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Facts about Gold
Basic facts
Gold is a chemical element with the symbol Au; and an atomic number of 79.
The Latin name for gold is aurum.
Among the metals, gold is the most malleable and ductile.
In nature, gold can be found in nuggets or grains in rocks, as well as in alluvial deposits and veins.
Pure gold is chemically unreactive compared to other metals. Gold does not oxidize in air or water. (However, gold does dissolve in mercury.)
Nitric acid can be used to confirm the presence of gold in items. (This is the origin of the term "acid test.")
Gold is a good conductor of heat and electricity.
Pure metallic gold has no taste.
Gold has only one stable isotope, 197Au, which occurs naturally.
Gold is the official state mineral of both Alaska and California.
Facts about gold coins
Gold was used for national currencies for centuries. Even after the advent of paper currency, national treasuries backed the money they issued in gold. (This was known as the gold standard.)
During World War I the belligerent nations converted to a fractional gold standard (and then promptly inflated their national currencies). After World War II the gold standard was replaced wholesale by a system of convertible currency exchange.
Switzerland remained a lone holdout to the gold standard for years. The Swiss government backed 40% of its money supply in gold until Switzerland joined the International Monetary Fund in 1999.
Pure gold is too soft for use in coins. When used for coinage, it was typically hardened by alloying it with other metals: usually copper, silver, nickel, or other base metals.
The gold content of gold alloys is measured in carats (k). Pure gold is designated as 24k.
Gold is often held in storage (as bullion coin or bullion) as a hedge against inflation or other economic uncertainties.
The ISO currency code of gold bullion is XAU.
Gold coins minted from the1520s through the 1930s (and intended for general circulation) usually conformed to a standard 22k alloy. (This is called crown gold.) An alloy was used to make the gold sufficiently hard.
Investment bullion coins are typically 24k; they are softer than the 22k coins---but they are not intended for circulation. (However, there are exceptions: The South African Krugerrand and the American Gold Eagle are examples of older investment grade coins that are still minted at 22k.)
The special issue Canadian Gold Maple Leaf coin has the highest purity of any gold coin. It guaranteed to be 99.999% pure.
Other modern gold coins with high levels of purity include:
- Australia's Gold Kangaroo (minted from 1986) 99.99% pure
- The American Buffalo gold bullion coin (minted by the U.S. Mint since 2006) at 99.99% pure
Gold bullion bars vs. coins
Precious metals in bulk form are called bullion. Bullion is traded on commodity markets.
Bullion metal is usually cast into ingots (bars), or minted into coins.
Bullion coins are technically issued as legal tender; but their face value as currency is far below that of their value as an investment commodity. As an investment, bullion (whether in ingot or coin form) is valued by its mass and purity rather than by its face value.
Both gold bullion bars and coins are priced on the basis of their fine gold content; commissions and premiums from brokers may vary according to availability.
What is a bullion bank?
This is an investment bank that deals in bullion. These banks might be called "bullion banks," or, alternatively, "bullion dealers." These investment banks are members of the London Bullion Market Association.
Bullion banks are wholesale suppliers. They typically deal in large quantities (usually over 1000 ounces).
How can a smaller/individual investor invest in gold?
There are many financial instruments that allow individuals to invest in gold. In addition to bars and coins, gold investments can also be made through gold certificates, futures, and options.
Is gold a better investment than stocks?
There is no precise answer to this question. But here are a few facts to consider:
Over time, there is no relationship between returns on gold and returns on shares purchased in major stock markets.
Gold and stocks are fundamentally different assets. Gold is typically regarded as a static store of value. Stocks, on the other hand, are bought with the expectation of a return on value.
Like all commodities, the price of gold is driven by supply and demand. Hoarding and bulk selling can bring about dramatic price swings.
The price of gold is more affected by sentiments than is the case with other commodities. Gold prices are “emotion prone”.
Bank failures, war, and low interest rates all increase the demand for gold.
Since 2001, the price of gold has more than tripled in value against the US dollar.