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GOLD Your Guide to Buying
Gold coins, Gold jewelry
Gold is one of the basic elements and is one of the world's most precious metals. Gold has the chemical symbol AU from the Latin aurum (gold). Gold is relatively rare and hard to find in nature. Gold, when it is found, has to be processed and then refined in order to get pure gold. It is estimated that only slightly more than 100,000 tons of gold have ever been taken from the earth during all of recorded history. And although gold can be found in rivers, seas and land in many parts of the earth, it is not easily extracted. Opening a mine is a time-consuming and costly operation, and several tons of ore are required in order to produce just one ounce of the precious metal. If you look at any natural resource that is in limited supply you will find that it has value. In fact that rarer it is the more valuable it is likely to be. Diamonds for example can be very expensive. The larger the diamond the more rare it is, and the more valuable. Gold is a natural resource that is in limited supply and has high demand.
Gold can be melted, or shaped, to create any design. It can be alloyed with a number of other metals to increase its strength and produce a variety of colors and can be re-melted and used again and again. The consumption of gold produced in the world is about 50% in jewelry, 40% in investments, and 10% in industry.
Gold has many industrial uses due to its unique properties but gold is often stored as a valuable commodity by governments and individuals because it has been accepted for over 5,000 years as money or representing value. Worldwide, gold is the universal standard of monetary value.
Gold has been a valuable and highly sought-after precious metal for coinage, jewelry, and other arts since long before the beginning of recorded history. Gold standards have been the most common basis for monetary policies throughout human history, being widely supplanted by fiat (paper) currency only in the late 20th century. Australia, Austria, China, Canada, South Africa, to the United States and the United Kingdom all produce their own gold coins.
Pure gold is too soft for day-to-day monetary use and is typically hardened by alloying with copper, silver or other base metals. The gold content of alloys is measured in karats (k). Pure gold is designated as 24k. English gold coins intended for circulation from 1526 into the 1930s were typically a standard 22k alloy called crown gold, for hardness (American gold coins for circulation after 1837 contained the slightly lower amount of 0.900 fine gold, or 21.6k). Bullion gold coins can be almost pure gold (99.99%) or alloyed with copper (Krugerrand) or silver. The 1 oz. coin still contains 1 troy oz. of gold plus a very small amount of copper or silver for hardness.
Today, bullion gold coins are still produced every year and are typically minted by governments in a design standard to their country. For example, the USA makes the Gold Eagle and the gold buffalo coins while Canada makes the Gold Maple Leaf, China the panda, Austria the philharmonic, Australia the kangaroo and South Africa the Krugerrand. It is all gold no matter what design or shape. The only difference is the alloy.
Gold bullion coins are usually sold by the ounce or fractional ounce and that's a troy ounce, not an everyday ounce which is called an avoirdupois ounce. It is very difficult to fake a bullion coin, although many have tried, due to the known values of the coins themselves. The weight and dimensions are well known. So if you measure the dimensions and weigh the coin, then compare these to the known values for the coin, you can tell if the coin is fake. This is because the weight of the metal for a given shape is almost impossible to duplicate. Gold is very dense and therefore heavy, so substituting any other metal and having the same dimensions would make the coin weigh less except for possibly some other rare metal but then that would eliminate any profit. Not very worthwhile. Do not be concerned if the coin weighs just slightly more than the stated weight. For example if a coin weighs 31.4 grams and the published weight is 31.1 grams, this is fine. The mint would like to have each coin weigh the stated weight but the manufacturing processes are not that exact. As long as the coin weighs at least the published weight but not more than a few tenths of a gram more, and the coin dimensions are per the published numbers, you have a legitimate bullion coin. Buy from a trusted known source and you have a 99% chance of never getting fake coins.
You can also buy bars of gold, from small 1 oz. bars to larger bars. The largest gold bar is the 250kg (8,037 troy oz.) bar in Japan.
The price of gold is like anything else. What will a willing buyer pay a willing seller. Gold is traded daily all around the world. London and New York markets offer a daily spot price as a guideline which most lesser traders use to determine a current price in terms of dollars. The price is for one troy oz. An ounce of gold in recent times and in dollar terms has gone from about $20 prior to 1934 to over $1600 in 2011. So as you can see the price varies widely. But this is more the value of the dollar than gold. In dollar terms, the price goes up as the value of the dollar goes down. The gold stays the same. It takes more dollars to buy the same oz. of gold as the paper money is devalued.
For the current spot price of gold as well as silver, platinum and other metals, go to www.kitco.com and click on the various charts.
The various gold coins such as the 1 oz. gold eagle, maple leaf or krugerrand often sell with a profit or premium well above the spot price so the retailer stays in business and makes a living. This premium also varies widely depending on demand and market conditions. In the USA, the eagle is more popular than say the maple leaf gold coin and therefore you may pay $50 over spot for the maple leaf and $70 over spot for the eagle. As the demand goes down, the premium should drop accordingly. In addition, unless you buy locally, you may incur shipping and insurance costs. You may even have to pay sales tax.
Bullion coins have no added collector or numismatic value. You are just paying for the metal. Gold coins such as the $20 Saint Gaudens Gold Coin are somewhat rare since the supply is limited and collectors will pay a higher price than the value of the actual gold in the coin. What price you pay for this type of gold coin is determined by many factors. One is the condition of the coin. Professional coin grading services such as PCGS certify a coin's condition, usually place it in a protective container with indications of it's condition such as MS-65 meaning mint state 65 or MS-62 or MS-61. It is much harder to know about what you should be paying for a numismatic gold coin than a bullion coin.
Gold jewelry is very popular and can be found in rings, earings, bracelets, necklaces, watches, you name it. Because 100% pure gold is too soft for prolonged handling, it is mixed with other metals to give it the durability necessary for jewelry. Most gold used in jewelry is alloyed with silver, copper and small amounts of zinc to produce various shades of yellow gold, or with nickel, copper and zinc to produce white gold. The color of these gold alloys goes from yellow to white as the proportion of nickel increases. Alloying gold with copper creates what is known as pink or rose gold. Alloys with platinum or palladium are also used in jewelry. Since nickel is the most popular alloy used in white gold, it is important to note that some people may be allergic to nickel. If that is the case, 18-Karat gold with a higher percentage of pure gold or platinum settings may be viable alternatives.|
The gold content of a piece of jewelry is measured in Karats, which can range from 1 to 24. For example, 14 Karat (14K) gold is 14 parts of gold to 10 parts other metals. The higher the Karat, the greater the gold content. This term should not be confused with “carat”, which measures the weight of diamonds.
One of the most important things to look for when buying gold jewelry is the purity of the gold. The higher the gold content, the more valuable it is. The amount of gold in a piece is represented in the karat mark, usually inscribed on the back of the piece (e.g. 24K, 18K, 14K, etc.). The European system is different and uses numbers representing a fraction of 1000, so "750" would be 75% gold, or the equivalent of 18 Karat. In addition to the karat mark, every piece of gold jewelry should be stamped with a hallmark or trademark of its manufacturer and sometimes its country of origin. In the United States, 14-karat gold, or 583 parts pure gold, is the most common degree of fineness and pieces are marked 14K. Nothing less than 10K can legally be sold as gold jewelry in the U.S.
24K Gold: Pure gold, or 24-karat, is generally considered too soft for use in jewelry, so it is alloyed with other metals to increase its strength. However you will find 24K in gold bullion coins such as the Canadian gold maple leaf coin.
18K Gold: 18K Gold is 18/24ths, or three-quarters pure gold. Jewelry of this fineness is marked "18k" or "750", meaning 75 percent gold.
14K Gold: In the United States, 14-karat gold is used most commonly for jewelry. Fourteen-karat gold is 14/24ths, or slightly more than one-half pure gold. Jewelry of this fineness is marked "14k" or "585," the European designation meaning 58.5 percent gold.
10K Gold: Nothing less than 10-karat gold can be legally marked or sold as gold jewelry in the United States. These pieces are marked "10k" or "417", the European designation meaning 41.7 percent gold.
Jewelry, like most items, comes in a variety of qualities. Some jewelry is high quality while a lot of jewelry is low quality. The price often reflects quality but not always. If you want high quality jewelry, expect to pay more because gold and silver are expensive. A lot of jewelry is not gold at all or only has a thin covering of gold over a cheaper base metal. This is called gold plating. Sometimes the jewelry will even be stamped GP or EP or HGP indicating plating. Over time the gold covering will wear off exposing the metal underneath.
If you buy a fake gold ring, it's likely made of copper. When you perspire, the metals in the ring react with the acid in your sweat to form salts, which are green. These acids are essentially causing the copper to corrode on the surface of the metal, which forms a salt compound of the metal. These salts are absorbed into the skin and you see green skin. But don't worry. Metal allergies cause redness and swelling, not a dull green color. Green skin is a dead giveaway the jewelry is very low quality. Gold will not react with most things and will not turn your skin green. This is why gold coins found at the bottom of the sea in a ship sunk 400 years ago are still in perfect condition.
Spotting cheap jewelry is often difficult. Brass looks much like gold. Gold has a mild shine but brass can be even more brilliant and could be too shiny, giving away its lower quality. Gold is dense and therefore heavier than other metals. Gold is also non-magnetic. Gold does not rust.
The price of a given piece of gold jewelry is partly based on its gold content and partly based upon other factors including labor, craftmanship, profit margin, design, overhead. You'll pay a per-gram price that includes both the going rate for gold and workmanship and design.
As a commodity, the market price of gold has skyrocketed over the years, from a per-ounce price of $260 at the end of 2000 to $1600 in July of 2011. The increase is largely due to investor fears about inflation and the weakness of the U.S. dollar, but rising demand for gold jewelry and consumer electronics has also played a role.
In diamonds, carats measure weight. But for gold, karats are a measure of purity. Think of gold as a pie with 24 slices. Pure gold is 24 karats; the karatage label for lesser amounts is based on how many slices, or parts, of that 24K maximum are gold. So 18K, for example, is 18 parts gold and six parts other metals. The higher the karat, the more gold in a piece of jewelry and the higher its price tag.
|American Markings ||- Gold Content -||European Marking|
|24K ||100% ||1,000|
|18K ||75% ||750|
|14K ||58% ||585|
|12K ||50% ||500|
|10K ||42% ||417|
It is unusual to find 24K jewelry. Pure gold is too soft for everyday use. It scratches easily. When we talk about gold jewelry, it's usually 14k or 18k. Goldsmiths alloy other metals usually copper or silver in this lower-karat gold to lend strength and durability. Check the jewelry for a karat marking. For a piece to be labeled "gold" jewelry in the United States, it must be a minimum of 10K; in Britain and Canada, 9K; and in Italy and France, 18K.
All gold starts out yellow-ish in color. But alloyed with other metals, gold can be any color white, red, green and even black. No one color is more valuable than another. Price will vary based on the karatage, as well as what other metals are included. A 22K white gold piece, for example, will still be pricier than 18K yellow gold. But 22K white gold alloyed with silver will be less expensive than 18K white gold alloyed with rhodium, a member of the platinum family. (Because pure gold is 24K, the highest-karat colored gold you'll see is 23K. Most colored gold is 22K or less.
Where to buy gold jewelry
Just because a piece is marked 18K gold doesn't mean it is. Less scrupulous sellers may put a high karat mark on a low-karat piece; a practice called under-karating. Shop with a retailer you trust, and be wary of no-name sellers online. Generally stay away from mall kiosks, department stores, flea markets, street vendors, traders, no-name retailers, non-jewelry stores and look for instead the top brand names in their own retail outlets such as Bulgari, Cartier, Tiffany, and others with known reputations. Do your homework ahead of time and avoid costly mistakes.
Consider an appraisal
Diamonds and gemstones aren't the only jewelry that needs appraising. If you're buying a pricey gold piece, an appraisal can give you an accurate measure of karat and composition.
A well-crafted piece will look just as nice from every angle. Expect to pay a premium for jewelry crafted by a well-known artist, or for a piece with an intricate design. You pay for the artistry in gold jewelry, as you would for a painting. Gold filigree, for example, is created by pounding gold into thin wire, which is then twisted into a complex pattern and surrounded by a stronger gold frame. Check the piece for a manufacturer's trademark (usually found near the karat mark). High-end goldsmiths include this so the piece and its quality can be traced back to them.
How a piece is created will greatly affect its price. Machine-made jewelry is the cheapest option, while machine-made, hand-finished pieces are slightly more expensive. The priciest gold jewelry is created entirely by hand. If a designer has to spend 30 hours making a chain, that's going to be reflected in the price. Example: A 7-inch gold bracelet with intricate patterns may weigh only a third of an ounce but could cost up to $1,000 today. You are paying about $500 for the gold and about $500 for the other factors mentioned above.
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