Wednesday, January 13, 2010
My husband and I have discussed buying gold on numerous occasions over the years but never actually purchased any. I am wondering lately if we made a very bad mistake in not buying it. The dollar is in serious trouble due to the overspending by our government, and I am wondering if the dollar can be saved. When a representative of a gold investment firm called last week, I began to think about maybe buying gold again. After a discussion with my husband, I decided that I really needed to know more about gold. I learned a few new things about it and will share what I know with you. The metallic element known as gold (chemical symbol, Au) was one of the first known metals. Those who possess this bright yellow metal have been for thousands of years considered wealthy. No one knows when gold was first discovered, but there is evidence that people in Ur in Mesopotamia (now Iraq) and in Egypt were using it as early as 3500 BC. The artistry in the cups and jewelry found in those countries suggests that people had been working with gold for several hundreds of years before the objects were made. Gold is valuable chiefly because it is rare, but it is also valuable because it can be made into fine wire (ductile), hammered into sheets (malleable), or formed into any desired shape. It also has resistance to rust and other chemical changes that would cause tarnishing. Gold's beautiful yellow color and soft metallic glow make it highly valuable as jewelry and other ornamentation. It is also easy to work with because of its softness. Gold must be combined with some other metal when it is made into a hard object such as jewelry or coins. This type of mixture is called an alloy. Gold alloys are measured in karats (or carats), which are divided into 24 parts. Pure gold is 24 karat (24K). The number equals the amount of gold in the item, such as 18 karat gold means there are 18 parts of pure gold plus 6 parts of some other metal. Copper and silver are common metals to be alloyed with gold, such as in gold leaf. White gold is made from gold alloyed with such other metals as nickel, palladium, or platinum. According to scientists, gold is formed from gases and liquids coming up beneath the earth's surface through cracks or faults in the surface of the earth. Gold can be found in several different places: 1) lode or vein deposits where minerals have filled fractures in rocks, resulting in thin, sheet-like deposits; 2) placer deposits are larger particles like nuggets and grains of gold that have been washed into streams; 3) Some gold as a minor element is found in copper deposits called porphyry copper deposits; 4) There is some gold in solution form in all seawater - about one grain of gold per short ton. Pure gold is not often found. It is often mined as a by-product of quartz, calcite, lead, tellurium, zinc, or copper. Gold mines produce about 40 percent of the US-produced gold. Gold is obtained in a two-step process: 1) get the gold ore; 2) separate the gold from the ore. Gold is used by nations as an international form of money and is acceptable in all countries as payment of debts. When a country is on the gold standard, it is willing to redeem any of its money in gold and it has a set price to buy and sell gold. Some of the advantages of being on a gold standard are that it checks inflation, restrains government spending, and stabilizes currency exchange rates among countries. A disadvantage is that it prevents necessary adjustments in domestic currency supplies as well as in international exchange rates. Until l933, when the US abandoned the gold standard, a stated amount of gold could be obtained for most paper money. The gold value of a dollar was reduced in 1934, but gold remained the standard of measurement until the mid-1970's. The US was officially on the gold standard when Congress passed the Gold Standard Act in 1900 but went on and off the gold standard several times before abandoning it completely in 1971. The official price of gold in 1973 was $42.22 an ounce (about the size of a silver dollar). The government stopped setting the gold value of the dollar in 1976, and the price of gold now rises and falls in relation to the demand for gold. The demand for gold must be high at the present time because I was quoted a price of $1100 an ounce last week. I should have bought gold in 1973! The United States has not minted gold as legal currency since 1933, but it does issue gold coins for collectors ($50, $20, $10, and $5 pieces) as well as bullion coins for investors. Most of the nation's gold has been stored underground at Fort Knox, Kentucky since 1937. The Federal Reserve Bank of New York stores the gold reserves of many nations. Facts for this post came from articles by Harrison Ashley Schmitt and Irving Morrissett in World Book Encyclopedia, Vol 8, pages 249-253, 254.