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Investing in Gold
Today, gold trades in many markets around the world.At any time of the day or night a current market price is being established somewhere. Two of the most important world markets, however, are in London and New York.
The London market is one of the oldest in the world and is the largest market for physical gold. Since September 12, 1919 the price of gold has been set at "the London gold fix" and this price is used in contract arrangements around the world. Today, the gold fixings take place at 10:30am and 3pm and provide published prices which are used as official pricing medium by producers, consumers and central banks.
The New York market opens as the second London fix takes place and gold then trades throughout the day. The New York market is particularly noted for the volume of "paper gold transactions" such as futures contracts that are traded on the exchanged. The Comex division of the New York Mercantile Exchange is the center of these activities.
In 2004, StreetTRACKS Gold Shares were introduced as a way of allowing investors access to the gold market. Sponsored by a subsidiary of the World Gold Council, the shares are designed to track the price of gold and trade like a continuously offered security.
There are other important gold markets in Zurich, Tokyo, Sydney, Hong Kong and elsewhere - so gold is being traded somewhere 24 hours a day.
Prices
- Historical Yearly Price Table (1833 - 2006) (PDF)
- Monthly Price Charts (1990 - 2006) (PDF)
- Interactive Chartlet of Gold Prices (1975 - 2004) Interactive chartlets enable visitors to create charts and save chart data as an image file or Excel spreadsheet.
* For information on how gold is used in electronics, telecommunications and medicine, see the gold uses page.
* For information on how gold is produced, see the gold production page.
Introduction to Investing
Throughout human history, gold has been not only a means of exchange, but also a store of value. Gold is an excellent hedge against inflation, and protects earnings for the future. Modern investors can invest in gold the traditional way - by purchasing gold bullion in the form of bars or coins - or they can trade in gold or gold futures electronically, or by investing in gold mining or refining companies.
Forms of Gold Investment
The reasons for investing in gold have remained much the same throughout history. Gold is a safe haven in times of economic and financial instability. It is a proven asset-diversifier that, when included in domestic portfolios, reduces the portfolio's overall risk. And gold is an excellent hedge against inflation over the long term. Gold is the only asset that is negatively correlated against the price of the dollar.
Investment in gold can take many forms. What follows is a summary of the World Gold Council's Guide To Investing in Gold outlining various investment vehicles, their advantages, disadvantages and levels of risk.
GOLD BULLION BARS & COINS
International refiners make it convenient for investors to own bullion by offering gold bars in a variety of weights and sizes ranging from 1 gram to the popular kilobar (32.15 troy ounces) to the international "London Good Delivery" bar (400 troy ounces).
Broker commissions on buying and selling gold bars are minimal, and in most cases, purchasing bullion is the most cost efficient means of owning gold. Bars bearing the "hallmark" of internationally recognized refiners are the easiest to sell.
Buying gold bullion coins is popular among medium and small investors. Gold bullion coins are legal tender of the country of issuance and their gold content is guaranteed. The bullion coin bears a face value that is largely symbolic, its true value depends on its gold content and the day-to-day changing price for gold plus a small premium of approximately 4 to 8 percent.
GOLD STATEMENT ACCOUNTS
Gold statements are obligations of the issuing institution, usually a commercial bank, to deliver upon demand, a stated quantity and fineness of gold in accordance with the issuer's terms and conditions. An investment in a statement account provides safe and convenient storage and allows investors to buy gold in convenient dollar amounts. Usually the gold held by statement account holders is "pooled" with the gold of other investors in a depository.
GOLD ACCUMULATION PLANS
Gold Plans function as a savings vehicle whereby customers invest a certain amount of money at regular intervals, regardless of changes in the gold price. Accumulation plans are offered by selected banks, brokerage firms and precious metals dealers. As in the case of the gold statement account, an investment in gold in an accumulation program is "pooled" with other investors.
GOLD MINING SHARES
Many investors are familiar with the equity market and are consequently more comfortable accessing the gold market by way of buying stock in gold mining firms. The capital appreciation potential of a gold share is dependent not only on the future price of gold, but also on the future prospects of the company based on its management and operating strengths. Mining shares offer capital appreciation opportunities, as well as the opportunity to earn a dividend. Generally, if the price of gold rises, so do earnings and dividends.
GOLD OPTIONS
A gold option provides an investor the right to buy or sell gold at a fixed price at some specified future date. The price of an option is called the premium which is a means by which the buyer compensates the seller for granting the option. With options, the buyer's downside risk is strictly limited to the cost of the option - i.e. the premium plus any transaction costs. Gold futures options are traded on recognized commodity exchanges.
MUTUAL FUNDS
Many mutual funds offer investment programs in gold. With gold mutual funds, the investors is buying general market risk instead of company-specific risk. Mutual funds diversify their holdings among dozens of companies. Some funds offer a broad mix of international mining stocks, while others invest in specific regions such as North America, Australia or South Africa.
Leading Gold Bullion Coins
American Eagle
(1986 to date) Proof quality coins also available. Available in 1,1/2, 1/4 and 1/10 troy-ounce sizes. Fineness: .916 or 22 karats.
Canadian Maple Leaf
(1979 to date) Available in 1, 1/2, 1/4 and 1/10 troy-ouncesizes. Fineness: .9999 or 24 karats.
South African Kruggerand
(1976 to present) Available in 1, 1/2, 1/4 and 1/10 troy-ounce sizes. Fineness: .916 or 22 karats.
English Britannia
(1987 to date) Available in 1, 1/2, 1/4 and 1/10 troy-ounce sizes. Fineness: .916 or 22 karats.
Australian Kangaroo
(1989 to date) From 1986 to 1988 Australia produced the Gold Nugget Coin; it was replaced in 1989 by the Kangaroo coin. Available in 1, 1/2, 1/4, 1/10 and 1/20 troy-ounce sizes. Fineness: .9999 or 24 karats.
Chinese Panda
(1982 to date) Available in 1, 1/2, 1/4, 1/10 and 1/20 troy-ounce sizes. Fineness: .9999 or 24 karats.
Austrian Philharmonic
(1989 to present) Available in 1, 1/4 and 1/10 troy- ounce sizes. Fineness: .9999 or 24 karats.
Mexican Centenario Family
(Official Govt. Restrikes) Available in: 50 Pesos: 1.2 troy oz. (1947), 20 Pesos: 0.48 troy oz. (1959), 10 Pesos: 0.24 troy oz. (1959), 5 Pesos: 0.12 troy oz. (1955), 2.5 Pesos: 0.06 troy oz. (1945), 2 Pesos: 0.04 troy oz. (1945) Fineness: .900 or 21.6 karats
Mexican Onza
(1981 to present) Availabe in 1, 1/2, and 1/4 troy-ounce sizes. Fineness: .999 or 24 karats.
Outlets for the Purchase of Gold
| Type of Gold Investment | Banks |
Precious Metals/ Coin Dealers |
Brokerage Houses | Mutual Fund Vendors |
| Bullion |  |
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| Bullion coins | |
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| Numismatic coins |
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| Statement accounts | |
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| Accumulation plans | |
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| Futures |
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| Options |
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| Forwards | |
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| Mining shares |
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| Mutual funds | |
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