Metalytics Purity Scanner used by the experts at SD Bullion on every coin or bar purchased from secondary sources.
How to Invest in Gold
There are a variety of ways to invest in gold and to gain exposure to the gold market, including junior and senior mining stocks, streaming companies, ETFs, and gold coins.
Gold Bullion, Bars, and Coins
If You Don’t Hold It, You Don’t Own It!
When buying gold, it is extremely importance to understand the difference between paper gold, and physical gold. Additionally, the understanding of the terms and concepts of hypothecation, rehypothecation, allocated, and segregated are crucial to your investment decision.
What are the Advantages/Disadvantages of Bullion vs Mining Stocks and ETFs?
While the CNBC’s and Bloombergs of the world hype and promote ETFs such as GLD, concerns are rampant among gold investors that the ETFs such as GLD do not actually hold the bullion bars they claim. These fears were apparently substantiated in 2011, when CNBC’s Bob Pisani attempted to quell GLD “conspiracy rumors” by touring a GLD gold bar warehouse. The event went epicly wrong when Pisani held up a random 400 oz gold bar for the camerawith the serial number of ZJ6752, which unfortunately for the GLD, was nowhere to be found in the SPDR’s gold bar list, and was subsequently discovered to be on the bar list of another ETF firm entirely.
Gold Mining Stocks are another vehicle to gain exposure to the gold market, and particularly with the junior miners sector, often offer a leveraged play on the price of gold– albeit at a significantly higher risk. Mining firms can and do go off the board entirely (See Allied Nevada Gold) , and in reality, one is investing in the management of a mining company to almost as great of an extent as to the ore the company owns.
In addition, legendary gold trader Jim Sinclair warns any investor looking to invest in today’s modern banking world to request delivery of the actual stock certificates registered in their own name rather than in street name.
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