Faith in the Bailout? Or in Gold?

With the U.S. government now struggling to steady the teetering economy, and bailout after bailout being sucked down by greedy banks and other businesses who then ask for more, where can investors look?  The market is clearly struggling under the weight of unscrupulous investment deals that have now gone south.  And many are looking at the gold market.

Gold prices are currently sky high.  In late February, they topped $1000 per ounce; a benchmark that wasn’t anticipated until much later this year.   Since then, they’ve come down somewhat again.

Sure, the glittering metal has mesmerized people from all walks of life for thousands of years.  But as an investment, it’s had a slightly tarnished history.  In the 1980’s and 1990’s, it actually lost value as the stock markets gained and some global central banks started selling their reserves of the precious metal.  By the late 1990’s, it was below $300 per ounce and as an investment, it returned zilch.

But then came September 11, 2001.  The terrorist attacks of 9/11 shook global markets and sent investors scurrying for something they could hold on to: gold.   By 2006, the return was 16.25% across five years.   And last year, the global equity market collapse brought a boom in the price of gold.

The attention being placed on gold right now is largely due to the uncertainty that many investors feel.  In the past, they might have considered buying land as an investment, but speculation in real estate has cost already. And nobody feels sure where the drop in land values might end.  Thus, as the stock market crashed last year, demand for gold rose 64% over the preceding year.

What does this mean to you?  If you’re investing in gold for financial security, this is a tricky time.  The price of gold has already seen huge gains.  Nobody wants to get in when the price is already high.  But if you are trying to get out, it might not be the right time to do that, either.  Buyers are now turning away from trades because the high prices have brought out everyone with a bulky neck chain or bracelet left over from the 1990’s.

If you buy gold on a site like Apples of Gold, you are buying it as a purchase of love; either you love it or you care deeply about the person that you are buying it for.  These are not financial investment pieces, but rather a down payment on a lifetime of caring that you hope will return rich rewards on a regular basis.

Sweat of the Sun – Properties of Gold

From Mythology to the Economic Standard

The Incas called gold the “sweat of the sun”; the Pharaohs insisted on being buried in what they referred to as the “flesh of the gods”; and Isaac Newton established gold as the benchmark of a new global economy.

Sir Isaac Newton, England’s Master of the Mint, first standardized the price of gold in late 1717. First as gold coins, and later as backing for paper money, gold become the standard by which an economy was measured. It was not until 1971 when the U.S. dollar was no longer directly measured by a gold standard, that gold began to exhibit volatility as a freely traded precious metal.

Gold Properties and Mining

Gold, whose chemical symbol, AU, became valuable due to its unusual malleability, density, longevity, and perpetual shine, became the transcendent symbol of aesthetic and mystical beauty.

Gold ore appears in nuggets or grains in rocks as small veins or alluvial deposits–sediments deposited by flowing waters or rivers, called placer deposits. Alluvial placers form when dense particles such as gold or platinum accumulate where water velocity is no longer strong enough to transport deposits further. Placer mining was prominent in such times as the California Gold Rush.

Placer mining today is much more sophisticated, utilizing excavation methods such as water pressure (hydraulic mining) or by using surface excavation and tunneling equipment.

Gold Consumption

In all of history, only 161,000 tons of gold has been mined–and more than half of this amount has been excavated in the past 50 years. It is surprising also to learn that the U.S. is not the number 1 consumer of gold. But that India holds this title as the largest “gold nation” worldwide (773.6 tons of gold consumed in 2007), followed by China (363.3 tons)–who surpassed the U.S. (278.1 tons) in 2007 as the second largest gold consumer.

Although fine jewelry dominates gold as the primary use for the yellow precious metal, gold is also critical in numerous industries.

In 2007 alone:

• 2,398.7 tons of gold were used to create gold jewelry

• 310.6 tons of gold were used for electronics as a non-corroding conductor

• 253.3 tons of gold were used in exchange-traded funds which have gained immense popularity in the past several years

• 235.6 tons were used for gold investment (or bar hoarding)

• 137.0 tons were used for official gold coins

• 92.7 for various other industrials

• 72.6 tons for medals and special coins

• 57.8 tons for dentistry

Source: National Geographic, Jan. 2009

Uses in Gold Jewelry

14k gold remains the most popular gold karat of fine jewelry in the U.S.; 18k is the standard in most European countries; and 22k is the benchmark for Indian jewelry.

Due to gold’s relative softness as pure 24k gold, the yellow metal is mixed with other alloys to create ductility–the ability to shape gold without fracturing it. Gold color–such as white gold or rose gold–is another variant achieved by mixing various base alloys over others.

Copper is the most common alloy used in yellow gold–but higher concentrations of copper creates the subtle, beautiful pink hue or undertones of rose gold.

Common alloy distributions include:

14K Yellow Gold · 58.33% Gold · 4% Silver · 31.24% Copper · 6.43% Zinc

18K Yellow Gold · 75% Gold · 13% Silver · 12% Copper

14K White Gold · 58.33% Gold · 28.32% Zinc · 4.8% Nickel · 8.55% Titanium

18K White Gold · 75% Gold · 2.23% Copper · 5.47% Zinc · 17.80% Nickel

14K Rose Gold · 58.33% Gold · 2.08% Silver · 39.59% Copper

18K Rose Gold · 75% Gold · 5% Silver · 20% Copper

(Read more about white gold properties)

Because of this alloy comingling, a small percentage of the population experiences sensitivities or allergic reactions to white gold (which contains nickel)–therefore turning to platinum, or titanium as a hypoallergenic alternative.

An Amalgam of History

Gold Remains one of the most alluring of precious metals. It has been said that all of the world’s gold could fit in a 10 meter cube. Newer research suggests that the earth’s molten core may contain massive amounts of gold–”enough gold buried deep within the Earth’s core”, concludes one Australian geologist, Professor Bernard Wood, “to cover the entire land surface of the planet to a depth of half a meter”.

Whether this conclusion is incontrovertible, gold has been the focus of ages–of obsession, of love, of idolatry, and war. From Biblical references as early as Genesis–the blasphemous golden calf to the Old Testament Deliverer of Israel, Moses, who was said to be rich in gold and silver, gold has elicited a complex duality of responses from humanity. From Dirty Gold campaigns to the diminutive hopes of economies like West Africa’s reaping even the smallest of benefits from gold mining in their own lands. Gold remains, literally and figuratively, an amalgam of history.

Featured in this Post, from Apples of Gold:

Men’s Elliptical Link Bracelet in 14K Gold

Figaro Link Chain in 14K Gold

Greek Key Hoop Earrings in 14K Gold

Cushion Cut Blue Topaz and Diamond Pendant

Celtic Cross Pendant in 14K Gold

Platinum: Softening Gold’s Drop?

As usual just lately, it’s a rough turn into the week for gold prices.  Gold prices fell the most in six weeks as the dollar’s climb and slumping energy costs reduced demand for the precious metal as a hedge against inflation. Silver also declined.

So I thought we’d take a look at platinum prices.  South African investment bank and asset manager Investec is now cuttingt its 2009 and 2010 price forecasts for platinum, palladium and rhodium, citing a downturn in demand from industrial users such as carmakers.

“The platinum price has rallied in the last few weeks, but a weak rhodium price and strengthening rand mean the platinum group metal basket price remains low and a number of mines are still losing money,” said Investec analyst Rebecca O’Dwyer in a research note.

Gold Prices Hit Historic High!

I was going to write about making resolutions relating to buying and investing and enjoying gold in coin, jewelry and investment gold this week, but when I took a look at the news of the day, I felt compelled to discussed what is going on in the markets. That’s because gold advanced for a second day to an 11-week high as mounting geopolitical tensions in the Middle East boosted the appeal of the precious metal as a haven. Silver and platinum also jumped.

I have been market-watching for years, but I have to say that I find this all fascinating. I have gold jewelry (along with other precious metals and gems) and yet when the price climbs like it has lately, I consider what I could sell. Or whether it’s time to buy more.

The embittered, tragic tension in the Middle East over the weekend drives the latest gold increase, as Israel called up reservists following two days of air attacks against the Hamas-led Gaza strip. This has pushed the price of gold up 2.4 percent to $890.49 an ounce. (Oil also gained as much as 5.6 percent. That’s because the Middle East produces almost a third of the world’s oil.)

“Gold is obviously gaining a lot of favor as a safe haven asset again,” Darren Heathcote, head of trading at Investec Bank Ltd. in Sydney, AU, said. The weaker dollar and rising oil prices helped boost the metal, he said.

Keep in mind, close to 300 Palestinians are dead in the weekend’s air strikes. This is the deadliest attack since the Six-Day War of 1967. Israel began the bombardment two days as part of an effort to halt rocket attacks coming from Islamic militants firing from inside the southern towns, after a six-month cease-fire between the Israeli government and Hamas expired on Dec. 19.

Meantime, other precious metals are also up. Silver rose 2.2 percent to $10.94 an ounce after rallying 3.6 percent on Dec. 26. Immediate-delivery platinum advanced 3.8 percent to $925 an ounce, gaining for the fourth straight day. It earlier traded as high as $935, which is the highest since Oct. 16.

AngloGold Ashanti Ltd., which owns the Siguiri gold mine in Guinea, said yesterday its operations in the West African country are continuing, even after the ruling military junta said Dec. 27 it canceled all mining agreements.

“In this thin market, the Guinea news may help boost gold prices, but the major factor is the tension in the Middle East,” said Tatsuo Kageyama, an analyst at Kanetsu Asset Management Co. in Tokyo.

And futures continue to do well, too. December-delivery gold on the Tokyo Commodity Exchange rallied 4.2 percent to 2,574 yen per gram ($884 an ounce) at 2:15 p.m. local time. December-delivery platinum rose 4.4 percent to 2,692 yen a gram.

Have you talked with friends at the water-cooler lately? Some say that it’s time to sell and get any money that you can for the gold that you have. Others suggest it’s time to hang on and ride the wave as the price goes ever higher. One friend said he wouldn’t dream of letting go of any precious metals in the current market, as he was too concerned about the state of the economy and what it would mean in his life. Aren’t we all?

The truth is, if your cash-flow is good, it’s a great time to buy more gold as a hedge against inflation. If you are cash-poor, it might be time to sell. But if you can stay in the market longer, gold may become even more profitable as the recession deepens and takes hold.

Gold Takes Lead Over Platinum by Head

With a front-running style, favored Precious Gold takes the lead by a head December 15th, 2008, 5:30 Eastern, with Price of Platinum coming in second at a price of $835 per ounce–$2 below gold. The prelude to this historical event was Friday, December 12th, when platinum and gold collided within a $1 spread of each other. Platinum still managed to take the lead last Friday–but not so today.

It’s nothing short of an exhilarating horse race.

What finally put platinum trailing in the sand was unexpected: what else but the failing American auto-making industry. Platinum sank again with news of the U.S. senate’s rejection of the auto “bail out”. This made the difference since the auto-industry utilizes platinum in catalytic converters–and not just a tad. Approx. half of annual platinum demand comes from the auto-sector, which used 905,000 ounces of platinum in 2006!

Gold is clearly the winner over platinum in 2008, since the gold price performed at a 21% decrease vs. platinum’s 65% decline since March, 2008.

For those of you in search of your platinum diamond engagement ring this season, this does not mean that platinum rings will cost the same as gold rings, but now is the perfect time to buy that platinum ring, because platinum prices will be considerably lower in 2009 and possibly to the end of this decade unless the economy rebounds quicker than we anticipated, the auto industry does not substitute another metal for platinum (such as gold) in its catalytic converters, and platinum miners cut production in years to come, thereby reducing supply and effecting demand for the precious metal.

Platinum and Gold: When Metals Collide

Although platinum is 30 times rarer than gold, the two metals’ prices collided throughout the day and finally closed with gold at $822 per ounce and platinum at $823! Today’s $1 spread was nothing short of historical for precious metals; the last time platinum and gold met at such close quarters  was 1996!

Platinum has plummeted 65% for the year; gold has dropped 21%–making platinum next year’s bargain.

Metals had already seen a decline due to decreased consumer demand as a result of the economic downturn.  Adding to the ailment, platinum prices dropped further after the U.S. senate rejected a “bail out” for automakers today–deepening platinum’s fall from grace because of decreased demand for platinum in automobiles who use platinum for catalytic converters.

(Bloomberg) — According to London based metals refiner, John Matthey Plc, automakers make up about half of the world’s platinum and palladium demand. In 2006, North American automakers used 905,000 ounces of platinum.

According to Derek Engelbrecht of Impala Platinum Holdings, “the agony will continue in 2010″, if platinum miners in South Africa, who account for almost 80% of the world’s platinum supply, do not cut production. Without it platinum will, at best, stay at equilibrium or continue to decline.

2009-2010 will be the year of platinum jewelry as a direct result of decreased platinum jewelry prices. Perhaps now is the time to trade in your gold coins and buy that high-end platinum and 18k gold wedding band!

Marketwatch: Gold Prices Waver

Gold prices are already starting to rebound, after two weeks of falling prices brought on by a steep crude oil decline and worries about deflation.

But let’s factor in a few other things, like predictions in the past week that the price of a gallon of gas at the pump could drop to $1 per gallon.  And word this weekend from President-Elect Barack Obama saying this weekend that “things are going to get worse before they get better” and that he will “offer an economic stimulus plan equal to the task.”

The task ahead is difficult to put it mildly, as November unemployment figures dropped by the largest numbers seen in decades.  And where is gold?  The precious metal’s appeal as a hedge against inflation appears a bit tarnished but it is still considered a solid bet.  “I think that the whiff of deflation that’s in the air is enough to keep the near-term pressure on gold,” said James Steel, chief commodity analyst as HSBC.

There’s no doubt that we’re in troubled waters economically.  Dealing with the loss of jobs, frozen credit markets, falling home prices and other signs of economic turmoil is “my number one priority,” Obama said on NBC this weekend, adding that “more aggressive steps” are needed to cope with the crisis. The precious metal fell last week in line with the softer euro after the European Central Bank cut interest rates by a larger-than-expected three-quarters of a percentage point.

“Gold is mirroring the directions in euro-dollar after the ECB rate cuts,” said Pradeep Unni, a senior analyst at Richcomm Global Services.  “The dollar also seems to be discounting the gains ahead of the (U.S.) non-farm payrolls data scheduled tomorrow,” he adds.

The ECB cut its benchmark rate to 2.50 percent, its lowest level in nearly 2-1/2 years, as inflation plummeted and the euro zone economy sank deeper into recession.  This followed a full percentage point cut to 2 percent by the Bank of England.

In the slightly longer term, rate cuts by the Fed and the Bank of England are likely to benefit gold, if they increase liquidity, analysts said.

“The recent sharp dip in inflation pushed up real interest rates, exerting pressure on gold,” Commerzbank said in a note. “Generous rate cuts are, therefore, good for gold as they again reduce the opportunity costs involved in holding it.”

Traders turned their attention to U.S. non-farm payrolls data due on Friday for clues as to the next direction of the currency markets, and of gold.

Physical demand eased in some of gold’s traditional markets as traders awaited price falls. Indian buyers looked for prices of around $740 an ounce before making purchases, dealers reported.  The price is up as the week begins, but how long that will continue depends on what other actions are taken as the week continues.

Jewelry: A Modern Story

Jewelry’s modern story begins in the late 19^th century, which heralded many historic events affecting jewelry making and design, including:  

1. The birth and success of the industrial revolution;

2. The introduction of fashion and costume jewelry, and;

3. The launch of high-quality jewelry firms that have continued the tradition of fine jewelry into the 21^st century.

 

The industrialization of this age led to more jobs for the masses, ergo, economic freedom for the majority. This social phenomenon somewhat diminished the reputation of jewelry as a symbol of social rank. The new wealth created by this economic boom afforded the working class the option of buying jewelry that mostly matches their tastes. It is also important to note that as a result of this new economic opportunity, we witnessed the birth of society’s Middle Class.

 

The demand for affordable and simple-design jewelry increased. For supply to keep up jewelry was mass-produced and this in turn cheapened the market price.  Usually made from imitation of precious stones and electro-plated gold and silver, this jewelry eventually became known as fashion/costume jewelry that is devoid of intrinsic value. But it became a hit with many in the populace as it could be versatile and very inexpensive.

 

Men, for the majority of history up to this point, wore an equal amount of jewelry as women. But in this period, men’s jewelry was greatly reduced to buttons, cufflinks, and rings. At the same time, threatened by middle class consumption of something previously and exclusively enjoyed by the nobility, the wealthy sought the services of master craftsmen and goldsmiths to design personalized and high quality jewelry for them instead.

 

Fortunately, the 19^th century had provided for this particular need. There were several notable firms founded in this period that propagated the fine jewelry tradition well into the present times. Among them are by Peter Carl Faberge in 1900 Russia; Alfred and his son Louis Cartier in 1898, Paris; Charles Lewis Tiffany in 1851, New York; Bulgari in 1884, Rome; and Patek Philippe in 1851, Geneva (an acknowledged pillar of the timepieces industry).

 

Watches and matching jewelry were introduced in this period and have remained a significant part of jewelry ownership.

 

One thing we can affirm is that modern day jewelry is a thoroughly eclectic collection of various, differing cultures and religions; as well as from the artistry of craftsmen and goldsmiths who once upon their time, dabbled in the design and indulged the whims of their richer patrons.

A Brief History of Jewelry in the Middle Ages- Renaissance Periods

Early civilizations’ discovery of gold and the possibilities it presented were nothing short of wondrous. Gold–its malleability and versatility to be molded into various shapes and sizes of jewelry made it (and still makes it) the most popular metal to work with. It was approximately 5,000 B.C when different civilizations all over the world discovered gold and began to work this metal into pieces to frame precious stones into. In Central and South America, China, India, and Egypt, gold became the metal of choice to make into elaborate or simple pieces of jewelry.

The Middle Ages had seen the utilitarian and functional use of jewelry. Gemstones like ruby, garnet, and sapphire found their way into the fashion of the time heavily incorporated into clothes, brooches, clasps, belts and hats. Strings of pearls and gold chains were used as popular belts during these times.

It was also during the middle ages when Poesy rings became a fad. These rings symbolized a token of affection or friendship. A short, personal sentiment–mostly about love and friendship–can be found as inscriptions on or inside poesy rings and were exchanged between lovers and friends. In Roman history, a cameo was introduced bearing the icons of nobility and popular political leaders of the time.

This period also saw the introduction of several designs that are still popular today. A couple of these are the Celtic and Byzantine designs. Intricate, elaborate and beautiful, these designs are still very sought after in present times.

Religious-themed jewelry also became popular during this period. Crosses and icons of Christianity i.e. papal rings, rosary beads, pendants with the saints and other religious figures were introduced around this era.

Inspired by the amount of gemstones and pearls traded all around, craftsmen and goldsmiths designed opulent, extravagant pieces of jewelry. And since it came with a hefty price, only the nobility and those in the upper strata could afford it. In addition, it was around this time that the Sumptuary Law (laws attempting to regulate consumption, especially of luxury items) was enforced. This was the law which governed who could wear what jewelry and was supposed to protect the top nobility’s status in the society.

If the medieval period saw the rapid development of jewelry making and its application to various situations, the Renaissance on the other hand, simply refined these changes. It was at this time that the Sumptuary Law was lifted and the nobility, being conscious of standing apart from the masses, sought master craftsmen and goldsmiths to customize and design jewelry for them. Beautiful pieces of jewelry became the object of desire. Quality became increasingly important. It was at this point that jewelry as a symbol of wealth and social status became a distinct and expensive truth.

This period saw the continued popularity of gemstones set in gold and silver. The European trade with the East had brought with it vast exposure to artists, goldsmiths, and jewelry craftsmen. The era also introduced the tradition of matching jewelry with clothes and other accessories. This practice was said to have been encouraged by Napoleon Bonaparte while he was King of France.

Truly we can say that these two eras ushered in a brilliant development for jewelry design, uses, and the craft  as a whole. Many types of jewelry that were introduced in these periods are still very popular today.

(End of the Second in a Three-Part Series)

Jewelry: A Walk Through Time

The term jewelry came into the English language in the mid-thirteenth century; it is derived from the French word joule, which in turn came from the Latin word jocale; the term roughly translates to as plaything.

Curiously, what began as a mere plaything became an important part of every society, and through all and every culture, in mankind’s history. The use of jewelry is one of the few practices that has remained to endure time and change-whether social, cultural or political.

As jewelry use surpassed its primordial function as playthings to our prehistoric man, it then evolved into a symbolic accent to denote an individual’s social and religious rank. Moreover, gemstones in particular, were the popular jewelry of choice to ward off evil spirits, and were preferred by the more superstitious culture. Much later, jewelries were incorporated into functional and practical uses in clothes as buttons and accessories. Gold, on the other hand, served as a currency to trade or buy other goods.

Most of us living today may not know it, but wearing jewelry dates back to as far as 85,000 years ago. Based on the most recent archeological find at Grotte des Pigeons, Taforalt in Eastern Morocco, shell beads coated with red ochre are believed to be the oldest form of ornament or jewelry used in prehistoric time. In addition, early ancestors of modern jewelry were made, crudely and simply, from various natural materials like beets, stones, teeth and shell beads, strung together to form a necklace, anklet, or armlet. Among these ancient forms, it was the shell beads that had amazingly survived time, particularly of the genus Nassarius, the same kind of shell beads previously found in the caves of Israel and Algeria.

There are no existing data that points to when exactly the practice of burying jewelry with its owner began. Most discoveries of these ancient pieces were found in tombs- from the Egyptians to Roman burial chambers; from the caves of prehistoric man to the Incas and Mayans, these jewelries were buried together with the owners. Historians can only assume that the owner may be a high-ranking spiritual or tribe leader to afford to be buried with their possessions.  These days, jewelry is passed on to the next generation of family members.

Archeologists have acknowledged that there is no conclusive evidence the latest find is the oldest they will ever find. Like the previous discoveries, it is simply a matter of time before another string of shell beads will turn up. As to when, only luck knows!

(End of the First in a Three-Part Series)

Next week: A look into the use of jewelry in the Middle Ages-Renaissance periods.

Photograph courtesy Ian Cartwright, Institute of Archaeology, Oxford University

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