Gold is the Number One Hedge Against a Falling Dollar

Gold is the chaos hedging premier monetary asset of the world. As geopolitical tensions, war, financial turmoil, geopolitial tension or virtually and global unrest manifests, gold responds directly. We will see gold rise higher in the future as the US and the global community keep spending too much. Too much much is being requested by banks and printed by the Federal Reserve and many other factors like a weakening Dollar, tensions internationally like the Middle East and also China and India's furiously growing economies effect directly the price of gold.

If you watch the markets then you will see that gold, silver, oil, commodities and other tangible assets tend to rise together, they're contra-cyclical to paper financial assets for 2/3 of a cycle. When stocks are doing well, then gold prices don't move and when stocks are flat to negative on their rate of return in other asset classes, gold performs very well. People tend to step back from other financial assets and say, until the risk reward relationship is fair and even, I'd rather protect than speculate. That's why, for 2/3 of the business cycle it is contra-cyclical.

In the past six years, gold has risen roughly 158%, silver, a bit stronger, has risen roughly 246%, Gold stocks 300% while the Dollar has dropped roughly 32%. Compair the the Dollar today to the Dollar in 1870 and it is only worth 1cent and compaired to the Dollar in 1919 it is only worth 2cent and the largest drop in the Dollar, since it has been unhinged from gold, has been since the 1970's. There has been a long term decline of the Dollar since the birth of the Federal Reserve in 1913, ending over 100 years of Dollar price stability. The US is now running a total annual budget and trade deficits exceeding $1.5trillion Dollars and the Federal Reserve is creating annually 1-2 trillion Dollar liquidity out of thin air which has a phenomenal effect on things like the DOW JONES INDUSTRIAL AVERAGE, the DOWN JONES TRANSPORTATION AVERAGE and the DOW JONES UTILITY AVERAGE which have all been moving well since 2001 -2002 but if you divide their price performance by the price of gold, which is in my opinion real money, you have declining trends in all three averages of the DOW JONES.

So here we have it, US debt has grown 5.5 times, roughly, since 1980 from $8 trillion to $44 trillion which is the biggest debt explosion in world history.

How do we deal with this massive debt? One way to pay it off is to raise taxes. WE have seen that before and we will see it in the years to come. They can print money as in Weimar Republic Germany after World War II. They could sell off by privatizing National assets such as telecommunications, transport, water systems or real estate. They could repudiate debt as Russia did in 1917 with $110 billion. Finally, they could simply resort to plunder by launching wars to acquire wealth such as the Roman Empire did, the Spanish Empire did, the Nazis did and the Japanese.

Large Dollar holders are now beginning to exit the Dollar since the latest decline. The Dollar became the world's reserve currency in 1944, everything had to be related to Dollars, most international transactions were denominated by the US Dollar for the next 62 years giving America huge financial power economically and politically. The United Arab Emirates announced that it would cut its Dollar holding in half in October 2006 and Japanese life insurers with $1.6 trillion in managed assets announced they were to diversify out of their Dollar holdings. Central banks all across Asia (South Korea, China, Japan, Taiwan and Hong Kong) have all started to diversify out of Dollars. China with $1trillion in foreign currency reserves has begun to diversify out of its $700billion and to cut back on its purchases of U.S. Treasuries. Russia too has cut its Dollar holdings from 70% to 40%; Sweden cut its Dollor reserves from 37% to 20% and Italy cut theirs by 21%. China is pushing the world to rely less upon the Dollar for world trade.

If foreign banks holding roughly $2.94trillion of U.S. Dollars were to diversify even 10% of their assets, you'd see $294 billion dumped into the market. 20% diversification would make $588 billion thrown out there which has a very negative effect on the Dollars value and of course interest rates would rise.

Foreign commercial institutions like insurance companies, banks, hedge and pension funds hold between $7-8 trillion in U.S. Dollars. Again any diversification away from the Dollar will have the same effect of rising interest rates and inflation through the roof. The Euro is now taking the place of the Dollar, many of the world's oil transactions have begun to be made in Euros. In mid 2006, the IMF director for the Middle East and Central Asia urged Persian Gulf countries to peg their currencies to the Euro instead of the Dollar. There is now more Euros' in circulation worldwide in currency and bonds than Dollars and so the Euro is now big enough to become the new world reserve currency. Foreign Dollar holders are now switching to Euros, British pounds, Swiss Francs and other strong currencies, into gold and other commodities such as oil and minerals.

So as the Dollar collapses, gold has risen. They tend to move in the opposite direction if they aren't attached. Over the last 36years, the US Dollar has declined 80%, while gold has risen 1900%. Today it takes five times more of the Dollar to buy the same amount of goods or services than in 1971.

In the end we can see that against a depreciating Dollar, gold is the perfect hedge.

In these time of a failing Dollar, reaching to something solid like gold, silver or platinum is a great way to secure your future. Visit my website at http://www.wheretobuy-gold.com for resources and information. Also my new blog which is at http://howtobuy-gold.blogspot.com/
Thank you for your time!

Gold Or Silver - Which is the Best Investment?

It is fall 2008; our economy is shrinking; our personal and business assets are loosing market value across the board; the banking system is going catatonic; and commodities like gold and silver are bouncing around like my truck on a road full of potholes. Earlier in the year the US dollar was declining in value against virtually every other currency and all commodities. While this fall the dollar has strengthened relative to foreign currencies because the problems in our economy are also global problems that are affecting the economies of all industrialized countries. Along with the worldwide banking collapse and strangulation of our economies by high energy prices, we are entering into a significant global recession. Price speculators have been very active all year long in all of the commodity markets, such that prices on all raw materials, including gold and silver, shot up dramatically in the first six months of 2008, while in the past few months speculation is now driving most commodity prices way down. Since gold and silver have been de-monetized for a long time their values only rise and fall with industrial demand, because social demand for them as safe-haven money is still very limited. If our economy goes into a deep recession, the uncertainty of job security, retirement security, and the near certainty of rising inflation, caused by government deficits and Federal Reserve intervention into shoring up failing banks and other private businesses, will cause more people, as well as many businesses, to exchange dollars for gold and silver. Right now there is a preference for gold rather than silver as a security hedge; but for the individual, gold is the wrong metal to own.
Consider that with more than six billion people on earth there simply is not enough gold and silver available to have these precious metals fulfill the role of money for everyone. It is estimated that about 4.4 billion ounces of gold have been mined in historical times and at least 4 billion ounces are still with us as pure bullion, or easily recovered and smelted into pure bullion; this amounts to only two-thirds ounce per person. It is also estimated that about 44 billion ounces of silver have been mined in historical times and about 20 billion ounces of this silver has been consumed in the past and disposed in ways that are not profitable to recover. Approximately 24 billion ounces of silver could be recovered and converted to coins or bullion; this amounts to about four ounces per person. Central banks and governments hold about 800 million ounces of gold and negligible amounts of silver, leaving just over 3 billion ounces of gold and 24 billion ounces of silver in the hands if businesses and individuals; or an approximate ratio of 8 to 1.
If our paper currency fails, causing people to barter with gold and silver for their daily needs and wages, then gold can at most command a value of eight times that of silver. Since the current ratio of value is $750 to $10, or 75 to 1(in the fall of 2008), gold is nearly 10 times higher that it should be relative to silver. This means that silver will appreciate many times over when gold and silver become barter money again. It is less than 50 years since silver was taken out of our US coinage; yet prior to 1964 silver has been in coins going back over 1000 years. While gold has not been barter money since 1934 in the United States, its history as coined money goes back more that 2000 years.
It makes no sense to ask whether gold will go to $10,000 per ounce or $10 per ounce, because it is the US dollar that is changing value. Gold and silver change their value very little with respect to goods and services for which they may be bartered. One hundred and two hundred years ago an ounce of gold would buy a good suit of clothes and an ounce of silver would buy a good meal at a restaurant, and so they will today. Over the years these metals have not strayed very far from this valuation except under severe economic tensions, at which time they typically rise in value rapidly.
Even though gold and silver are in relative short supply and little used as money, the U.S. paper dollar is the wrong barometer of economic stability. Assets and commodities should not be valued in terms of US dollars, but in terms of fixed quantity commodities like gold and silver. The unstable item (dollar) fluctuates in terms of the stable (gold), not vice versa. Reporting it backwards does not make it valid. Worldwide currencies should be exchanged by valuing them to gold and silver, not to the U.S. dollar, or any other currency for that matter.
In the past there have been many government attempts to peg a monetary ratio between gold and silver. It has been ten-to-one, twenty-to-one and even thirty-four-to-one during the depression. Teddy Roosevelt ran for President promising to fix the ratio at sixteen ounces of silver to one ounce of gold. These ratios not only show a historical variance, they also are all showing ratios of silver to gold that are greater than the real amounts of these metals mined and refined. The reason that these metals are not valued in direct relationship with the amounts mined is principally the hoarding of gold by governments, central banks, international banks, and some international corporations. This hoarding of gold is the same as it having never been mined, as far as the markets are concerned. This hoarding of gold tends to skew the ratio of gold available to consumers and investors as compared to the silver available. And it is a valid factor in arriving at a proper price for gold with respect to silver, provided that this hoarded gold remains unavailable for investment or payment in trade. If this hoarded gold came back into the markets as a monetary unit it would un-skew a gold-silver relationship that goes back to the late 1800's. However, if governments decide by law to remove even more gold from private ownership to government ownership, they will do so at their price, similar to the US government action in 1934; and whatever is left in private hands will be too small of a quantity to serve as money. In either case silver would increase in value as compared to gold.
I am not asserting that gold and silver are improperly valued today. But I am asserting that investors who own gold to protect themselves from the calamity of a failed economy and inflating paper currency are investing in the wrong metal, by a factor of at least eight. Our current industrial and jewelry use of these metals would have no relationship to the value they would become as barter-money in a failing US economy. So one cannot compare these metals today and make an investment in holding either of them, based on their current uses and values in our social economy. When gold and silver are re-monetized to act as money in our economies it will not be by government decree, but by the actions of citizens acting to create opportunity and build a new economy.
If a well-to-do person were going to set aside food and other necessities for future consumption in case of economic depression, should they be advised to purchase champagne, caviar, and frozen pastries (gold); or should they perhaps purchase apple juice, sardines, and crackers (silver)? Quantity is more important than show when one is trying to survive. People who invest in gold as insurance against economic depression are not acting in their own best interest; they are simply following their investment counselor's bad advice.
If investors and their counselors really understood gold and silver they would never purchase or recommend the purchase of gold at its current inflated price. If silver is mined at ten ounces for each ounce of gold and is priced correctly at $10.00 per ounce then gold should only be $100.00 per ounce, when we consider their monetary barter value. But if gold is priced correctly at $750.00 per ounce then silver should be $75.00 per ounce. Whichever way the market moves in a panic, silver will appreciate by a larger factor in relationship to gold. Actually, both metals would appreciate with respect to the US dollar, but silver would outpace gold in percentage growth at the point where producers and consumers started preferring gold and silver in exchange for goods and services. Giving investment in silver today considerable value over investment in gold, because of this growth potential.
Besides the ratio of gold to silver issue there is another important aspect of gold usage in tough economic times that must be considered; and that is the usage of gold to purchase food, toiletries, medicines, clothes; etc. If we were to do the Zimbabwe thing and have the US dollar inflating 100 % per week while very few goods are available to purchase; anyone going to a store with a shiny 1-oz gold coin would find that their purchases may only use up 10 to 20 percent of the value of their gold coin and that the store cashier would not give them change in gold or silver (even if the store had gold and silver to make change); the cashier would give them change in paper dollars that would rapidly inflate to nothing if they could not be quickly spent.
This problem would not occur with silver to any great extent because silver is still available from 100 oz bars down to 1 oz coins, and also available as old US coins, right down to silver dimes, permitting shoppers to pay with exact change for the goods they require. In the late 1970's an elderly Dutch gentleman told me how he experienced this very problem when he was sent to Germany in the early 1920's to go to university. The gold coins he received from home, for living expenses, was greatly sought by the shopkeepers, but they had little to sell and he always received change in German Marks (paper) that lost more than half their value in a week. He seldom got full value for his money, because of daily inflation. The same situation could occur here; it certainly has hit many nations in the last few decades, and for some it lasted many years. Silver is by far a superior investment to gold when it is being held as insurance against inflationary times and economic panics.
The companies that mine gold and silver for our industrial and personal consumption should be aware of the potential re-monitization of these metals by consumers and retailers; and what this could mean for their businesses in tough economic times. Recovery from a bout of depression caused by hyperinflation will depend a great deal on having a good supply of gold and silver and a vibrant mining industry to supply the money necessary to grow and expand a new economy and support international trade.
Craig D. Hanks

Eugene, Oregon



This article is taken from a chapter of my book SOCIAL BENCHMARKS. Other excerpts can be viewed at http://beyondfarenough.blogspot.com/

Gold World Coins

Gold world coins are sought out by those who are among the most scrutinous of investors who are looking to invest in the "finer coins of the realm". There's something almost elite about them, that is to say, honorably high. Take for example the British Sovereign. Struck in 22 karat gold, these continue to set the standard among gold world coins as they have for centuries, with the quality of mintage, depiction of ancient art, and the place they have in history.
Perhaps the most famous of gold coins which virtually everyone has heard of within the coin collecting community and without, is the South African Krugerrand. From 1967 to 2007, 46,300,000 were minted, but throughout that whole time, less than 1% of them all were struck as special collector grade proofs (pristinely minted legal tender, but uncirculated and untouched by the public). Among gold world coins, these are sought after with extreme fervor.
A great example of the diversity you can find among world coins is the Nishu-kin gold coins from ancient Japan. While no longer minted, there are still many of these around which can be found at different dealers or numismatic exhibitions and so on. Rectangular in shape, these add variety to anyone's collection. Another superb example of gold world coins taking on new shapes is the Palau gold dollar, struck in .9999 fine gold, in the shape of a four leaf clover. How's that for a good luck charm, eh? Coins of gold from around the world are what many collectors treasure, for their variety, rarity and worth, as well as their cultural/historic significances.



Looking for some great coin deals? When buying coins head over to http://www.buyingcoinsonline.com First!

Gold, Silver and Platinum Bullion Can Be a Great Investment

A United States Coin, prior to being minted, may go through several stages where a proof coin is minted. This process is in preparation for the minting of the final coin. While these rare US coins primary purpose is for checking dies and archiving, nowadays they are struck in greater quantities for coin collectors (numismatists) and can even be found as a Proof Coin Set. The Gold Dollar Proof is a very popular form proof coin and of gold bullion at the moment. What exactly is gold bullion? The term refers to coins or ingots, also know as bars, that get their value primarily from the weight of the precious metal from which they are made. Potential bullion investors will be able to find bullion available in a variety of precious metals including Gold, Silver and Platinum. Gold proof coins while valuable based on the weight of the gold, have other factors such as age, beauty and denomination, that will enhance their value, especially for collectors. A gold ingot, on the other hand, would be valued primary based on the gold bar weight.
The most popular forms of bullion are bullion coins and ingots. Unlike the United States Coin, a silver ingot is shaped into a bar. The cost of an ounce of silver shaped into a silver ingot will be approximately the same as the cost of an ounce of silver shaped into a coin unless the coin happens to be one of those that are prized by numismatists like the American Buffalo coin or the American Eagle coin. In the case of especially rare US coins, the coin will often be worth many times an equivalent weight available as a silver ingot.
In addition, certain highly sought after coins, those especially rare US coins, like a 1776 continental silver dollar or a 1789 Brasher gold doubloon, can far exceed both their denomination value and their gold bar weight value as well. The bullion price of another highly prized United States coin is the Gold American Buffalo coin. The American Buffalo coin and the American Eagle coin are favorites among coin collectors. The value of the rare old American Buffalo or American Eagle coins is far higher than their modern equivalents since they are no longer minted in such limited quantities. As there is greater availability, the bullion price may be significantly less.
Coin collectors seek out old, rare US coins and value them not soley on the weight of the coin but on the rarity, age and quality of the coin. Some coins can have values many times their gold bar weight value because of their rarity, age and condition. Gold and silver bullion sales have increased in recent years due to a sagging economy, rising oil prices and the volatility of the stock market. Investors have turned to the bullion gold bar and collectible gold coin order to add diversity to their investment portfolios. While the stock market has plummeted recently, bullion price remains strong, making the bullion gold bar a safer investment in the opinion of many investors.
Many experts believe that gold will reach $1000 per ounce by 2009 so there has never been a better time to invest in gold bullion. As our economic conditions continue to deteriorate, many turn to gold and silver bullion as an excellent way to weather the storm.
If you would like to buy your bullion direct in order to advantage of current gold prices, why not take a visit to Gold and Silver Bullion Bargains. And don't forget, we have Platinum bullion too!



Joe Rodriguez - Gold and Silver Bullion Bargains

Is the US Dollar Headed For a Collapse? Gold Prices Seem to Indicate Just That

There is an elephant in the room that no one in Washington or the media wants to talk about these days; that of the impeding collapse of the US Dollar. While Ben Bernanke and the Federal Reserve continues to assure investors that the dollar is a safe investment, while printing money like madmen, several indicators seem to suggest otherwise. It isn't just an academical discussion either. The future of the dollar is of great importance to all Americans, particularly those with savings.
It used to be that the US Dollar was the strongest currency in the world. Those that traveled abroad would experience this first hand as their hard earned money would be highly appreciated by the locals. This just isn't the case anymore. Several countries now prefer the Euro and many have taken steps to replace their dollar reserves with Euros. The average American citizen may not have felt the impact yet. After all, domestic prices stay the same whether or not the dollar fluctuates, but they will eventually feel the impact as rampant inflation inevitably sets in. As the dollar weakens in purchasing power, it becomes more expensive to import goods, and since much of the US production has been outsourced, this will result in higher prices, which will be passed on to consumers.
Those with savings for retirement invested in American stocks and bonds will be hit the worst. Since their savings are in fixed dollar amounts, once inflation sets in, it's highly likely that the result will be a net loss as returns struggle to keep up with rise in prices. This is a common scenario and one that has happened many times over the world.
Of course, it is easy, but foolish, to dismiss such talks as fear mongering. However, there is very substantial indication that it is actually true. Take the price of gold for example. Gold has long been touted as a poor investment. Tell that to those who invested in gold around 2000-2001. Where one ounce of gold was worth $300 dollars in 2000, it's at the time of writing, December 2009, worth $1200. That's a 500% return on investment. Gold is the anti-dollar investment and has been since the Breton Woods currency system was abolished 40 years ago. Since then, gold has risen in value continuously, skyrocketing in value the last 10 years. Gold is the anti-dollar investment for the reason that gold is the real defacto currency of the world and has been that since mankind first dug up the metal. It does not corrode, fade or burn and it can't be printed or created artificially. It is the safe haven for all investments.
Why should we be worried that gold has risen so much in value? Essentially, what the market is saying is that it has lost faith in the US Dollar. While the central banks of the world are outwardly discrediting gold, they have actually been buying huge amounts. There is a reason for this of course. The more people hold gold, the less their monopoly on money is worth.
But that is not the only reason to fear for a dollar collapse. Few people know that a new pan-American currency known as the Amero has already been sent into circulation. Open a new browser window and do a Google search for 'Amero coin pictures'. This is a real currency, which if things continue down the current path, will replace the dollar and enter Americans into a currency union with Canada and Mexico. The then worthless dollars will be exchanged into Ameros at an unfavorable rate.
Does all this sound far fetched to you? Don't take my word for it. There are several influential people who do their best to warn the American public of this scenario. Two of those people are Congressman Ron Paul and hedge fund owner and soon to be Senator Peter Schiff. Peter Schiff, owner of Euro Pacific Capital, predicted the current financial crisis several years before it happened. Now he and Congressman Ron Paul are predicting the collapse of the US Dollar and doing their best to tell the American public about it.



How can you prepare yourself for the coming depression and possible collapse? The most sensible thing is simply to divert your savings into precious metals like gold and silver. There are several ways to do this. The most secure method is to actually buy physical gold known as gold bullion. Bullion simply means gold coins and gold bars, such as the South African Krugerrand or Canadian Maple Leaf. There are several places to buy gold such as the online store GovMint [http://buygoldbulliononline.info], who sells gold and silver coins. These coins are excellent for securing and diversifying your savings as they can easily be changed into silver for example.
The easiest choice for Americans looking to buy gold would be to buy from an online store such as that or head over the border to Mexico to buy Centenarios which are readily available. In any case, it pays to be prepared as there are risks involved buying gold. Buying Gold Safely [http://howtoinvestgold.org] is an excellent guide to buying gold and is a recommended read for anyone considering buying gold. It's available online for purchase and download.

How Do I Find the Value of Gold Coins?

With the price of gold remaining strong, you may have reached a decision to sell those old gold coins you have stashed away. Or you may be thinking of purchasing gold coins, and want to know the true value of gold coins before you go along to a dealer.
Whatever your reason for wishing to know the values of gold coins, this information should help.
First, you should understand there are basically two kinds of gold coins on the market.
There are historical gold coins which were issued for circulation in many countries, including the USA, up until the 1920s and 1930s. (Yes, gold dollar coins were once issued too.) These circulation coins include famous ones like the American half eagles, eagles and double eagles, Indian heads and Saint Gaudens, and British sovereigns. These coins are not pure gold, but have some copper or silver added, to make them more durable. However, because of their collector value, these coins are usually worth much more than the value of the gold they contain.
The other main type of gold coin is the modern bullion coin issued by many countries since the 1960s. These coins are not meant to be used as 'money' but for investment or for collectors. Popular bullion coins include the American Gold Eagle, the Canadian Maple Leaf, the Krugerrand, the Austrian Philharmonic and the Chinese Panda. The value of these coins is the value of the gold they contain (usually one ounce, or the fraction of one ounce as stated on the coin) plus a premium which can be as much as 10% or more.
To find the value of a gold coin whether it is an old gold coin or a modern bullion coin, you need to know the spot price of gold. This is published in most newspapers and online news sites. If you know the weight of the coin a simple calculation will give you a baseline value of the coin (though you may not get as much as the actual gold value of the coin from some dealers). Next, you need to consult online or printed guides for the price of the particular coin you are interested in.
There are many good online services which will show you the actual prices currently being paid for gold coins on auction sites like eBay. You can also browse auction sites like eBay yourself, to see what people want you to pay for particular gold coins. Remember that the rarity, and the condition or grade of gold coins, particularly historical ones, make a huge difference to their value. If you own a gold coin and have trouble identifying what it is, there are excellent books and catalogs you can consult which are still better and more comprehensive than anything online.
For historical coins you will need to know the actual gold weight of the coin (the percentage of the weight which is real gold) to assess its value against the spot price of gold, and many online services also make this easy. For bullion coins, the actual weight is stated on the coin itself.



I have assembled all the resources mentioned above to help you find the current prices you can expect for your gold coins - see the value of gold coins page at my site bullion-gold-coins.com.
Robert G Smith writes about the price of gold and about the many types of gold coins you can collect.

Now is the Time to Invest in Gold and Silver

Is now a good time to make a gold investment or a silver investment? The gold price and the silver price have both risen steadily, and rather dramatically, from 2005 to the present.
Has this rise run its course or is it merely a beginning? These important questions deserves honest consideration. The following information shows why great upward pressure remains on gold and silver prices, making possible even more dramatic increases.
Some History of Gold and Silver Prices
From 1792 to 1933, the gold price was $20.67 per ounce in the United States - all money could be exchanged for gold. In 1933, the US went off this gold standard, devalued the dollar to $35 per ounce of Gold, and forbade any US citizen from holding or owning any gold. Foreign citizens and banks could, however, convert their US notes into gold. After World War II, the gold-backed US dollar became the world's key currency for several reasons:

The European countries involved in WWII were heavily in debt to the US.
The US economy was very strong and the value of dollar had appreciated.
Of all the major world currencies, only the US dollar was backed by gold.
The US agreed to link the dollar to the gold price of $35 per ounce and exchange gold bullion for dollars.

In 1971, the dollar became fiat money; the dollar became merely a paper note having neither value in itself nor backing in real assets. This happened when President Nixon ended the ability of foreign banks to convert their US dollars into gold. Nixon's action eliminated the official $35 per ounce price of gold - the value of gold and the value of the dollar were no longer linked.
The private market, which in 1968 was allowed to set a separate price for gold, then determined the world's only gold price. At the time of Nixon's order, the gold price had recently risen to about $40 per ounce and the silver price was about $1.40 per ounce. (The market quoted gold and silver prices in US dollars per ounce.)
Since 1971, the value of the fiat dollar lay in the US government's declaration that the dollar is legal money to exchange for goods and services. The US Treasury could then pay its bills and its debts in fiat dollars. Standing behind the national debt has been the increasingly shaky assurance that the US government, or rather the US taxpayer, is good for every dollar that is owed. Still, for almost 40 years, the dollar has remained the world's currency standard largely because of the past strength and continuing importance of the US economy.
After the dollar had become fiat money, gold and silver prices increased modestly at first. But by the end of 1974, when the right of US citizens to own gold was finally restored, the price of gold had risen above $180 per ounce and the price of silver above $4.00 per ounce.
As precious metals and former currency standards, gold and silver prices almost always rise and fall together. What factors affect their price? Is now the time to make a profitable gold or a silver investment?
Yes, now is a great time for a gold or silver investment. The US and the world are on the brink of changes that could heighten economic uncertainty, and even produce fear. Of course, no one can predict any future price, but such uncertainty increases the demand for gold and silver and drives their prices up.
Spikes in Gold and Silver Prices Since 1971
Unusual or extreme conditions existed during three times when the price of gold and silver rose abnormally high. These factors often accompany economic uncertainty and higher gold prices.
1973-1975: Troubling the nation and world were the Watergate scandal, President Nixon's resignation, and Arab members taking control of OPEC and cutting oil production. Inflation was high and spiked to over 12%. The rise in the gold coincided with consumer confidence plummeting to an historic low. Additionally, gold climbed and fell nearly in tandem with both inflation and the unemployment rate, which reached 9%. Interest rates also surged to a post-war high of 12% just months before gold peaked at nearly $200 an ounce.
All of 1980: This was the year of the Iran hostage crisis. Gold and interest rates were both extremely high and extremely volatile. The price of gold skyrocketed to $850 per ounce, dropped to $485, and surged again to $710 before dropping again. Interest rates followed gold by a few months in rising to 20%, falling to 11%, and climbing back to 21% by year's end. Consumer confidence plunged briefly and the inflation rate grew to over 14%; it was higher than 11% for nearly two years.
1982,83: Consumer confidence was very low for a prolonged period, likely caused by the highest unemployment rates since the great depression and a very high interest rates, still over 16% when gold began its rise from $296 per ounce. Inflation, however, had dropped below 7% and continued to drop as the gold price stayed between $395 and $510 per ounce.
Other Factors Affecting the Price of Gold
Deficit Spending:
Long term budget deficits decrease a country's economic stability.
Debasing the Currency:
When a nation borrows money or increases its (fiat) money supply by printing, the value of its currency decreases. Gold, however, maintains its value. Thus, when the dollar loses value, the price of gold generally increases and vice versa.
Uncertain Conditions Today:
From 1988 through the end of 2001, through the market crash of 2000 and even 9/11, the price of gradually gold fell while the dollar's value was erratic until 1995 when it increased dramatically. Unemployment, inflation, and interest rates were all low and produced the feeling of economic stability.
In January 2002, the price of gold began its rise from $280 per ounce to over $900 per ounce in 2008. During that time, the inflation rate, the interest rate, and the unemployment rate all remained low, while deficit spending and borrowing increased. Uncertainty began to build because of the wars in Afghanistan and Iraq. Gold prices seemed to rise and fall with the conditions in the Middle East, rising with the deterioration in 2006 & 2007 and falling in 2008 with the improvement in Iraq.
Dire economic conditions built up across the globe throughout 2008 and gold began a steep rise to its current price near $1200 per ounce. There are many reasons for that. Unemployment rose and stayed high. Deficit spending, debt, and money supply increases hurt currencies and economies. While gold prices are most affected by the stability of the US economy, deep weaknesses in the Euro and in many European economies have contributed to the current uncertainty.
Unfortunately, the economic uncertainty is likely to increase and put even more upward pressure on gold and silver prices. A gold investment or a silver investment could now be highly profitable for several reasons.

Inflation remains low. Its rise will lower purchasing power and trouble businesses and consumers.
Interest rates remain low. Its rise will produce many new economic problems.
Debt and deficit spending are projected to remain very high. Paper fiat money will be worth less and less.
The dollar has strengthened along with the recent rise in the gold price as Euros are being converted into both dollars and gold. Is this temporary or artificial? Will the dollar fall in value?
Disruptive terror attacks loom. God forbid that a serious attack is successful.
Nuclear aspirations of Iran and North Korea are troubling.
The Middle East seems closer to war than to peace.

Of course, none of these events are desired. Yet, with eyes open, the wise person will be prepared and the wise investor will seriously consider purchasing gold and silver.



Thomas Herold is a successful entrepreneur and the founder of Wealth Building Course. A powerful financial education training that teaches the basic steps to become financial free and create lasting wealth. Get your free ebook 'Building Wealth' now.

Rising Gold Prices - An Overview

It is important to grasp the big picture of why gold is going up and the factors that are fueling its rise.
An Overview Since 1974
In 1971 President Richard Nixon ended US dollar convertibility to gold, bringing to an end the central role of gold in world currency systems. Three years later Congress legalized the ownership of gold by US citizens. Freed from the government-mandated price of $35 per ounce, the dollar and gold floated. In 1979 and 1980, investors' lack of confidence in the government's ability to restrict the expansion of the money supply resulted in panic buying of precious metals as a hedge against inflation. Gold prices soared, and in January 1980 the gold price hit a record of $850 per ounce. During the four-year period from 1976 to 1980, the price of gold had risen by more than 750%.
In the early 1980s the US Federal Reserve raised interest rates to restrict money supply growth. This policy achieved its purpose and by 1982 interest rates were declining and the fear of inflation had subsided. Investment capital responded by moving into financial assets from commodities including gold, and the market soared. After the historic highs of January 1980, the price of gold meandered in the $300-$400 range until hitting a low of $256 in February 2001. Then the bull market for gold returned, and by November 2009 the price had pushed up to $1,140 - a rise of 445%. To some investors, this suggests that history is repeating itself and gold is heading beyond $2,000 per ounce. To return to the 1980 high, when adjusted for inflation, the price would need to be over $2,000 now.
Today's Gold Market
The price of gold is set by the Gold Fixing, which is also known as the Gold Fix or London Gold Fixing. Twice a day by telephone, at 10:30 GMT and 15:00 GMT, five members of the London Gold Pool meet to settle contracts between members of the London bullion market. These settlements brokered by the Gold Fixing are widely recognized as the benchmark used to price gold and gold products throughout the world.
Let's examine some of the factors that influence the price of gold.
Gold Supply
There is an agency that tracks of all the gold in the world. Gold Fields Mineral Services Ltd (GFMS) is an independent, London-based consultancy and research company, dedicated to the study of the international gold and silver markets. GFMS publishes the annual Gold Survey, which features comprehensive analysis and statistics on gold supply and demand for over sixty countries. GFMS estimates that above-ground gold stocks represent a total volume of approximately 160,000 tonnes, of which over 60% has been mined since 1950. GFMS estimates that all the gold ever mined would form a cube measuring 20 yards (19 meters) on each side.
The production of new gold does not generally keep pace with inflation. The aboveground gold stock increases at a fairly constant rate of around 1.7% per year. During the last 50 years the largest annual increase was 2.1% and the smallest increase was 1.4%. This is less than the long-term historic rate of inflation, which is 4%.
The single largest holder of gold in the world is the United States government, with 8,133.5 tonnes. As of November 2009 this gold supply was worth approximately $330 billion. Other top holders of gold include Germany, the International Monetary Fund (IMF), Italy, France, SPDR Gold Shares, China, Switzerland, Japan, and the Netherlands.
The US Dollar
The price of gold is widely understood to inversely track the dollar. When the dollar falls the price of gold tends to rise. But there have been many cases when the price of gold did not keep up with changes in the value of the dollar, or even ran counter to it.
For example, when gold peaked in 1980, it reflected a prevalent fear of inflation in the wake of the 1979 oil shock and a U.S. monetary policy that lacked credibility. The case for gold as a hedge against inflation was persuasive. But today, the price of oil is up significantly in currencies other than the dollar. Even measured in euros, it has returned to the February save-haven peak. The weakness of the US dollar alone cannot explain the rise in price.
In early November, with the goal to support the United States' recovery from recession, the US Federal Reserve decided to maintain the massive stimulus measures and hold down US interest rates for "an extended period." With the Federal Reserve keeping rates low, a record US budget deficit continuing to rise, and central banks all over the world diversifying away from the dollar, gold may continue to be a very attractive choice. After all, the cost of borrowing money to invest in gold is next to nothing.
On the global markets there is a persistent lack of confidence in paper-based currencies. The weakening of the U.S. dollar has had a broad effect that reduces confidence in other currencies. And with central banks and government policymakers still entangled in their unprecedented fiscal and monetary interventions, this could continue for much longer.
The current strength of gold may be a reflection not of a specific response to the value of the US dollar, but rather the expression of the same underlying malaise with the lingering effects of the global financial crisis.
Supply and Demand
In recent years the decline in mine supply has been supplemented by several factors including sustained central bank gold sales. In the 1990s, central bankers were acting as a group to reduce their gold holdings, confident that the fiat currencies were a better store of value. Central bank reserve sales, which during the past decade have played a key role in keeping gold prices in check, have slowed recently. Now gold's attractions are re-emerging and bankers look set to be net buyers, which should help tighten the market.
In addition, scrap sales offset mining declines. In the first quarter, scrap sales rose sharply as gold re-visited its all-time high.
Industrial demand for gold is influenced by fabrication needs, which have dropped sharply since 1997. The global economic downturn, coupled with higher prices, further reduced the demand for jewelry, and supply-demand changes add little in terms of explaining bullion's rise.
Government Bonds
Ten-year U.S. treasury yields have rebounded from their end-of-2008 lows between 2% and 3.3%, but this does not necessarily represent widespread fear of inflation. There is little evidence that gold buying is the result of inflation concerns.
Speculation and ETFs
The 2008 surge in crude oil prices to US$147 per barrel suggests that a similar speculative bubble is forming in gold. However, one obvious difference between then and now is that when oil peaked, the forward market was anticipating a decline in prices. The gold market anticipates a rise, and forecasts a value of US$1,250 per ounce for June 2014. While ETFs were cited as a culprit for the rise in oil and are also playing a role in the gold market, their impact may be limited in the gold market.
Early in 2009 ETFs may have been active buyers, but their activity has leveled off since. There has been a sharp increase in long forward positions in gold at the Commodity Futures Trading Commission (CFTC) and net longs have reached a record.
Despite all the attention being paid to sales of gold by central banks and the fact that world gold holdings have experienced a broad decline, holdings in industrialized economies are on the rise as a share of total foreign reserves. And this trend was renewed in the first quarter.
China and Foreign Markets
China is emerging as an international economic force and its reported gold holdings are not necessarily reliable. This is particularly significant now that Chinese authorities can make their purchases on the domestic market. The People's Bank of China (BOC) holds about 1,054 metric tons of gold, which is about two percent of its $2.3 trillion in foreign currency reserves.
Retailers and jewelers are increasingly reluctant to buy at higher levels. In recent years India has been the world's biggest importer of gold, and in February 2008 imports stood at 23 tonnes. The figure fell to 1.8 tonnes in January 2009 and in February there was no gold imported. But in October 2009 on the back of rising demand India's gold imports surged by over 45% at 48 tonnes. India had imported 33 tonnes in the corresponding period during the previous year.
In September 2009 the International Monetary Fund (IMF) announced that it would sell 403.3 metric tons of gold to strengthen its finances and increase its ability to make loans to developing countries. In November IMF revealed that from Oct. 19 to Oct. 30 it sold 200 metric tons of gold to the Reserve Bank of India (RBI). The RBI paid $6.7 billion for the equivalent of about 8% of the world's annual mine production. As a percentage of foreign reserves, India's gold holdings are now higher than even China's. Many analysts believe India's purchase will spur other countries and investors to ramp up their gold purchases. Indeed, with 203.3 metric tons still on sale at the IMF, China may become the next big purchaser.



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The Diminishing Popularity of Silver Dollar Money

While silver dollar money was the only source of legal tender in centuries gone by, it has diminished in popularity and in some instances has been removed from circulation by the U.S. Mint. It is rather a strange phenomenon when you look at other countries-the United States is the only country to focus on wide spread use of paper money in such a small denomination. Why is it so unpopular here yet popular in other countries? Perhaps it is because we have become accustomed to paper money since it has been around for so many years now.

One of the major advantages to paper money over silver dollar money is the weight. While the silver dollar is rather heavy paper can easily be shoved into a pocket or wallet. Many people tend to toss their change into jars because they don't like carrying it around, so having paper dollars is more convenient. It also makes it easier for retailers who don't have to track an additional roll of coins for the register-or in the event of both, having to track both types of money during a busy day.

Strangely, as much as people claim to dislike silver dollar money they are anxious to get hold of it when new issues come from the mint. Several years ago when gold dollar coins came on the market everyone was more than happy to grab some from the bank instead of paper. Silver money in any denomination is much easier to handle if you are putting it into your pocket while paper money is more convenient for your wallet. The silver dollar first came off the mint in 1794 and was in circulation until 1803. Several other mintings were put into circulation before the government replaced the silver dollar with paper dollars.

The way silver dollar money is circulated is good for the collector since there are always limited coins put into circulation. This makes the market a perfect one for the collector who can gather pieces for his collection while they are still in circulation at face value an watch it increase in value once the coins are out of circulation customarily within a few years. This leave the collector open to use his available funds to purchase old and rare coins that will increase in value much sooner than the newer ones.

Another thing to remember is the content has changed over the years. At some points in its history the only thing silver about it was its color. It has gone through many transitions in its metal content including that of platinum, partially silver, silver mixed with gold elements and much more. At one point the silver dollar was replaced with foreign coins that were heavier in weight than the U.S. variety, thus allowing for melting and the additional silver content being maintained by the exporter. The types of metal in the coins also have an affect on the value of the coin.

Seven Tips To Spot Fake Gold Coins

Everyone must have seen reports of the collapsing economy as thousands of Americans are losing their jobs each month. With the failing economy, many are rushing to invest in precious metals like gold coins, bars and bullion. Due to the high demand of gold, there is a need to answer the demand and it consists of the massive production of fake precious coins by deceitful individuals.

True enough, many have been victimize by people selling fake gold coins. If you are not careful enough, you can be one of them. In order to spot if the precious coins that are circulating in the marker are counterfeit or not, check the following tips below.

Check The Quality Of Metal

Assessing the quality of metal is the easiest way to tell if the coin is not genuine. Fake coins can either look dull or too shiny. In order to tell the difference, you need to know first the quality of metal used by the original coins. The fake coin may have a grainy texture and appearance.

Use Magnet To Tell If The Gold Coin Is Authentic

Magnet can help check if the coins are genuine or not. Take note that magnets cannot attract genuine gold.

Test The Coins With A Sterling Silver Cleaner Solution

In a sterling silver cleaner solution, immerse the gold coins. If you notice that the coating changes in color and the precious coins tarnish after a day, then the coins are definitely fake.

Check Even The Smallest Detail Of The Coins

For evaluation purposes, it is indispensable to make a list of the diameters of authentic coins. You may want to get a scale calibrated by grams. If a gold coin measures a little bit on the lighter side or perhaps, more than it should be, better thinks twice. It is truly important to check all the measurements including the weight, diameter and thickness.

Know The Facts About The Coins

Surely every gold collectors are familiar with the individual markings, images, dates and words in their coin collection. They can easily detect a fake just by looking at these data. Know that these facts are important. A slight difference can mean that the coin is counterfeit. Also know where the image should be facing in real coins. Let's say we are looking at a 1958 US Gold dollar. It features an Indian princess wearing a feathered cap. When you count the feathers, it should total to seven. One feather less means the coin is definitely a fake.

Examine With Your Ears

You can detect if the coin is authentic by listening to the sound as it land to a hard surface. Conversely, this type of assessment needs specialized skills of an expert. Take note that gold coins will make a distinct strike, while a coin mixed with other metals will simply generate a dreary clunk. In an ideal world, you should have a gold coin so you can easily compare in between coins.

Check The Price Of The Coins

You can easily tell if the gold coins are bogus if the seller is not confident with what he is selling. If he is giving you a price that is very questionable, do not hesitate to ask. You can also check online with other resellers and see if the price of the gold coins is at par.

Investing in gold coins is definitely a good solution to the failing economy. On the other hand, be sure to check the gold coins if they are authentic. Better be a smart and careful consumer than a weeping buyer. Good luck!

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