Wednesday, March 28th, 2012
Abstract
Lately, there have been questions on what the standards for gold dinar and silver dirham are. Since the dinar and dirham indeed formed the Shari’ah monetary standards from the time of the Prophet pbuh, our work can, therefore, only involve in the rediscovery of that classical standard. Henceforth no parties or organizations can come up with their own standards. Since the Islamic gold dinar did not come into existence until after about 50 years of the Prophet’s pbuh demise, it is obvious from history that the solidus of the Eastern Roman Byzantine Empire was the monetary basis for the Shari’ah. Hence the best way to determine the standard is to look at the definition given by its issuer, the Byzantine Empire. Coins unearthed by archeologist cannot be relied upon for this purpose because such coins generally suffer from wear and possible tempering like clipping etc. It was found that the actual historical standard for the dinar to be 4.5gm of pure gold and the dirham to be 3.15gm of pure silver. However, since the role of dinar is simply as a measure of value that depends on the gold-content and if zakat is based upon 1-year’s provision of foodstuff, then the 4.25gm dinar of pure gold and 2.975gm dirham of pure silver, as those circulated during the Prophet’s pbuh era, is also a standard.
Introduction
Undoubtedly, the interest in gold dinar among the public, academics, business community and even governments has increased lately. The turmoil in the US and Europe and the ongoing global economic and monetary crisis has added to this interest. Capitalism based on interest-based fiat monetary system is indeed collapsing and the world is on the lookout for possible solutions to the crisis. Returning back to gold as the international monetary standard has been one suggestion from some quarters. In the case of Islamic economics, the call is to go back to the Islamic gold dinar that was the monetary standard of Shari’ah throughout Islamic history till the fall of the Ottoman Caliphate in 1924. The gold dinar is generally agreed upon as a 4.25gm gold coin, based upon the Roman solidus that circulated during the times of the Prophet pbuh. The gold dinar forms the monetary standard for the Shari’ah rulings on muamalat, zakat, hudud and mahr. Nonetheless, there is difference is opinion among the proponents of the gold dinar on the purity and weight of the coin – should it be made of 22K gold or 24K fine gold? Should it be 4.25gm or more than that?. Twenty four karat (24K) gold is fine gold, by today’s standard it is 99.99 percent pure. The 22K accordingly contains 91.66% gold, hence known as 916 gold. Due to the rounding, some gold dealers make it to be 917, which means that in one thousand parts, 917 parts is gold while the rest is some other metals, normally silver or copper. (more…)
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Monday, August 22nd, 2011
How to limit inflation’s corrosive effect on your pocket. By Emma Simon
How do you inflation-proof your finances? Many people will be asking following confirmation last week that the cost of living is rocketing.
The Consumer Price Index, the Government’s official measure of inflation spiked to 3.3 per cent, the highest it has been for more than a decade.
In reality, many families are seeing prices rise at a far steeper rate – as this official figures does not include mortgage costs or council tax, both of which have risen over the past year.
It is estimated that the real cost of living for the average family in the UK has risen by 9.5 per cent over the past 12 months, with petrol costs rising by 22 per cent, heating bills going up by 19 per cent and grocery bills rising by 23 per cent over this period.
And this doesn’t look like just a temporary blip. Economic experts do not expect inflation to fall significantly this year. Commodity prices are expected to remain high which means more expensive fuel and food. And if inflation is not brought under control quickly this could force the Bank of England to increase interest rates pushing mortgage rates still higher.
So after a decade of low inflation and low interest rates how can you reposition your finances to adapt to these new circumstances? Inflation may once again become a fact of life, but there are steps you can take to reduce its corrosive effect on your pocket.
SAVINGS
Inflation is a silent thief, quietly reducing the value of your savings while no one is looking.
Even with relatively low inflation, the buying power of your cash savings is significantly reduced over 10 or more years.
With inflation running at 4.3 per cent your money is effectively halved in just 17 years.
Even if inflation falls to 3 per cent, £100,000 in the bank will have lost a quarter of its value a decade later.
To mitigate this effect, savers should make sure their money is in the best-paying account possible.
Currently there are a number of instant access accounts paying in excess of 6 per cent . But there are two products that guarantee that your savings will beat inflation, regardless of future rises.
National Savings & Investments offers index-linked certificates, which are three-year and five-year savings plans, paying 1 percentage point above the RPI. This gives a current pay rate of 5.3 per cent. As these are tax-free products, this equates to 8.83 per cent for higher-rate taxpayers and 6.63 per cent for basic-rate taxpayers.
Leeds building society offers a similar two-year bond and Isa. Both pay 2.5 percentage points plus RPI at the end of the financial year.
So if inflation stays at its current level, the interest rate will be 6.8 per cent.
INVESTMENTS
If you want to protect your savings against inflation over the long term, the equities have in the past been a good bet.
A spokesman for the Investment Management Association says: “This remains true today, whatever one’s views on the short term prospects for the market. A well-diversified portfolio of equity funds remains a good hedge against inflation.”
Look for shares that pay strong dividends, as this money, if reinvested, accounts for the lion’s share of total returns from equities so should help you outrun inflation. For those looking to minimise volatility, collective funds are the best bet. These are more diversified, reducing risk, and enable you to make regular savings rather than just deposit a lump sum. This can help smooth out the ups and downs of the stock market.
Equity income funds have long been a favourite of British investors. They aim to deliver a dividend stream up to 10 per cent higher than the FTSE average while also striving for capital growth. Some of the biggest names in fund management work in this sector, and over the past five years the best-performing funds have almost doubled investors’ money, according to Morningstar, the fund analyst. It may also be worth looking at the less popular investment trust sector.
Many of these trusts have been delivering a decent income stream for years, again helping investors protect against inflation. The City of London trust, for example, has delivered a growing dividend stream for 41 years.
“Investment trusts can hold back dividends in strong years to ensure they continue to be paid in leaner years,” says Annabel Brodie-Smith of the Association of Investment Companies. Most trusts in the UK or Global Growth & Income sectors pay strong dividends, she says.
There is another asset that has traditionally proved an excellent hedge against inflation: gold. Over five years the price has shot up by a staggering 344 per cent – rising by a fifth in the past year alone.
Of course, there is a danger of buying at the top of the market, but experts say prices are unlikely to fall until both inflation and the credit crisis are under control.
PENSIONS
Inflation can be particularly damaging for pensioners, who generally have fixed incomes. And pensioners have been hit especially hard by the price rises, as heating and food costs account for a far greater proportion of their spending.
Those approaching retirement who worry that inflation will be a big problem over the next decade may want to consider an inflation-linked annuity, so your pension keeps pace with prices. But these annuities pay a far lower starting income. At current prices it would take a 65-year-old man 14 years for the inflation-linked annuity to overtake the income provided by a standard, “level” annuity.
“Annuity rates have been rising over the past year, but you have to ask yourself why,” says Billy Burrows of William Burrows Annuities.
“Much of this has been because inflation is starting to stir again, so in real terms those retiring might not be a lot better off.”
He says many of his clients – who include bankers, stockbrokers and other professionals – have been shunning inflation-linked annuities.
“The costs are simply too high,” he says. So what can you do to protect your retirement income?
“Those with a large enough pension pot should look at spreading their risk and investing in a range of different options,” says Burrows.
This could include income drawdown plans or with-profits annuities, which give some exposure to stock market-linked returns. However, this is an extremely complex area – not least because any decision you make you have to stick with for life – so always seek expert advice.
The only other hope is an increased state pension. This would reverse a trend that has seen an additional 300,000 pensioners fall into poverty in the past year.
“The Government should increase the state pension to at least £124 a week and reinstate the link to earnings as soon as possible,” says Age Concern, the charity. The link is due to be restored by 2012. But with Gordon Brown urging restraint on wages, the change seems unlikely to be brought forward.
sources
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Tuesday, August 16th, 2011
Navigating the many financial markets can be a difficult prospect. Saving money for retirement, a child’s college fund, or buying a home all require long-term planning and strategies that sustain growth over long periods of time.
Gold investing offers a powerful tool for investors to reach their goals while diversifying their portfolios with a proven investment vehicle. Just like any other investment strategy, it is important to buy gold with a specific end goal while keeping the condition of the overall market in mind.
Use Gold Investing To Diversify Your Holdings
When the equity and debt markets take a downturn, many people choose to buy gold. The reason is that this commodity is an excellent tool to diversify holdings, lower overall risk, and gain value when other options are losing value.
Fact of the matter is, when other markets are losing worth, precious commodities will hold their value and experience sustained growth. Some investors choose to buy gold reactively, after markets have fallen. However, a proactive investment serves to strengthen a portfolio before it can lose net worth.
Gold investing is ideal for its low volatility and historical price trends. Commodities tend to hold their worth since they are based on bullion that is not subject to wild price swings. The security inherent in bullion provides a steady foundation and an overall upside to its growth potential. This is why investment in bullion can show a profit when other markets are showing a loss.
In technical terms, this commodity has a negative correlation to stocks and similar investment options. When the price of equities and stocks goes down, the worth of this commodity tends to grow.
This property is what allows gold investing to diversify a portfolio and provide growth opportunities and protection during bad economic situations and bear markets. Bullion also has a tremendous upside and the ability to appreciate in value so that it is a viable option to grow wealth long-term in addition to steadying portfolios against poor market returns.
Gold Investing Timeframes To Match Investing Needs
Every investment option has a certain timeframe in order to achieve the best growth in value with the lowest amount of risk. Debt and annuities, for example, have fixed terms while equities are fairly liquid but should be held for the long term in order to minimize risk. In order to buy gold effectively, it is important to understand the appropriate timeframe and match it to your financial goals and requirements.
Bullion has aspects that make it attractive for both long- and short term investing. Its low volatility makes it appropriate for the short term since values will not fluctuate wildly. Certain ‘hot coins’ can even be bought and sold along similar lines as stocks that day traders might use. However, for most investors, they are interested in the longer timeframes and growth potential.
Most investment vehicles are tied to assets for their underlying value. Equities are a measure of a company’s worth while debt is secured by future payments, for example. However, companies lose value and default on loans and this fact makes up the majority of the risk in equities and bonds. On the other hand, bullion has an intrinsic worth that is not tied to a company’s performance or its ability to pay back debt. Its underlying value can fluctuate but it will never lose all of its value or become obsolete in a changing market.
These properties allow precious metal commodities to be taken at a long timeframe with the knowledge that values have historically trended upward and will most likely continue to do so 10, 20, 30, years into the future and beyond.
A Reputable Dealer Is Essential For Effective Investing
This tip is essential for any financial transaction and investment strategy. The right dealer will tell you how reputable they are right from the beginning of your first discussion. If a dealer asks you for your investment goals, your concerns, and asks questions, they are probably the right person for the job.
A salesman ‘tells’ you what you need before ‘asking’ you what your situation is. Anyone who pushes a product before really knowing their client’s unique situation is more of a salesman and less of a reputable dealer.
The right dealer will utilize their knowledge of gold investing to help their clients make the right decision for them and not a commission. In the end, the most effective strategy utilizes bullion’s strengths and unique qualities to strengthen portfolios and provide lasting value and income…
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Thursday, August 4th, 2011
The dinar is the official currency of several countries. The history of the dinar dates to the gold dinar, an early Islamic coin corresponding to the Byzantine denarius auri. The gold dinar has been revived as a bullion gold coin called the Islamic gold dinar. in another word dinar is a 22 carat gold formed in coin and weighted about 4.25 gram.
the picture if dinar and dirham
Countries and regions which have previously used the dinar
A mancus or gold dinar of the English king Offa of Mercia (757–796), a copy of the dinars of the Abbasid Caliphate (774). It combines the Latin legend OFFA REX with Arabic legends. (British Museum)
The 8th century English king Offa of Mercia minted copies of Abbasid dinars struck in 774 by Caliph Al-Mansur with “Offa Rex” centered on the reverse.[2][3] The moneyer visibly had no understanding of Arabic as the Arabic text contains many errors. Such coins may have been produced in order to trade with Islamic Spain.
- Abu Dhabi: the Abu Dhabi dinar or Bahraini dinar which were used from 1966 to 1973
- Bosnia and Herzegovina: the Bosnia and Herzegovina dinar
- Croatia: the Croatian dinar
- Iran: the Iranian rial was divided into 100 dinars
- Republic of Serbian Krajina: the Krajina dinar
- Republika Srpska: the Republika Srpska dinar
- South Yemen: the South Yemeni dinar
- Sudan: the Sudanese dinar
- Yugoslavia: the Yugoslav dinar
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Wednesday, August 3rd, 2011
Many people desire to invest in gold but they don’t understand how to maximize that investment. They see the price of this precious metal and feel that they can’t afford to buy enough for it to matter. This is a sad truth that many take to heart. The true reality of the situation is that gold is very affordable if people know how to acquire it in an economical manner.
There are several methods for saving money when you buy gold. One of the most prevalent methods is to first understand how to tell real gold from fake gold and then purchase it from people that simply want to make some fast cash. This can be done by opening a pawnshop, a flea market jewelry stand or going to a pawnshop or jewelry shop that does not melt down their own gold and asking if they have any damaged gold merchandise they’d be willing to sell for a lower price.
Cheap gold during an economic recession is almost unheard of but it can be found. The prospective buyer simply needs to look harder and make themselves available. The truth is that many individuals do not know how much their gold is worth and simply desire to sell it to make some quick money. The savvy trader in this exchange can save anywhere from thirty to eighty percent off the true metal value of the gold in question.
Another method for saving money on gold involves the trading of stock options. While the futures market is a dangerous place to be in the purchase of stock options have far fewer negative drawbacks. With stock options a few thousand dollars can control tens of thousands of dollars worth of gold. To invest in gold with this method has no risk beyond the possible loss of the investors money. While this is not a good thing the truth is that it is much better than purchasing it via futures and risking the possibility of owing a brokerage firm more money after losing it all from a bad prospect.
No matter which version of acquiring cheap gold is used there is one universal truth. Gold should be bought when the price is low and sold when it is high. The price of gold does not fluctuate rapidly. The price change is a gradual increase or decrease over the course of months, sometimes years. It is a direct reflection of the economic stability of the times. Low priced gold, such as the price tag a decade ago that waffled at around two to three hundred dollars, is a trend of solid and strong economies where plenty of people have jobs. High priced gold such as it is today is a sign of weak economies and troubled minds.
The best time to buy gold, such as gold coins, is when the economy is strong and people have sold most of their investment off. The methods mentioned above, particularly the purchase of the solid metal for cheap price, is one of the best methods available in prosperous times because whenever the economy hits a repression again the price of gold goes up and the long term investment pays off.
Gold coins are always a good buy even though some of them are not true bullion. The value of such coins tends to increase beyond normal gold price over the course of time. Often they can be sold for much more than their actual metallic value is currently worth. Buying gold coins is always a cheap method due to the fact that the governments that mint them tend to set a hard price on the end product when they are first purchased. This means they are often far less expensive when buying them directly from the mint.
The savvy investor that wants to own physical gold finds many such opportunities at a low cost if they know where to look. Flea markets, wholesalers, jewelry stores that wish to be rid of damaged pieces at cost, and local shops are all locations to find it on the cheap. As mentioned stock options are also a solid method of trading in this market. Either way the deals are there. The only one stopping the smart investor is the investor.
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Thursday, July 21st, 2011
A gold coins or bullions investment is great if you want to protect yourself from drops in the stock market, currency problems, inflation and deflation. Here are some great tips for the beginner looking to buy gold as an investment.
Gold investment advice tip 1 – Go for gold coins or bullions.
If you are beginner to gold as an investment, start out by investing in gold coins or gold bullions. These are simple to understand, simple to acquire and offer the least risk. Shortly after purchasing gold coins or bars, you will receive them via a delivery company. Gold coins are light, and easy to transport and store. If buying large quantities then gold bars are a little cheaper, but more difficult to deal with as they are heavier and bulkier.
Gold investment advice tip 2 – Stick to the metal.
As a beginner, avoid gold futures. 9 out of 10 people who try this come out as losers. Gold mining shares are less complicated, but still risky, as they have nothing to do with the price of gold itself. If gold goes up in price, this does not mean that gold mining shares will appreciate too. Leave these to the experienced investor.
Gold as an invesment tip 3 – Don’t hand around.
Don’t wait to buy gold. Of-course, don’t buy if prices are particularly high, due to sudden a surge in interest in gold (which often occurs when stock markets fall suddenly, as they did in 2008). Buy gold when you need it. It is not a stock or real estate investment, and timing is not vital. Gold as an investment diversifies your overall wealth, and is not affected in a negative way by economic dangers.
Gold as an invesment tip 4 – Get your portfolio well balanced.
Experts recommend that the middle of the road investor purchases gold so that it is at 10 to 30 percent of the portfolio. Exactly where you go between those figures depends on the current financial and economic situation.
Tip 5 – Don’t save on amateurs.
A professional gold firm is essential for the beginner looking to shorten the learning curve. A good firm will steer you away from the possible problems that you may face, and ultimately save you money. A reputable gold broker will help you select the right gold product mix, and make sure you are paying the right prices.
Tip 6 – Stay away from antiques.
Many investors buy a gold investment that has little to do with their objectives. Safe-haven investors comprise about 80% of the physical gold market. Instead of just adding coins to their portfolio mix, many of these investors end up with a leveraged gold position or a few rare and very expensive gold coins. These are not what is required for safe-haven investing, and most investors should avoid them.
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Monday, July 11th, 2011
Description: Grasberg is a world-class mining complex in Indonesia, where Freeport-McMoRan Copper & Gold is engaged in exploration and development, mining and milling of ore containing copper, gold and silver.
Did You Know? PT Freeport Indonesia commenced mining operations at this site in 1972 and in 1988 discovered the Grasberg mine. Today, after significant production, the Grasberg mining district contains the world’s largest recoverable copper reserve and the largest gold reserve.
Location: Papua, Indonesia
Ownership: We own 90.64% of PT Freeport Indonesia, the principal operating subsidiary in Indonesia, including 9.36% owned through its wholly owned subsidiary, PT Indocopper Investama. The Government of Indonesia owns the remaining 9.36% of PT Freeport Indonesia. FCX operates under an agreement with the Government of Indonesia, which allows us to conduct exploration, mining and production activities in a 24,700-acre area (Block A). We also conduct exploration activities in an approximate 500,000-acre area (Block B). All of our proven and probable mineral reserves and current mining operations are located in Block A.
Mines, Processes and Facilities: Two mines are currently in operation: the Grasberg open pit and the Deep Ore Zone (DOZ) underground block cave.
Grasberg. We began open-pit mining of the Grasberg ore body in 1990. Open-pit operations are expected to continue through 2015, at which time the Grasberg underground mining operations are scheduled to begin. Production is currently at the 3,295- to 4,285-meter elevation level and totaled 49.0 million metric tons of ore in 2008 and 57.5 million metric tons of ore in 2007, which provided 67 percent of our 2008 mill feed and 75 percent of our 2007 mill feed. Remaining mill feed comes from our DOZ mine.
DOZ. The DOZ ore body lies vertically below the now depleted Intermediate Ore Zone. We began production from the DOZ ore body in 1989 using open stope mining methods, but we suspended production in 1991 in favor of production from the Grasberg deposit. Production resumed in September 2000 using the block-cave method. Production is at the 3,110-meter elevation level and totaled 23.1 million metric tons of ore in 2008 and 19.5 million metric tons in 2007.
During 2008, we completed over 16,000 meters of development drifting in support of the block-cave mining method for the DOZ mine. Further expansion of the DOZ operation to 80,000 metric tons of ore per day is under way with completion targeted by 2010. The success of the development of the DOZ mine, one of the world’s largest underground mines, provides confidence in the future development of PT Freeport Indonesia’s large-scale undeveloped underground ore bodies.
Development Projects. In addition to the Grasberg open pit, four other ore bodies (the Grasberg block cave, Big Gossan, Deep MLZ, and Kucing Liar) are located in Block A. We have several projects in progress in the Grasberg minerals district, including developing the large scale, high-grade underground ore bodies located beneath and adjacent to the Grasberg open pit. These ore bodies are included in our proven and probable recoverable reserves.
Ore Bodies: Our ore bodies are located within and around two main igneous intrusions, the Grasberg monzodiorite and the Ertsberg diorite. The host rocks of these ore bodies include both carbonate and clastic rocks that form the ridge crests and upper flanks of the Sudirman Range, and the igneous rocks of monzonitic to dioritic composition that intrude them. The igneous-hosted ore bodies (the Grasberg open pit and block cave, and the DOZ block cave) occur as vein stockworks and disseminations of copper sulphides, dominated by chalcopyrite and, to a much lesser extent, bornite. The sedimentary-rock hosted ore bodies occur as “magnetite-rich, calcium/magnesian skarn” replacements, whose location and orientation are strongly influenced by major faults and by the chemistry of the carbonate rocks along the margins of the intrusions.
The copper mineralization in these skarn deposits is also dominated by chalcopyrite, but higher bornite concentrations are common. Moreover, gold occurs in significant concentrations in all of the district’s ore bodies, though rarely visible to the naked eye. These gold concentrations usually occur as inclusions within the copper sulphide minerals, though, in some deposits, these concentrations can also be strongly associated with pyrite.
The Grasberg complex shown below illustrates the layout of the current 2.7 billion metric ton Grasberg/Ertsberg minerals district reserves. The western side of the district is dominated by the Grasberg, with its massive open pit (final design shown) and block cave mineable reserves, and the Kucing Liar and Big Gossan ore bodies. The eastern side of the district is dominated by the Ertsberg East ore bodies, the DOZ and the Deep MLZ. The underground production and exploration access to these ore bodies is shown.
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Monday, July 4th, 2011
Any property that is purchased with the intent of gaining a return is considered investment property. Investment property can be an apartment building, a duplex, a single-family dwelling, vacant land, commercial property — basically any type of real estate. The term investment property usually describes property that the owner does not occupy, but in some cases, the owner may occupy a portion of it.
Purchasing investment property can be a lucrative venture, whether one simply hopes to purchase a home or plans to make a business out of such investments. One strategy for beginners is to purchase an investment property such as a duplex, or other multiple family dwelling, and live in one unit while renting out the other(s). This way, monies collected from the renter or renters covers the note, leaving the owner without a mortgage payment. Eventually the property is paid off, and the purchaser continues collecting the rent for a profit. (more…)
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Sunday, July 3rd, 2011
this article will talk all about gold investment, how to buy, what the prospect and any others. the artcles sources are from : USAGOLD.COM , and i hope will give lot benefit to all of you.
Question. What kind of gold should I buy?
Answer. We probably get that question more than any other — pretty much on a daily basis. The answer, however, is not as straightforward as you might think. What you buy depends upon your goals. We usually answer the “What should I buy?” question with a question of our own: “Why are you interested in buying gold?”
If your goal is simply to capitalize on price movement, then bullion coins will serve your purposes. If you are interested in long-term asset preservation and you have additional concerns about capital and/or monetary controls — a more complicated scenario — then you might want to include the lower premium variety of pre-1933 European and American gold coins in the mix. These have been treated by the U.S. government since the 1930s as historical items, and, as a result, afford the privacy-minded investor a greater degree of safety than gold bullion. These can still be acquired at reasonable premiums over their melt value.
But what I just gave you is a rough sketch. To develop a more refined strategy, we recommend spending time with your broker here at USAGOLD-Centennial Precious Metals. We can help you design a portfolio capable of weathering these uncertain times and in keeping with your long-term goals.
Q.When should I buy?
Answer. The short answer is ‘When you need it.’ You cannot approach gold the way you approach stock or real estate investments. Timing is not the real issue. The first question you need to ask yourself is whether or not you believe you need to own gold. Once you answer that question in the affirmative, there is no point in delaying your actual purchase. The real goal is to diversify so that your overall wealth is not compromised by economic dangers and uncertainties like the kind generated by the 2008 financial crisis.
Q. Can you give us a profile of the typical gold investor?
Answer. Gold owners are a group of people we have come to know very well in our nearly 40 years in the business. Contrary to the less than flattering picture sometimes painted by the mainstream press, the people we have helped become gold owners are among those we rely upon most in our daily lives — our physicians and dentists, nurses and teachers, plumbers, carpenters and building contractors, business owners, attorneys, engineers and university professors (to name a few.) In other words, gold ownership is pretty much a Main Street endeavor.
Traditionally, wealthy, aristocratic European and Asian families have kept a strong percentage of their assets in gold as a protective factor. That same philosophy has taken hold in the United States in recent years and begun to spread, particularly in light of the on-going financial crisis, and among those interested in retaining family wealth from one generation to the next. In a recent years, we have helped a good many family trusts diversify with gold coins and bullion at the advice of their portfolio managers.
Q. Why not wait for the necessity to arise, then buy gold?
Answer. Over the past few years, as concern about a financial and economic breakdown spread, there were periods of gold coin bottlenecks and actual shortages. The national mints could not keep up with public demand, and the flow of older gold from Europe was stymied by accelerating demand both there and in the United States. Premiums shot-up and a mad scramble developed for the available gold, even at rapidly escalating prices.
These events pointed up some of the problems inherent to the contemporary gold market. During times when demand for gold is booming, you cannot call the warehouse and order gold coins like you can most other consumer items. Even running at full capacity, the manufacturers (the national mints) cannot keep up with demand surges like the one we had in 2008 – 2009. In the case of the older coins coming from Europe, the supply simply dries up because, to make a long story short, they aren’t making any more of them. You should not treat a gold acquisition the way you do ordinary consumer purchases. Though your need might be great, the supply might simply have disappeared. If you think you should own gold, the worst thing you can do is get caught up in a price guessing contest as to when is the best time to buy. The better approach is make your acqusition(s) and position yourself positively in the event of further economic problems.
Q. You frequently mention gold as insurance. What do you mean by that?
Answer. Those of you who have read my book, The ABCs of Gold Investing: How to Protect and Build Your Wealth with Gold, know that gold’s baseline, essential quality is its role as the only primary asset that is not someone else’s liability or responsibility. That separates gold from the majority of capital assets which in fact do rely on another’s ability to pay, like bonds and bank savings, or the performance of the management, or some other delimiting factor, as is the case with stocks.
The first chapter of that book ends with this:
“No matter what happens in this country, with the dollar, with the stock and bond markets, the gold owner will find a friend in the yellow metal — something to rely upon when the chips are down. In gold, investors will find a vehicle to protect their wealth. Gold is bedrock.”
This is precisely what people learned during recurring economic crisis situations over the centuries as well as in contemporary meltdowns such as Mexico’s in 1994, the Pacific Rim’s in 1997, and the United States’ slow motion crisis from 2001 to the present. If you consider what investors lost in the U.S. stock market over the last decade and what gold investors gained during the same period, the swing in the net wealth effect is astonishing. When push came to shove, those who owned gold understood what we mean when we say “gold is bedrock.” To reduce this to a course of action: Diversification is important.
Q. What percentage of my assets should I invest in gold?
Answer. Once again the answer is not cut and dried, but a general rule of thumb is 10% to 30%, and once again your broker at USAGOLD-Centennial Precious Metals can help you make the decision. How high you go between 10% and 30% depends upon how concerned you are about the current economic, financial and political situation.
Q. In your book, The ABCs of Gold Investing, you start the chapter by saying “Who you do business with is one of the most important aspects of gold investing.” Why is that?
Answer. A solid, professional gold firm can go a long way in helping the investor shortcut the learning curve. A good gold firm can help you avoid some the problems and pitfalls encountered along the way, and provide some direction. It is very important to pick the right firm. An experienced and reputable gold broker can help you choose the right gold product mix to hedge your portfolio, make sure the prices you pay are in line with market expectations, and help you in general with the decision making process. Also, the right firm — one with proven longevity — will most likely be around to help you liquidate all or part of your holdings should the need arise.
Q. Can you briefly describe what you believe to be the biggest mistake investors make when starting out as gold owners?
Answer. The biggest trap investors fall into is buying a gold investment that bears little or no relationship to his or her objectives. Take safe-haven investors for example. That group makes up 90% of our clientele, and probably a good 75% of the current physical gold market. Most often the safe-haven investor simply wants to add gold coins to his or her portfolio mix, but too often this same investor ends up instead with a leveraged (financed) gold position or a handful of exotic rare coins (often costing five or six figures). These have little to do with safe-haven investing, and most investors would be well served to avoid them — except as a sideline.
Q. What is your view of gold stocks?
Answer. Many of our clients own gold stocks and we believe they have a place in the portfolio. However, it should be emphasized that gold stocks are not a substitute for real gold ownership, that is, in its physical form as coins and bars. Instead, stocks should be viewed as an addition to the portfolio after one has truly diversified with gold coins and bullion. Gold stocks can actually act opposite the intent of the investor, as some justifiably disgruntled mine company shareholders learned in the recent past when their stocks failed to perform as the price rose. There is no such ambiguity involved in actual gold ownership.
Q. What about gold futures contracts?
Answer. Futures contracts are generally considered one of the most speculative arenas in the investment marketplace. The investor’s exposure to the market is leveraged and the moves both up and down are greatly exaggerated. Something like 9 out of 10 investors who enter the futures market come away losers. For someone looking to hedge his or her portfolio against economic and financial risk, this is a poor substitute for owning the metal itself.
Q. Please summarize: What is the best approach for the safe-haven investor?
Answer. If you want to protect yourself against inflation, deflation, stock market weakness and potential currency problems — in other words, if you want to hedge financial uncertainties, there is only one portfolio item that will serve you in all seasons and under most circumstances — gold coins and bullion.
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