GOLD MONEY AND PAPER CURRENCY:
Gold. It is everywhere and yet nowhere. Everyone knows it has great value and yet few people possess any of the yellow metal. Since Biblical, Roman and current times, gold coins have been used as currency for goods and services. When paper printing became available, it was often used as a receipt for gold deposited in vaults, redeemable for customer gold on demand. Eventually, those paper notes were found to be more easily tradeable than the physical gold.

It has taken almost two millenia to mine enough gold to fill only two Olympic-sized swimming pools. So event today gold remains scarce enough to inspire fever, passion, and oddly enough, indifference in many investors. With declining mining production, increased investor demand, China converting paper currency to gold, and increased consumption of citizens of India, it has become more difficult to find. Many experts anticipate a return to gold (and perhaps silver) as money and for backing currencies.

EVERYDAY GOLD:
Gold is found in jewelry, coins, electronics and even at the top of the U.S. Capitol dome. While 24k (carat) gold is soft enough to be pounded into thin sheets of gold leaf, it is too soft to be handled roughly. Hardening by alloying with copper, silver or other base metals is the common solution. While pure gold is designated as 24k, other common alloys are 22k, 18k, and 14k. For example, if you have an 18k necklace, to find the gold ratio, you can divide 18k by 24k. This calculation shows that you have a item which contains 75% gold.

GOLD COINS:
Most gold coins in circulation since the 14th century were minted in a 22k alloy; the remainder of the metal being copper. However, newer bullion coins are sometimes pure 24k gold. While the U.S. Gold Eagle, the British Sovereign, and the South African Krugerrand continue to be traded due to their ability to withstand handling. Conversely, pure gold coins have a luster that is often more attractive to gold buyers. The gold Canadian Maple Leaf coin, which at 99.99% pure, enjoyed higher demand until the U.S. Mint issued the American Buffalo .9999 fine gold bullion coin.

REASONS FOR HOLDING GOLD:
Gold can be used around the world as money. It is easily recognizable and crosses almost all language barriers effortlessly. Or, it can be traded for local currency in almost every corner of the world. Many fans of gold coins or bars speak of using them to hedge against economic, or political difficulties.

JUNK GOLD SALES:
In the United States, many are consolidating their junk necklaces, rings and gold crowns, and converting them into paper currency through various services. Coin shops like the jhmint.com and goldsmash.com will exchange the gold for U.S. dollars.

TIMELESSNESS OF GOLD:
Possession of gold has been sought since humans started recording history. Initially, gold was most often found in nuggets or fine grains. Later miners refined their techniques to seek gold in veins and in alluvial deposits near rivers. Gold is shiny with a bright yellow color and luster found to be alluring by many people. It maintains its appearance by not oxidizing in air or water and, so has been a symbol of wealth and a store of value more thousands of years. Additionally, a gold standard has provided monetary backing for many world currencies. However, there is no current paper (fiat) currency in the world that is backed by gold or silver. It also has been linked to a variety of symbolisms and ideologies from Egyptian times onward.

INDUSTRY AND ELECTRONICS:
Gold is so malleable that it can be made into thread and used in embroidery. It can also be pounded so thinly that fine coatings are used in electronics. Although silver is the best conductor of electricity, where conditions are harsh (like in outer space), gold is a better choice.

MINING:
While gold is almost always recovered and recycled, it has continues to be mined, mostly in large open pit or hard rock underground mines. Deposits with a few grams (a few paper clips) per ton are profitable to extract.  It is believed that about 50% of gold deposits refined, have been from  South African ore. Recently, China overtook South Africa in gold production. The United States, Peru, Russia and Australia comprise the rest of the majority of gold mining. In the U.S., South Dakota and Nevada supply two-thirds of the ore used for the extraction of gold.

GOLD PRICES:
Gold is most often measured using grams, with 31.1 grams in a troy ounce, with 14...... in an avoirdupois ounce. The price per gram is determined using Gold Fixing in London, which was created in in 1919 to provide a common world price. The U.S. Government enjoyed a troy ounce value of $20.67. Then in 1934 FDR devalued gold to $35.00 per troy ounce. President Nixon eventually took the U.S. off the gold standard in 1971, which allowed the market price of gold to trend much higher.

PLATINUM AND PALLADIUM:
About 8 million troy ounces of Palladium are mined and refined each year, so it is about 10 times as rare as gold.  Much of palladium is consumed for industrial uses, such as catalytic converters which help reduce car exhaust emissions, Many consider it to be a "green" metal, environmentally friendly, and silver colored. Platinum has many of the same properties of palladium and is even more rare and more expensive.

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**Jason Hommel from jhmint.com was recently interviewed by his local newspaper. Excerpts from his article are below:

SILVER CONTENT:
People often ask us about the silver content in old US coinage, in quarters, half dollars, and dimes minted in 1964 or earlier. The metal content consists of 90% silver, and 10% copper -- that's called the purity level.  But one dollar's worth of coinage contains just under 72% of one troy ounce of silver -- that's the measure of the weight.  People get the two things mixed up, and they have difficulty with the math, not knowing what amount to multiply or divide against the silver value per ounce.

And there are other things that affect the value, too.  Old coinage can be sold in bulk in bags of $1000 face value at a time, and so, there are better prices if you can trade in bulk.  But if the coins are very worn out, or if you have only a few coins, you won't get such a good price.

DETERMINING VALUE:
To figure out a rough value, figure that a large bag weighing about 55 pounds, and containing $1000 face value of silver coinage, will have about 715+ ounces of silver.  Then, multiply the ounces by a percent or two under the spot price of silver, and that's about what it's worth, but even that varies, depending on market conditions.  Sometimes, 90% silver can trade above spot, and I've seen it as high as about 30% above spot, but not in today's calm market.

Because many people find it confusing to calculate the value of 90% coinage, most people prefer to own 99.9% pure, 1 troy ounce "rounds" that are a bit heavier than the old silver dollars, that contained about 76% of 1 troy ounce of 90% pure silver.  They are called "rounds" because they are privately minted, and not issued by the US government, which would make them coins.

Many people wonder if they own any rare coins in their old coin collections.  Most people just own junk.  A general rule is that unless it's silver, gold, and a US coin in very good condition, then forget about it.  Foreign coins are typically worthless, unless they are silver or gold.  Most pennies and nickels are hardly worth the time to look through.

California State government levies a sales tax on bullion purchases under $1500, but over that, sales tax is not charged.  The Federal government requires a "CTR", or cash transaction report on anything over $10,000, and so many buyers tend to buy just under that limit for the sake of personal privacy.  Wire transfers are often used for amounts over that.

GOLD AND SILVER SPREADS:
People also wonder about dealer markups, or the spread.  Gold and silver both cost about 9-10% over the spot price when you buy, and when you sell it back, you can usually get about spot, or maybe 1-3% under.   Many people think that's a wide spread, but the true profits for the dealer is often much less, due to the volatility, regular business operating costs such as rent, wages, advertising, minting costs, and the fact that re-ordering inventory from mints or other wholesalers requires placing orders in bulk.

Around 9% over spot is very cheap.  Historically speaking, when silver was the circulating currency during the great depression, the U.S. government bought silver from miners at 29 cents per ounce, and then turned that into $1.40 worth of coinage!  That's about a 400% premium over the cost of the silver, so a 9% markup is great by comparison!  The difference can be explained by the government monopoly verses the lower costs created by free market competition.  The bullion market today is very competitive.  Charge more, you lose customers.  Charge less, and you risk taking a big loss due to the volatility and all the other costs.

It can cost over $2.00 per oz. just to mint a 1 oz. round at many of the smaller private mints.  With our narrow spread, and the volatility, and the normal 1-2 day delay of putting cash into the bank to re-order, we lose money on some trades, but that's just the normal risk of doing business.

SILVER VERSUS GOLD:
Most people just don't understand how small the silver market really is.  World silver mines produce about 600 million oz. of silver per year, with most of that going to industry.  Investors buy only about 100 million oz., but at $18/oz., that's barely $1.8 billion per year.  In the scale of world finance, that's nothing.  With dealer profits of about 2-3% of that, after costs, the entire silver investment market earns barely $30 million per year, across all dealers, worldwide!  Without gold sales and scrap gold purchases, we'd go broke!

PAPER CURRENCY vs. GOLD / SILVER BULLION:
Some people really wonder how we can accept inherently worthless cash for real gold, after all, the JH Mint can't back up all the paper money that the banks have printed.  Well, as long as the families of the miners and the refiners still want and use paper cash to pay their bills, you can still get the stuff.  Watch out for the day that the miners decide they want to be paid in silver rounds!

-- Jason Hommel writes a free internet based newsletter with over 80,000 readers worldwide. You can subscribe to the free newsletter, and read prior articles, at silverstockreport.com. You can buy and sell gold and silver bullion at his coin shop in Grass Valley, California, jhmint.com

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