The Noble Metal
With property prices falling, stocks plummeting and banks closing - is the shimmering glitter of precious metal a safe investment?
Crashing stock markets, rising inflation and spiraling national debt were some of the miseries that headlined the news in 2009.
But among the negative headlines gold began to appear as a shining beacon - with a global dash to scrap old gold and cash in on what appeared to be one of the only commodities of any value. A metal with which man has held a love affair for 6,000 years.
The Birmingham Assay office reports that worldwide nearly 900 tonnes of gold was scrapped in the first half of 2009. That amounts to more being scrapped than fabricated in the first quarter of the year. A rollercoaster year by any means, investment demand for gold doubled to 1,820 tonnes.
Internet sites offering attractive prices sprang up to rival traditional pawnbrokers while reports that householders were gathering together at 'gold parties' to sell their unwanted jewellery to visiting gold buyers took hold.
Desperate times seemed to call for desperate measures, but selling and buying online cannot compare to solid and experienced advice from a respected retailer such as Baker Brothers'.
We heard stories of people taking a room in a hotel or erecting little stalls in shopping centres to buy gold. Trading standards and consumer bodies warned people against trusting these people, who were turning up and paying what they liked - sometimes less than 10 per cent of the value," said Baker Brothers' Kevin Coleman.
"The best thing is for consumer to go to their local jeweller for confidence. We have been buying bullion, second hand jewellery and antiques for decades."
At Baker Brothers', customers have always had the opportunity to sell their unwanted jewellery and although gold is undeniably precious, Baker Brothers' always advise that the investment is in the quality of the jewellery - not in the precious metal itself.
"Last year at one stage such was the demand for bullion that the dealers couldn't keep up. I have not seen anything like this since the surge in price in the 1980s - we had queues at the door of people wanting to sell their old gold - it's a fascinating business," added Kevin.
With confidence waning in the banking industry and scores of people waiting to withdraw their life savings from financial institutions on the brink of collapse, one of the world's oldest commodities suddenly seemed a lot more attractive.
Anxious savers worried about the future of traditional financial institutions suddenly started to invest in bullion rather than banks.
Aside from jewellery, gold in its bullion form is neither very easy nor manageable to buy. The smallest gold bar: 2.5 grams is typically bought as a gift rather than an investment whereas serious investors start with a 1kg bar. While buying gold may seem to be as sensible as it is romantic, buyers need to be aware that while a single kilogram bar may not be that big it's unwise to invest your life savings in a box full of gold and then leave it under the bed unprotected. Far easier for the precious investor to store are Krugerrands or a sovereign.
Gold is an ideal metal both for adornment and investment - it is indestructible, doesn't rust or evaporate and is malleable - making it ideal for jewellery. With prices rising, some buyers will be tempted to go abroad for a good deal - but as the bard himself said... all that glistens is not gold. "Buying jewellery abroad the consumer will get the weight of gold - but not design element to the jewellery," said Kevin. "Prices may be higher in the UK and Europe because of the design element but also because of the money invested in ensuring quality: the hallmark - a byword for quality for centuries," he added.
Gold Nuggets
- Gold bars were made as early as 4000 BC.
- Gold's chemical symbol is Au from the Latin word 'aurum' which means "shining dawn."
- The most expensive gold coin in the world: the 1933 Double Eagle was sold at Sotheby's auction house in New York in 2002 for the record sum of $7.59 million. If only it could talk it would have an interesting story to tell - having fallen into the hands of an Egyptian king, escaped meltdown in the US and being discovered by secret service agents in New York.
- The largest gold nugget ever found weighed 195lbs.
- 75% of all gold ever produced has been extracted since 1910.
- Beat an ounce of gold as thin as possible and it will stretch for 50 miles: from Bedford to London
- Less than 50% of all the world's gold is still in the ground.
- Gladstone is said to have told Disraeli that man is more likely to be knocked off balance by gold than by love...
- More gold was recycled than mined in the first quarter of 2009 - the first time on record.
- Gold has always been recycled thanks to its inherent high value - modern jewellery or dental crowns could contain precious metal that was mined in prehistoric times!
The gold price was set in 1717 by chairman of the Royal Mint, Sir Isaac Newton at £3 3s 11d halfpenny per troy ounce and it remained the same for over 200 years. Since 1919 the benchmark for the London gold price has been the London gold fixing - a twice a day telephone conference between the leading bullion dealers in the market. Like stocks and shares, the gold price will fluctuated many times on a daily basis, which will therefore affect the costs of making jewellery.
Today gold prices are hovering around an all time high. With experts predicting an upward trend, now seems to be the time to clear out the unworn and unloved jewellery and buy something new. Prices might be rising, but the allure of luxury gold jewellery means that now more than ever it is important to spend a bit more - and invest in quality.
"Every aspect of the watch and jewellery industry has seen price increases as a result of the rising cost of gold," said Kevin. "With increased demand for investment comes increased prices, a situation compounded by a weak dollar and the sale of UK gold reserves. It's galling that Gordon Brown sold off so much of the UK's gold reserves - he lost the UK economy some £5 billion - underlying what a commodity gold has become."
Consumers tend to be buying less, but are spending more money on higher quality pieces and are prepared to invest in something that has a designer name tag - intimating that man's love affair with gold is far from over...
Images courtesy of www.cooksongold.com
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