US Dollar Strength, Weakness and the Price of Gold: A Primer

When the US Dollar gets stronger, it takes fewer dollars to buy any commodity that is priced in $USD. When the US Dollar gets weaker it takes more dollars to purchase the same commodity.
The price of all US Dollar denominated commodities, like gold, will change to reflect the fact that it will take fewer or more dollars to buy that commodity. So it’s quite possible, in fact it’s almost always the case that a portion of the change in the price of gold is really just a reflection of a change in the value of the US Dollar. Sometimes that portion is insignificant. But often the opposite is true where the entire change in the gold price is simply a mathematical recalculation of an ever-changing US Dollar value.
When the dollar gets strong, gold appears to go down, and vice versa. That accounts for part of the fluctuations that we see in the value of gold.
The other part is an actual increase in the supply or demand for gold. If the price is higher when being measured not only in US Dollars, but also in Euros, Pounds Sterling, Japanese Yen, and every other major currency, then we know the gold demand is higher and it has actually increased in value.
Consequently, if gold is higher in US Dollars while at the same time cheaper in every other currency, then we can conclude that the US Dollar has weakened, and that gold has actually lost value in all other currencies. But the price, because it is being quoted in $USD will be higher and give the illusion of gold becoming more valuable. In such a case the devaluation of gold, due to increased supply on the market, is camouflaged by a weakened US Dollar.
Our feature on kitco.com breaks the change of the price of gold into 2 components. One part shows you how much of that change can be attributed to US Dollar strength, or lack of it. The other portion is indicative of how much the price changed as a result of normal trading. Interestingly whatever changes happen to the price of gold as a result of US Dollar strength/weakness also occurs to every other US Dollar denominated commodity by the exact same proportion.

Source from http://www.kitco.com/kitco-gold-index.html#RT

What You Need to Know About Gold

By JEFF D. OPDYKE

Gold shined in 2008. Could 2009 be as bright?

Of all the major assets -- stocks, corporate bonds, cash and others -- gold was one of last year's few standouts. While so many investments collapsed amid the turmoil, the price of an ounce of gold posted a gain of about 4.3%.

Chris Gash

So far this year, the rare metal is up about 0.7%, after a rally Friday put it back in positive territory. And longer-term concerns are emerging that aggressive, untested government policies aimed at righting the flailing economy could ultimately fuel a further rise in gold prices.

When that might happen, no one knows. But for investors who want to hedge against potential economic turmoil, "buying gold is a very good idea for 2009," says Chuck Butler, president of EverBank World Markets in St. Louis.

The case for gold is this: The government is pumping trillions of dollars into bailouts and stimulus plans, a purposefully inflationary policy aimed at reversing current deflationary pressures. If inflation results, or if the dollar weakens as the supply of dollars necessarily increases under the stimulus plans, gold is a likely winner because it hedges against inflation and fiat currencies.

The opposing view: "The inflation argument hasn't been seen yet in government data, and once the economy catches gear, the [Federal Reserve] will pull the money back out of the economy," negating any inflationary pressures, says Tom Pawlicki, a precious-metals analyst at MF Global, who says he's "not friendly on gold."

Though gold is generally thought of as a physical asset, these days investors have a variety of options. Here are a few of them, along with the inherent pros and cons:

Bullion

This is the pure metal, typically cast as bars or coins in weights ranging from a single gram to one kilogram.

Bars like those minted by Credit Suisse and Pamp Suisse trade at a slight premium to gold's market price and are generally the least expensive way to own physical gold. Coins such as the American Eagle often include a collector's premium that can increase the cost slightly. Rarer coins can fetch substantially more.

Local coin shops generally sell bullion, though it's also widely available -- often at a smaller markup -- through a variety of online dealers, including Apmex.com and BostonBullion.com, among others.

Pros: Though this is conspiracy theory, if the government ever confiscates gold or limits its ownership -- as happened in the 20th century -- possessing gold in physical form offers some means of retaining control of your wealth in an economic disaster.

Cons: Risk of theft or loss if you keep gold at home. If it's in a bank safe-deposit box, you won't have access in an emergency if the bank is closed. And safe-deposit boxes aren't insured in the event of a disaster.

Pooled Accounts

These are sort of like a gold bank account in that your gold is held in a vault. The markup per ounce is usually less than 1% of gold's current market price, making this cheaper than owning physical bullion.

Depending on the provider, pooled accounts are either "allocated," meaning that specific, numbered bars are allocated to you, or "unallocated," meaning you're assigned a sum of gold, though not specific bars. Allocated accounts charge annual storage and insurance fees. Unallocated accounts generally don't. Kitco.com and EverBank.com offer pooled accounts.

Pros: Perhaps the most secure form of owning gold, since the metal is kept in a vault and the inventory is regularly audited. You can also request that your gold be sent to you, though you'll typically pay delivery and fabrication charges.

Cons: Annual fees in allocated accounts can add up over time, while some unallocated accounts are held in the company's name, meaning that if the firm goes bust, creditors can grab the company's assets -- including your gold.

Exchange-Traded Funds

These trade like shares of stock on a stock exchange, with each share representing some fractional portion of an ounce of gold. For instance, each share of the SPDR Gold Shares ETFrepresents 0.1 ounce, and thus trades at about a tenth the price of gold. The shares are typically backed by physical gold held in vaults in London, New York and Zurich and audited regularly.

Pros: Relatively cost-effective ownership, since you're not paying insurance and storage costs. Nor do you take physical possession of the metal, so there are no fabrication costs or risk of loss or theft. Buying and selling are instantaneous.

Cons: Taxes. The government treats gold as a collectible, and thus capital gains on a gold ETF are taxed at a flat 28%, nearly double the long-term capital-gains rates on stocks.

You also pay the ETF's management fees -- roughly 0.4% -- which depletes your account. You can't request that gold be fabricated into bars. And if the government ever does confiscates gold, "some people think ETF gold could be seized," says Leo Larkin, an analyst at Standard & Poor's Equity Research.

Mining Stocks

With publicly traded mining companies, you don't own the metal but you do own shares of companies digging holes in the earth. This is the most leveraged gold play, since a rising -- or falling -- gold price is spread across hundreds of thousands or millions of ounces the company has in the ground.

Pros: More bang for the buck. Mark Johnson, portfolio manager for the USAA Precious Metals & Minerals Fund, estimates that "you probably have to put two times as much money into bullion or ETFs to get the same exposure to gold as you do with mining shares."

Cons: Exposure to all sorts of corporate and geopolitical risks, based on the countries in which a particular gold miner operates. And because mining is so energy intensive, rising energy prices can negate some of the increase in gold prices.

Source from http://online.wsj.com/article/SB123284319920613125.html

Amazing facts about gold

Gold has had such a long and fascinating history, and has so many unique properties, that it’s hardly surprising there are quite a few startling facts about it.

Celebrating with gold

Gold featured in the celebrations when sporting history was made in July 2009 as Roger Federer won a record fifteenth Grand Slam tennis tournament at Wimbledon. A series of outfits, all featuring gold detailing, had been commissioned for the two week tournament with a special jacket standing by in the hope of a landmark win. As Federer raised the trophy to the cheers of the crowd, the golden number 15 was revealed on the side of the jacket.

The most expensive gold coin in the world

One of the world's rarest and most sought after collector coins, the 1933 Double Eagle, was sold at Sotheby's auction house in New York in 2002, for the record sum of $7.59 million. The coin led an eventful life, escaping a big gold meltdown in the US, falling into the hands of an Egyptian King and then being discovered by undercover secret service agents in New York!

Recycling gold

Ever since it was first discovered, gold has always been recycled thanks to its inherent high value. So that means your modern jewellery or dental crown could contain gold that was mined in prehistoric times, and might have even been part of some priceless item belonging to ancient royalty! Today, at least 15% of annual gold consumption is recycled each year.

Spread the wealth

Fine gold is so malleable that it can be beaten down to a thickness of 1112µ (.0001112 mm) into translucent gold leaf, so that one ounce (31.1 gr.) of it will cover about 16 square metres!

Wood gilding

The slow and careful process of gilding wood requires no less than 22 operations – all manual! The sheets are 1/110,000th of a millimetre-thick, and are laid on a ‘gilding cushion’ (the skin of a stillborn calf) before being cut to the desired size. The gilder, using a silk brush charged with static electricity, plucks up the gold leaf and delicately lays it on the suitably scraped wood.

Carats and carobs

The word ‘carat’ (the measurement for gold purity) comes from ‘carob’; carob seeds were originally used to balance scales in Oriental bazaars. Pure gold is designated 24 carat, which compares with the ‘fineness’ by which bar gold is defined.

Some people go to great lengths to use gold as much as possible. Here are some of the more extreme examples…

Gold leaf cakes

The ‘Palets d'Or de Moulins et des operas’ were made by Lenotre, the famous French pastry cook. Gold leaf is laid on the chocolate while it is still not quite solid.

Elvis’s golden car

The specific model is a Stutz, about 20 of which are made a year, and the King had three! In the cars, everything normally in chrome – such as the steering wheel, pedal surrounds, ashtray and cigarette lighter – is in gold instead.

Gold hand basin

This washbasin and its gold taps are on sale for an undisclosed price in a New York shop specialising in deluxe bathrooms.

Gold coffee pot

The pot has a permanent gold filter that preserves the coffee's flavour. It consists of an extremely slender mesh cover with a fine layer of 23-carat gold.

Gold shower curtain

Dennis Kozlowski, disgraced former CEO of Tyco International, is said to have enjoyed gold-threaded shower curtains costing $6,000!

Source from http://www.goldipedia.gold.org/facts/

GOLD

GOLD

The one dollar US Sacajawea coin. Although it appears to be made of gold, it is not! It is an alloy of copper, zinc, manganese, and nickel.

Gold is a precious metal that has been valued by people since ancient times. People use gold for coins, jewelry, ornaments, and many industrial purposes. Until recently, gold reserves formed the basis of world monetary systems.

Gold is a very soft metal when it is pure (24 Kt. is pure gold). Gold is the most malleable (hammerable) and ductile (able to be made into wire) metal. Gold is usually alloyed (mixed with other metals, often silver and copper) to make it less expensive and harder. The scientific abbreviation of gold is Au.

The purity of gold jewelry is measured in karats. Some countries hallmark gold with a three-digit number that indicates the parts per thousand of gold. In this system, "750" means 750/1000 gold (equal to 18K); "500" means 500/1000 gold (equal to 12K).

Source from http://www.enchantedlearning.com/jewel/pages/gold.shtml

Public Bank Launches Gold Investment Account

Public Bank is pleased to announce the launch of a new investment product effective 21 April 2008 known as the Gold Investment Account that allows individual customers to purchase the purest available gold commodity in 99.99% fineness at daily prices in Ringgit Malaysia per gram. Managing Director Dato' Sri Tay Ah Lek said, "The launching of the Gold Investment Account is in line with the recent rise in gold demand and to provide alternative investment products to the Bank's customers who wish to earn potentially higher returns. Gold investment is always regarded as the best possible hedge against inflation. The world demand for gold as a precious metal is ever growing as evident from the India and China markets which are among the world's largest consumers of gold." The Gold Investment Account provides the Bank's customers with the convenience of investing in gold without the hassle of keeping physical gold as trading is carried out through a passbook. The passbook will record every purchase and sale of gold made through the account. The initial gold purchase quantity to open a Gold Investment Account is affordable at only 20 grams and subsequent minimum trading quantity is 5 grams and in multiples of 1 gram. The difference between the selling and buying prices is relatively small. As a global practice, the Gold Investment Account does not pay interest as this is not a deposit placement and furthermore, the Bank keeps the gold with an authorised custodian bank. The Bank can make available the physical gold in denominations of 100 grams, 500 grams and 1,000 grams should the customer require physical withdrawal of gold. A minimum quantity of 2 grams of gold is to be maintained by the customer to ensure the account remains active. For more information on the Gold Investment Account, customers may visit their nearest Public Bank branch, call free-phone at 1-800-88-3323 during working hours, or log on to Public Bank's website at www.pbebank.com. * * * * * * * * Gold Investment Account * * * * * * * * Source from http://ww2.publicbank.com.my/cnt_press257.html

Public Bank offers gold investment account

Tuesday April 22, 2008

Datuk Seri Tay Ah Lek

KUALA LUMPUR: Public Bank Bhd has launched a new investment product, Gold Investment Account, that allows customers to purchase the purest available gold commodity in 99.99% fineness at daily prices in ringgit per gram.

Managing director Datuk Seri Tay Ah Lek said in a statement the launch of the product was in line with the recent rise in gold demand and to provide an alternative investment product for customers who wished to earn potentially higher returns.

“The account provides customers with the convenience of investing in gold without the hassle of keeping physical gold, as trading is carried out through a passbook,” he said.

Tay said the initial gold purchase quantity to open an account was 20g and subsequent minimum trading would be 5g and in multiples of 1g.

He said the account would not pay interest and the bank would keep the gold with an authorised custodian bank.

Tay said the bank would make available the physical gold in denominations of 100g, 500g and 1,000g should the customer required physical withdrawal of gold.

“A minimum 2g of gold are to be maintained by the customer to ensure the account remains active,” he said. – Bernama

PBBANK : [Stock Watch] [News]

Source from http://biz.thestar.com.my/news/story.asp?file=/2008/4/22/business/21020597&sec=business

Investment Guide: Gold

An easy guide to investing in gold

Why gold?

Whether as a stepping stone into the physical market, or as a move to diversify your investment portfolio, gold offers strong benefits to an investor.

1. Gold offers secure value and is easy to invest.

   Historically, the value of national currencies may rise and fall but the value of gold remains remarkably stable. Gold fulfils the function of money and is accepted worldwide as a form of payment. You don't need a huge sum of gold to begin investing gold bullion coins, for example, can be purchased from weights as low as a quarter troy ounce.

2. Gold is the most liquid asset.

   Gold can be readily bought or sold 24-hours a day in one or more markets around the world. This cannot be said of most investments, including stocks of the world's largest corporations. In addition, the trading spreads on bullion are generally narrower than the spreads on stocks and bonds (which are considered liquid assets).

3. Gold diversifies your portfolio.

   Gold's low-to-negative correlation with stocks and bonds makes it an excellent portfolio diversifier. In fact, many financial advisers recommend keeping 5% to 10% of your total assets in gold. With gold, you can help offset market fluctuations and reduce volatility.

View today's gold rates >

Source from http://www.maybank2u.com.my/mbb_info/m2u/public/personalDetail04.do?channelId=INV-Investment&chCatId=/mbb/Personal/INV-Investment&cntTypeId=0&cntKey=INV08.04

60 lose RM25mil in gold investment scam

Wednesday February 10, 2010

By TAN SIN CHOW

sctan@thestar.com.my

GEORGE TOWN: At least 60 people from Penang have lost more than RM25mil in a gold investment scam which is said to be operated by a Kuala Lumpur-based company.

Police believe that the amount of money and the number of victims are just the tip of the iceberg as there could be many cases which have gone unreported.

State Commercial Crime Investi gations Department chief Asst Comm Roslee Chik said 30 reports involving 60 victims were received this year. All the incidents took place last year.

He said the Bukit Aman police headquarters had since taken over the investigation as the duped investors are from all over the country, including Kuala Lumpur and Selangor.

He added that the victims only realised that they were taken for a ride in the fourth month of investment.

“This is when the syndicate would give them two options – either to renew the contract or to pull out from the scheme.

“It would be the end of the road for investors then. For either options, syndicate members would tell you they need to re-weigh and re-assess the genuineness of the gold bars which was given to the investors.

“The syndicate will claim they need seven days to check the gold bars. But during the period, they will abscond with the gold,” ACP Roslee said at a press conference at the state police contingent headquarters yesterday.

Source from http://thestar.com.my/news/story.asp?file=/2010/2/10/nation/5644965&sec=nation