Not All Gold Is Created Equal: What to Know Before You Buy

Email

If you own gold, or are thinking of buying some, here's something you need to consider…

It's not all the same.

Some, like fake gold-painted lead ingots, have no value whatsoever.

Some gold said to be in storage or in the ground may not even be there at all.

There are a number of aspects of gold's quality, whether it's real or even exists, that every investor needs to know…

The Best Gold to Buy

When investors evaluate gold mining companies, for example, there are a lot of factors to consider, like politics, infrastructure, deposit size and location, etc.

But one crucial element is the quality of the ore. The more highly concentrated the gold is per ton of rock, the less it will typically cost to produce each ounce.

When looking to buy gold coins, it's usually the gold content that differentiates various types.

goldFor North Americans, the four coins at left are among the most popular. Although they all contain 1 full troy ounce of gold, some also contain other metals, like copper, which makes the coin harder and therefore less subject to wear and tear.

Both of the American coins typically command somewhat higher premiums than either their Canadian or South African brethren, thanks to their level of recognition in North America.

Nonetheless, the Maple Leaf and Krugerrand are both among the most popular coins worldwide.

Although these coins are produced by their respective national mints, only the Krugerrand does not carry a face value. Of course, those that do are clearly worth much more than the stated $50, but this does make them legal tender in their issuing countries. The two American and one Canadian coin I've described are guaranteed by their respective governments for both content and purity.

Another popular gold investment option is gold bars.

One very significant characteristic here is to consider whether the bars are "good delivery" or not. Essentially, good delivery bars are sourced from a reputable refiner who is on the "good delivery" list of the industry standard London Bullion Market Association (LBMA) and the New York Mercantile Exchange (NYMEX).

Bars bearing the stamp and fineness of these refiners are typically readily accepted by gold dealers, allowing the seller an easier transaction and higher value.

Of course there's always a risk, however slight, that a gold coin or bar may be counterfeit. But there are a number of ways for you to assess whether or not your gold is real. Back in early 2013, I wrote an article titled Seven Ways to Tell if Your Gold Is Counterfeit to address this very topic.

Does America Really Have Its Gold?

Government Steps In…

President Roosevelt signed Executive Order 6102 on April 5, 1933, 'forbidding the hoarding of gold coin, gold bullion, and gold certificates within the continental United States.' In effect, the order meant the possession of monetary gold was made criminal. The rationale for confiscation was that citizens were "hoarding" gold, which was impeding growth in the economy, thereby exacerbating the depression. In effect, since U.S. dollars were exchangeable for gold at a fixed price ($20.67), Treasury was restricted in its money printing by the amount of gold it held. A large infusion through confiscation dramatically increased the government's gold holdings, whose value was further increased when Treasury raised the gold price to $35 per ounce. The rest is history. "

There's also the issue of where individual nations' gold is stored, and whether it's even there at all.

Former Congressman Ron Paul has long questioned whether Fort Knox indeed holds the 5,000 tons of gold we're told it does.

Paul has pressed for an independent audit and even introduced legislation calling for one back in 2011. But this was never passed.

Join the conversation. Click here to jump to comments…

About the Author

Peter Krauth is the Resource Specialist for Money Map Press and has contributed some of the most popular and highly regarded investing articles on Money Morning. Peter is headquartered in resource-rich Canada, but he travels around the world to dig up the very best profit opportunity, whether it's in gold, silver, oil, coal, or even potash.

Read full bio

  1. H. Craig Bradley | May 12, 2014

    REPRESSION AND SUPPRESSION of Truth

    No wonder a Republican Congress would not Ron Paul's Bill (2011) to audit the gold holding in Ft. Know, Kentucky. Its entirely possible even a photo of the inside of the vault would cause a dollar panic. Picture a huge warehouse with lots of empty space and shiny floors with just a couple of pallets of gold in the middle of the room. No way they want the public to see that one.

    • Dwane Brown | May 12, 2014

      There has been reliable information that only 10% of the minted gold was melted after the 1933 confiscation. According to Milton Friedman, "A Monetary History of the United States 1867 – 1960," 13.9 million ounces of gold still was, in 1934, in circulation. That puts the total amount of turned in gold at 21.9% of the total in circulation. I'd venture to say most of the gold coins from that era come back to the United States from overseas where they were shipped for speculation back then.

  2. LarryM | May 17, 2014

    I recently heard a presentation explaining that the US world monetary structure was about to be downgraded by many nations of the world. No longer will the "Dollar" be the currency of the world.
    With Bill H.R.2847, all foreign banks must report any and all US currency and account transactions
    to the IRS. How will the implementation of the currency downgrade affect the normalcy of the US and it's citizens? Is this currency crisis a factual happening? What steps would be required by an individual to lessen the blow?

  3. Donald Gleichman | May 19, 2014

    My best friend passed away 3 weeks ago besides leaving behind his friends & wife he left her a handful of small gold bars/little ingots. I'm going to look at them afternoon & am wondering best way to determine cash value. Take them to coin dealer or gold coin dealers?

Leave a Reply

Your email address will not be published. Required fields are marked *

Some HTML is OK