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The Beginner’s Guide to Investing in Gold

Imagine yourself sitting in a stream swirling water in a pan, desperately hoping to see a small yellow glint of gold and dreaming of striking it rich. America has come a long way since the early 1850s, but gold still holds a prominent place in our global economy today. Here’s a comprehensive introduction to gold, from why it’s valuable and how we obtain it to how to invest in it, the risks and benefits of each approach, and advice on where beginners should start.

Why is gold valuable?

In ancient times, gold’s malleability and luster led to its use in jewelry and early coins. It was also hard to dig gold out of the ground — and the more difficult something is to obtain, the higher it is valued. 

Over time, humans began using the precious metal as a way to facilitate trade and accumulate and store wealth. In fact, early paper currencies were generally backed by gold, with every printed bill corresponding to an amount of gold held in a vault somewhere for which it could, technically, be exchanged (this rarely happened). This approach to paper money lasted well into the 20th century. Nowadays, modern currencies are largely fiat currencies, so the link between gold and paper money has long been broken. However, people still love the yellow metal.

Where does demand for gold come from?

The largest demand industry by far is jewelry, which accounts for around 50% of gold demand. Another 40% comes from direct physical investment in gold, including that used to create coins, bullion, medals, and gold bars. (Bullion is a gold bar or coin stamped with the amount of gold it contains and the gold’s purity. It is different than numismatic coins, collectibles that trade based on demand for the specific type of coin rather than its gold content.) 

Investors in physical gold include individuals, central banks, and, more recently, exchange-traded funds that purchase gold on behalf of others. Gold is often viewed as a “safe-haven” investment. If paper money were to suddenly become worthless, the world would have to fall back on something of value to facilitate trade. This is one of the reasons that investors tend to push up the price of gold when financial markets are volatile.

Since gold is a good conductor of electricity, the remaining demand for gold comes from industry, for use in things such as dentistry, heat shields, and tech gadgets. 

How is the price of gold determined?

Gold is a commodity that trades based on supply and demand. The interplay between supply and demand ultimately determines what the spot price of gold is at any given time.

The demand for jewelry is fairly constant, though economic downturns do, obviously, lead to some temporary reductions in demand from this industry. The demand from investors, including central banks, however, tends to inversely track the economy and investor sentiment. When investors are worried about the economy, they often buy gold, and based on the increase in demand, push its price higher. You can keep track of gold’s ups and downs at the website of the World Gold Council, an industry trade group backed by some of the largest gold miners in the world. 

How much gold is there?

Gold is actually quite plentiful in nature but is difficult to extract. For example, seawater contains gold — but in such small quantities it would cost more to extract than the gold would be worth. So there is a big difference between the availability of gold and how much gold there is in the world. The World Gold Council estimates that there are about 190,000 metric tons of gold above ground being used today and roughly 54,000 metric tons of gold that can be economically extracted from the Earth using current technology. Advances in extraction methods or materially higher gold prices could shift that number. Gold has been discovered near undersea thermal vents in quantities that suggest it might be worth extracting if prices rose high enough.  

How do we get gold?

Although panning for gold was a common practice during the California Gold Rush, nowadays it is mined from the ground. While gold can be found by itself, it’s far more commonly found along with other metals, including silver and copper. Thus, a miner may actually produce gold as a by-product of its other mining efforts.

Miners begin by finding a place where they believe gold is located in large enough quantities that it can be economically obtained. Then local governments and agencies have to grant the company permission to build and operate a mine. Developing a mine is a dangerous, expensive, and time-consuming process with little to no economic return until the mine is finally operational — which often takes a decade or more from start to finish. 

How well does gold hold its value in a downturn?

The answer depends partly on how you invest in gold, but a quick look at gold prices relative to stock prices during the bear market of the 2007-2009 recession provides a telling example.

Between Nov. 30, 2007, and June 1, 2009, the S&P 500 index fell 36%. The price of gold, on the other hand, rose 25%. This is the most recent example of a material and prolonged stock downturn, but it’s also a particularly dramatic one because, at the time, there were very rea­l concerns about the viability of the global financial system.

When capital markets are in turmoil, gold often performs relatively well as investors seek out safe-haven investments.

Ways to invest in gold

Here are all the ways you can invest in gold, from owning the actual metal to investing in companies that finance gold miners.

Jewelry

The markups in the jewelry industry make this a bad option for investing in gold. Once you’ve bought it, its resale value is likely to fall materially. This also assumes you’re talking about gold jewelry of at least 10 karat. (Pure gold is 24 karat.) Extremely expensive jewelry may hold its value, but more because it is a collector’s item than because of its gold content.

Bullion, bars, and coins

These are the best option for owning physical gold. However, there are markups to consider. The money it takes to turn raw gold into a coin is often passed on to the end customer. Also, most coin dealers will add a markup to their prices to compensate them for acting as middlemen. Perhaps the best option for most investors looking to own physical gold is to buy gold bullion directly from the U.S. Mint, so you know you are dealing with a reputable dealer.

Then you have to store the gold you’ve purchased. That could mean renting a safe deposit box from the local bank, where you could end up paying an ongoing cost for storage. Selling, meanwhile, can be difficult since you have to bring your gold to a dealer, who may offer you a price that’s below the current spot price.

Gold certificates

Another way to get direct exposure to gold without physically owning it, gold certificates are notes issued by a company that owns gold. These notes are usually for unallocated gold, meaning there’s no specific gold associated with the certificate, but the company says it has enough to back all outstanding certificates. You can buy allocated gold certificates, but the costs are higher. The big problem here is that the certificates are really only as good as the company backing them, sort of like banks before FDIC insurance was created. This is why one of the most desirable options for gold certificates is the Perth Mint, which is backed by the government of Western Australia. That said, if you’re going to simply buy a paper representation of gold, you might want to consider exchange-traded funds instead. 

Exchange-traded funds

If you don’t particularly care about holding the gold you own but want direct exposure to the metal, then an exchange-traded fund (ETF) like SPDR Gold Shares is probably the way to go. This fund directly purchases gold on behalf of its shareholders. You’ll likely have to pay a commission to trade an ETF, and there will be a management fee (SPDR Gold Share’s expense ratio is 0.40%), but you’ll benefit from a liquid asset that invests directly in gold coins, bullion, and bars.

Futures contracts

Another way to own gold indirectly, futures contracts are a highly leveraged and risky choice that is inappropriate for beginners. Even experienced investors should think twice here. Essentially, a futures contract is an agreement between a buyer and a seller to exchange a specified amount of gold at a specified future date and price. As gold prices move up and down, the value of the contract fluctuates, with the accounts of the seller and buyer adjusted accordingly. Futures contracts are generally traded on exchanges, so you’d need to talk to your broker to see if it supports them. 

The biggest problem: Futures contracts are usually bought with only a small fraction of the total contract cost. For example, an investor might only have to put down 20% of the full cost of the gold controlled by the contract. This creates leverage, which increases an investor’s potential gains — and losses. And since contracts have specific end dates, you can’t simply hold on to a losing position and hope it rebounds. Futures contracts are a complex and time-consuming investment that can materially amplify gains and losses. Although they are an option, they are high-risk and not recommended for beginners.

Gold mining stocks

One major issue with a direct investment in gold is that there’s no growth potential. An ounce of gold today will be the same ounce of gold 100 years from now. That’s one of the key reasons famed investor Warren Buffett doesn’t like gold — it is, essentially, an unproductive asset.

This is why some investors turn to mining stocks. Their prices tend to follow the prices of the commodities on which they focus; however, because miners are running businesses that can expand over time, investors can benefit from increasing production. This can provide upside that owning physical gold never will.

However, running a business also comes with the accompanying risks. Mines don’t always produce as much gold as expected, workers sometimes go on strike, and disasters like a mine collapse or deadly gas leak can halt production and even cost lives. All in all, gold miners can perform better or worse than gold — depending on what’s going on at that particular miner.

In addition, most gold miners produce more than just gold. That’s a function of the way gold is found in nature, as well as diversification decisions on the part of the mining company’s management. If you’re looking for a diversified investment in precious and semiprecious metals, then a miner that produces more than just gold could be seen as a net positive. However, if what you really want is pure gold exposure, every ounce of a different metal that a miner pulls from the ground simply dilutes your gold exposure.

Potential investors should pay close attention to a company’s mining costs, existing mine portfolio, and expansion opportunities at both existing and new assets when deciding on which gold mining stocks to buy.

Mining-focused ETFs

If you’re looking for a single investment that provides broadly diversified exposure to gold miners, then low-cost index-based ETFs like VanEck Vectors Gold Miners ETF and VanEck Vectors Junior Gold Miners ETF are a good option. Both also have exposure to other metals, but the latter focuses on smaller miners; their expense ratios are 0.53% and 0.54%, respectively.

As you research gold ETFs, look closely at the index being tracked, paying particular attention to how it is constructed, the weighting approach, and when and how it gets rebalanced. All are important pieces of information that are easy to overlook when you assume that a simple ETF name will translate into a simple investment approach.

Mutual funds

Investors who prefer the idea of owning mining stocks over direct gold exposure can effectively own a portfolio of miners by investing in a mutual fund. This saves the legwork of researching the various mining options and is a simple way to create a diversified portfolio of mining stocks with a single investment. There are a lot of options here, with most major mutual fund houses offering open-end funds that invest in gold miners, such as the Fidelity Select Gold Portfolio and Vanguard Precious Metals Fund

However, as the Vanguard fund’s name implies, you are likely to find a fund’s portfolio contains exposure to miners that deal with precious, semiprecious, and base metals other than gold. That’s not materially different from owning mining stocks directly, but you should keep this factor in mind, because not all fund names make this clear. (For example, the Fidelity Select Gold Portfolio also invests in companies that mine silver and other precious metals.)

Fees for actively managed funds, meanwhile, can be materially higher than those of index-based products. You’ll want to read a fund’s prospectus to get a better handle on its investing approach, whether it is actively managed or a passive index fund, and its cost structure. Note that expense ratios can vary greatly between funds.

Also, when you buy shares of an actively managed mutual fund, you are trusting that the fund managers can invest profitably on your behalf. That doesn’t always work out as planned.

Streaming and royalty companies

For most investors, buying stock in a streaming and royalty company is probably the best all-around option for investing in gold. These companies provide miners with cash up front for the right to buy gold and other metals from specific mines at reduced rates in the future. They are like specialty finance companies that get paid in gold, allowing them to avoid many of the headaches and risks associated with running a mine.

Benefits of such companies includes widely diversified portfolios, contractually built-in low prices that lead to wide margins in good years and bad, and exposure to gold price changes (since streaming companies make money by selling the gold they buy from the miners). That said, none of the major streaming companies has a pure gold portfolio, with silver the most common added exposure. (Franco-Nevada, the largest streaming and royalty company, also has exposure to oil and gas drilling.) So you’ll need to do a little homework to fully understand what commodity exposures you’ll get from your investment. And while streaming companies avoid many of the risks of running a mine, they don’t completely sidestep them: If a mine isn’t producing any gold, there’s nothing for a streaming company to buy.

The built-in wide margins that result from the streaming approach provide an important buffer for these businesses. That has allowed the profitability of streamers to hold up better than miners’ when gold prices are falling. This is the key factor that gives streaming companies an edge as an investment. They provide exposure to gold, they offer growth potential via the investment in new mines, and their wide margins through the cycle provide some downside protection when gold prices fall. That combination is hard to beat. 

What’s the best way for a beginner to invest in gold?

There’s no perfect way to own gold: Each option comes with trade-offs. That said, probably the best strategy for most people is to buy stock in streaming and royalty companies. However, what to invest in is just one piece of the puzzle: There are other factors that you need to consider.

How much should you invest in gold?

Gold can be a volatile investment, so you shouldn’t put a large amount of your assets into it — it’s best to keep it to less than 10% of your overall stock portfolio. The real benefit, for new and experienced investors alike, comes from the diversification that gold can offer. Once you’ve built your gold position, make sure to periodically balance your portfolio so that your relative exposure to it remains the same.

When should you buy gold?

It’s best to buy small amounts over time. When gold prices are high, the price of gold-related stocks rises as well. That can mean lackluster returns in the near term, but it doesn’t diminish the benefit over the long term of holding gold to diversify your portfolio. By buying a little at a time, you can dollar-cost average into the position.

As with any investment, there’s no one-size-fits-all answer for how you should invest in gold. But armed with the knowledge of how the gold industry works, what each type of investment entails, and what to consider when weighing your options, you can make the decision that’s right for you.

Something big just happened

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By – Reuben Gregg Brewer(TMFReubenGBrewer)

Original

Purpose is Life-Changing. Find Your Why

Nothing gives a person inner wholeness and peace like a distinct understanding of where they are going.

Fulfilment is a right and not a privilege. Finding fulfilment in life starts with understanding exactly WHY you do what we do.

Simon Sinek, author of Find Your Why: A Practical Guide for Finding Purpose for You and Your Team, explains:

Once you understand your WHY, you’ll be able to clearly articulate what makes you feel fulfilled and to better understand what drives your behavior when you’re at your natural best. When you can do that, you’ll have a point of reference for everything you do going forward. You’ll be able to make more intentional choices for your business, your career and your life. You’ll be able to inspire others to buy from you, work with you and join your cause.

Robert Bryne once observed, “The purpose of life is a life of purpose.”

In order to get somewhere, you need to define your end goal. That is essential. And the sooner you define it, the clearer everything else will become. A life without a purpose is a life without a destination.

Finding the right direction in life is an existential problem for all of us.

What do you look forward to in life? Living without purpose is dangerous.

Fyodor Dostoyevsky once said, “The mystery of human existence lies not in just staying alive, but in finding something to live for.”

Finding the right direction in life is something you create. You make the decision to act. To try. To do something. No matter how small.

At some point in life, you’re going to have to stop thinking about taking action and act.

Your purpose in life is to find and do the things that make you smile, laugh and forget time. Even if you aren’t sure yet, move into the exploration and experimentation phase of your life and enjoy the journey.

In her book, The How of Happiness, A Scientific Approach to Getting the Life You WantPositive psychologist Sonja Lyubomirsky wrote that only 10% of happiness comes from extrinsic incentives like money, fame, and status.

Commit to a purposeful life.

Johann Wolfgang von Goethe sums up the idea and intention at its best: “Until one is committed, there is hesitancy, the chance to draw back, always ineffectiveness.”

When you commit to living your life with a purpose, amazing things can happen.

You can’t put time on it. You can’t force yourself to find your “why” tomorrow or next month, or even next year. But by all means, search for clarity and move closer to the life you crave.

In the 1940s, Viktor E. Frankl, was held prisoner in Nazi concentration camps. With all the agony and brutality, what kept Frankl from giving up his relentless fight for his life was purpose!

He found meaning in his struggle, and that’s what gave him the power to push forward through unimaginable pain.

A quote by Viktor nicely sums up his philosophy on how people were able to survive the camps, without losing the will to live.

In “Man’s Search for MeaningViktor says“Those who have a ‘why’ to live, can bear with almost any ‘how’.”

Once you have defined your aims and what you want, it is easier to deal with doubts. Easier not to get distracted from what is important, keep your focus, and keep moving.

Only sustained movement in one direction can bring tangible results.You have permission to change your goal, rethink, choose another, by all means.

It’s hard to maintain any momentum if your direction lacks definition.

In order to reach big goals, you need time, during which you must continue moving in your chosen direction, not veering off course.

Defining your direction as early as possible is the most important decision in sports. But, curiously enough, this is also the most important decision in life in general, but much fewer people realize it.

Living “on purpose” means you live intentionally.

Napoleon Hill once said “There is one quality that one must possess to win, and that is definiteness of purpose, the knowledge of what one wants, and a burning desire to possess it.

In order to get what you want, you have to choose one direction and move towards it, constantly improving over a prolonged period of time.

Maximum speed and output requires a precise framework.

People who have made genuine changes in their lives and managed to attain difficult goals are not stronger, more intelligent or fearless than you. The only difference is the decision to act in the direction of their dreams.

A strong sense of purpose fuels your motivation.

Successful people have a definite sense of direction. They have a clear understanding of what success means to them.

Everything they do is consistent with their goals. They look forward and decide where they want to be. Their day to day actions helps them move closer to their vision.

Once you find your why, you will be more careful and selective about your daily actions.

In her book, “Brave: 50 Everyday Acts of Courage to Thrive in Work, Love and LifeMargie Warrell, writes: “Knowing your why is an important first step in figuring out how to achieve the goals that excite you and create a life you enjoy living (versus merely surviving!).

Margie continues “Indeed, only when you know your ‘why’ will you find the courage to take the risks needed to get ahead, stay motivated when the chips are down, and move your life onto an entirely new, more challenging, and more rewarding trajectory.”

William Cowper said “Existence is a strange bargain. Life owes us little; we owe it everything. The only true happiness comes from squandering ourselves for a purpose.”

There’s no better feeling than suddenly becoming clear on something that had previously been a road block in your life.

Those “aha!” moments are a real blessing when they come. “The only journey is the one within,” says Rainer Maria Rilke.

Clarity of purpose challenges you to do better and commit to actions that get you closer to the one thing you really want in life.

With clarity, you can pull together resources, ideas and people for a common cause. Without it, there is wasted effort and even chaos.

Bud Bilanich, an executive coach says to develop your personal clarity of purpose you need to do three things:

First, define what success means to you personally.

Second, create a vivid mental image of you as a success. This image should be as vivid as you can you make it.

Third, clarify your personal values.

Getting clear about what you want is a process of trial and error! Try something. Then ask yourself: Do I like this? Yes. No. Get a journal and start putting down your feelings, thoughts, actions, and behaviors.

Use what you write as a way to pinpoint areas you are constantly exploring. Evaluate your results constantly.

What actions, thoughts, beliefs, and behaviors are you attracted to the most?

The key is to do more of what you enjoy and brings out the very best in you and you will continually clarify what it is that you want to do, be and have in life.

Original by – Thomas Oppong

How to buy Gold at Spot Price?

New gold bullion buyers often begin by wondering how they might be able to buy gold at spot as well where can you buy gold bullion at the spot price.

We begin first and foremost, with a word of caution. Please be careful in your buying gold bullion at spot price endeavors.

Many offers for gold at spot price or even for gold under spot price are often the realm of conmen, counterfeits, and dishonesty.

Here we’ll teach you how to buy gold at or near spot safely via proper due diligence and knowing the counterparty is trusted and in fact, delivers on their word or promises.

Where can you buy gold at spot price?

Here at SD Bullion, we often offer customers the opportunity to buy 1 oz Gold Bullion Bars very close to the prevailing gold spot price.

To begin the 21st Century, we experienced about 10-years straight of consistently higher gold prices year after year (from 2001 until later 2011). The still standing nominal price record for fiat US dollar gold price’s was touched near $1,900 oz USD in August 2011.

Since that time, the price of gold has consolidated to as low as about $1,050 oz USD in late 2015 but has since rebounded to fiat USD prices over $1,500 oz in the past few months.

Below is an over 200-year chart of gold’s US dollar price.

Note in this long term gold price chart, the US dollar gold price per troy ounce started moving exponentially right after the 1971 Nixon Shock which severed the final underlying ties between gold bullion and now every government currency in circulation including the fully fiat US dollar.

Can I buy Gold at Spot Price? – Yes possibly, for Now

Due to lower price premiums currently in the gold bullion industry, various high volume gold bullion dealers (who work on razor-thin profit margins), have at times offered one time buy gold at spot price opportunities for new customers. The buy gold at spot price offer is done as a ‘loss leader’ mostly to encourage investors to become new customers and to get on their email list for future product promotions.

After all, there is no one easier to sell gold bullion to, then someone who has already bought gold bullion.

Others might even get some cheap debt-fueled sales subsidies by large corporations who may be trying to bolster their top-line revenues and perhaps further gain bullion trading market shares on their platforms.

Physical gold bullion dealers make little to no money in these gold at or next to spot price offers. Most often it is a loss in terms of overall costs associated with such transactions, yet some gold bullion dealers do so in the effort to gain new customers to market products to. They are ultimately hoping to bolster their bullion business growth for the long term.

We strongly suggest that on any gold bullion at spot price deal you may come across, that you perform proper gold buying due diligence on the gold-selling counterparty.

Stick with established high volume gold bullion selling businesses that get highly ranked on hard-to-rig gold dealer review websites.

Pay careful attention to rankings and review volumes. Any gold dealer with poor or mediocre reviews is not worth risking your hard-earned capital.

Also, pay special attention to the kinds of reviews that you read. It is certainly not out of the realm of possibilities that the reviews you find are fake or not genuine.

Can I buy Gold below Spot Price? – Unlikely & Be Very Careful, Scammery Chance is High Here

Typically the only individuals who buy physical gold bullion below spot price are gold scrap refineries, we buy gold stores, and gold bullion dealers who may bid or offer a price slightly lower than the fluctuating gold spot price. Often for gold bullion bars, the bid price given to purchase gold bars from customers is at or just below the gold spot price. Conversely, popular modern gold bullion coins typically yield bid prices at or even slightly above the gold spot price).

Currently, for new .999 fine physical gold bullion products, one should never accept a bid or offer price below 98% of the fluctuating gold spot price.

If an individual tries to buy gold below the spot price, the chances are high that you will run into counterfeit gold bars or coin conmen or con women on websites like Craigslist or unproven gold bullion sellers on eBay.

Be very careful as gold looking Chinese counterfeit products are a real issue in our industry and are used daily to try and take advantage of unknowing or ‘lowest price at all cost’ would be gold bullion buyers.

More often than not, these counterfeit gold frauds go undetected for years or even go unreported due to the embarrassment it may cause the person who fell for the scam.

For every “I tried to buy gold below spot price” victim and gold fraud story covered on the news or in the media. We could probably multiply that figure by 10X or more in the amounts of times this similar story has gone unreported.

Often those who get low or unbelievable gold price conned, don’t even tell their loved ones due to intense feelings of regret and humiliation.

Buying Gold at Spot or Buying Gold below Spot is not Normal

The reason for this is rather simple.

Physical gold bullion’s supply chain calls for physical gold bullion products to be sold above the gold spot price for various parts of this industry and value-added-chain, to remain solvent, and out of bankruptcy proceedings.

If selling gold bullion in large volumes at the gold spot price was a legitimate business model, people in business would have done so long ago.

Take a look at how gold bullion typically gets to the end-user below.

Gold Bullion’s Supply Chain from Origin to Sales Above Spot

Star explosions produce precious metal elements

Gold laced asteroids crossed the universe, formed and collided with Earth

We, humans, mine Gold + Recover Gold Scrap ( mostly below gold spot prices )

Gold Refiners purify physical gold (often selling .999 gold at the gold spot price to large gold mints/gold dealers)

Gold Bullion Mints create bullion products ( bars and coins then are sold above spot )

Gold Bullion Dealers like us here at SD Bullion, we trade gold bullion products

gold bought or gold sold online, then nondescriptly mailed fully insured, or done so locally)

Customers buy, own, sell, trade their physical gold (above, at, or slightly below the prevailing gold spot price)

Unless you own a physical gold bullion or gold scrap related business in this supply chain illustrated above, it will be risky and difficult ever to procure physical gold below fluctuating gold spot prices.

Paramount to any gold bullion purchasing is that you indeed get what you have paid to receive. There are decades of allegations and frauds which prove this is often not the case for some would-be gold buyers and or sellers.

Reputable high volume gold bullion businesses typically operate on super slim profit margins ranging between mere basis points (100ths of 1%) to low percentage points on various trades.

Gold dealers are not in business to go bankrupt. Many former gold dealers have gone bust over the years due to sheer incompetence or worse, avarice and rationalizations along the way to bankruptcy.

If you are attempting to buy gold at the gold spot price, please make well sure the counterparty is indeed trustworthy, solvent, and reliable.

If you found this content informative, be sure to pick up our 100% free SD Bullion Guide before you go.

Within that document, you will find many helpful tips and related information which may help you become a more successful long term bullion buyer and potential seller someday.

Thanks for visiting us here at SD Bullion.

James AndersonContent Director

Original Article

How to buy, sell and invest in gold

Learn more about gold and how you can start investing today.

Global stocks crashed in 2020 as a result of the unexpected coronavirus pandemic, and the historic volatility has led investors all over the world to seek safe places to put their money.

For centuries, gold has been a popular store of wealth. In turbulent times, you might notice people talking about gold as an investment. After the initial panic subsides, you often see the price of gold rising while other stocks are falling.

If you’re interested in investing in gold, there are three main routes to do so:

What’s in this guide?

  1. Buy gold mining stocks
  2. Gold ETFs
  3. Buy solid gold
  4. Compare providers for access to gold ETFs and more
  5. How much is gold worth now?
  6. Why is gold a “safe haven”?
  7. Bottom line

Buy gold mining stocks

One option is to invest in gold mining firms. You can find some of the largest firms listed on the S&P 500, including Newmont Mining (NEM) and Freeport McMoRan (FCX). Many other miners — the smaller firms are call junior miners — are also widely available through normal brokerage accounts. Through investing in mining stocks, you’re directly linking your capital to the success of these companies, and the changing value and price of gold.

While heavily correlated, the performance of gold mining stocks will not perfectly match the price of gold. Unlike the resource itself, companies are subject to a number of external factors such as employees going on strike, geo-political implications for the area, natural disasters and business decisions. In addition, because the cost of mining is often high, there’s usually a price point where increases in the gold price can influence the profit margins for gold miners exponentially rather than linearly. For instance, if the cost of mining is $1,000 per ounce, then a 13% increase in the price of gold from $1,150 to $1,300 actually represents a 100% jump in profits for the gold miner.

Pros

  • You can pick and choose a range of stocks individually in your brokerage account, and cash out when you want.

Cons

  • Like any investment, mining stocks are not immune to risk.

Gold ETFs

ETFs are another option worth considering. ETFs give access to a whole load of assets without having to put all of your money into one or two firms.

Simply, ETFs allow investors to minimize risk while taking advantage of the performance and general popularity of a particular sector — in this case, gold.

There are several gold-based ETFs to choose from, covering a whole host of different companies within the industry. There are mining companies, exploration companies, as well as the actual asset itself. Gold ETFs are a pretty good choice for those who are new to investing, as well as those looking to secure their portfolio.

Pros

  • ETFs allow for instant diversification across the whole gold industry, at a low price.

Cons

  • By placing your money in an ETF, you are trusting your gold portfolio to a preselected list of companies, so you naturally relinquish some control over the split of assets.

Buy solid gold

For some people, part of the appeal of gold is being able to hold it. If you’re one of those people, then the good news is that buying solid gold has never been easier. While you can buy gold directly from the US Mint, most investors do business with a local dealer or reputable online broker.

Gold is available in a variety of coins, ingots and bars as small as half an ounce and as large as 400 ounces. While the US Mint has produced numerous collectible gold coins in different themes, the standard gold bullion coin is called the Gold American Eagle. Other common gold coins include Canada’s Gold Maple Leaf, South Africa’s Gold Krugerrand, China’s Gold Panda and Australia’s Gold Kangaroo.

Pros

  • You have a tangible asset which is yours to hold, store or pass on to someone else.

Cons

  • You will need to factor in the cost of secure storage and insurance if you plan to build up a stockpile of gold. These costs will stack up over time, even if the value of your gold decreases.

Gold bars

Stack of gold bars Image: Getty

Gold bars generally range in size from 1/10 of an ounce to 1 kg (2.2 pounds), but there are also bars up to 500 ounces available. However, remember that precious metals use troy ounces and one troy ounce equals 31.1 grams.

There are two types of gold bars: cast bars and minted bars. Cast bars are produced by pouring molten gold into an ingot mold, while minted gold bars are manufactured via a minting or stamping process. Cast bars are cheaper to produce, but minted bars look better and are generally easier to sell.

Gold coins

Stacks of gold coins Image: Getty

Mints around the world also produce gold bullion coins. Typically smaller than bars and ingots, they’re generally considered to be a more convenient option for many investors. Not only are they cheaper to buy, but they also make it easier to liquidate a small portion of your investment when you need cash. Coins contain between 1/10 of an ounce and 1 ounce of pure gold.

These coins also have a nominal monetary value and can be accepted as legal tender in the country where they’re made.

How much is gold worth now?

How to safely store gold

Once you’ve purchased your gold, you’ll also need to find a safe place to store it. There are several options to consider, including the following:

  • Bullion dealers. Many gold dealers will also offer a storage service where you can keep your gold bars or coins for a fee, so ask about the storage options available when you make your purchase.
  • Safety deposit boxes. You can rent a safety deposit box at a bank to securely store your gold bullion.
  • Secure vault storage. For high-level security, you may want to research vault storage companies near you and the storage options they offer.
  • At home. You can also choose to store your gold at home. This obviously may not be as secure as some other options, so you may want to get a home safe installed. You’ll also need to update your homeowner’s insurance to make sure your precious metal is covered by your policy.

Why is gold a “safe haven”?

There are many reasons people view gold a safe haven for investors. For example:

  • Gold is a physical asset
  • It is not easily created or destroyed
  • It does not change (it is resistant to oxidation; gold looks the same hundreds of years from now)
  • It has cultural and historical value — gold predates modern currency and has always been seen as beautiful and special
  • Governments have turned to gold in times of financial crisis, which in itself adds to gold’s stability

What is a safe haven?

A safe haven investment is typically stable in times of market volatility. A safe haven is also useful for investors looking to diversify their portfolio, decreasing exposure to riskier assets or investments.

Bottom line

If you’re searching for ways to protect your wealth or diversify your investment portfolio, gold may be a practical solution.

But first do your research to make sure you know the costs of storage and security, as well as understand that returns may not match those provided by other investments. This will help you make an informed decision about whether buying gold is the right choice for you.

Disclaimer: The value of any investment can go up or down depending on news, trends and market conditions. We are not investment advisers, so do your own due diligence to understand the risks before you invest.

Original – Charlie Barton

The Effect of a Stock Market Collapse on Silver & Gold

Many investors hold gold and silver to hedge against various economic crises. But does this hedge hold up during stock market crashes? Knowing what effect a market plunge and subsequent dollar collapse will have on silver and gold is vital to making investment decisions now and then deciding what course to take should a major recession or depression occur.

It’s a common assumption that gold and silver prices will fall right along with the market. And if that’s the case, wouldn’t it be better to wait to buy them until after the dust settles? But suppose that the investors have it right and that their precious metals do retain their value — or even gain value. During a depression, is it better to hold gold or silver? In other words, which one is going to give you the best chance of weathering the storm?

Before formulating a strategy, let’s first look at price data from past stock market crashes… and see what it can tell us that might influence investment decisions.

The Message from History

To help answer the questions posed above, I looked at past stock market crashes and measured gold and silver’s performance during each of them to see if there are any historical tendencies. The following table shows the eight biggest declines in the S&P 500 since 1976 and how gold and silver prices responded to each.

[Note: Green signifies the value rose when the S&P crashed, red means it fell more than the S&P, and yellow denotes it fell but less than or the same as the S&P.]

What Happens to Gold and Silver During Stock Market Crashes

There are some reasonable conclusions we can draw from this historical data.

1. In most cases, the gold price rose during the biggest stock market crashes.

Does gold go up if a stock plunge occurs? In recent times, the answer has usually been, “Yes!” Notice this was regardless of whether the crash was short-lived or stretched over a couple years. Gold even climbed in the biggest crash of them all: the 56 percent decline that lasted two full years in the early 2000s. It seems clear that we should not assume gold will fall in a stock market crash — the exact opposite has occurred much more often.

2. Investors shouldn’t panic over an initial drop in gold prices.

You’ll recall that gold did fall in the initial shock of the 2008 financial crisis. This recent, albeit memorable, instance is perhaps why many investors think gold will drop when the stock market does. But while the S&P continued to decline, gold rebounded and ended the year up 5.5 percent. Over the total 18-month stock market selloff, gold rose more than 25 percent. The lesson here is that, even if gold initially declines during a stock market collapse, one should not assume it’s down for the count. In fact, history says it might be a great buying opportunity.

3. Gold’s only significant selloff (46% in the early 1980s) occurred just after its biggest bull market in modern history.

Gold rose more than 2,300 percent from its low in 1970 to the 1980 peak. So it isn’t terribly surprising that it fell with the broader stock market at that point. In recent years, the situation has been the exact opposite. Gold endured a 45 percent decline from its 2011 peak to its 2016 low, which was one of its worst bear markets in modern history. At the same time, this isn’t entirely a shock either, given its quick gains during the 2008 crisis and the 2011 crash.

4. Silver did not fare so well during stock market crashes.

In fact, it rose in only one of the S&P selloffs and was basically flat in another one. This is likely due to silver’s high industrial use (about 56% of total supply) and that stock market selloffs are usually associated with a poor or deteriorating economy. However, you’ll see that silver fell less than the S&P in all but one crash. This is significant because silver’s high volatility would normally cause it to fall more. Also notice that silver’s biggest rise (+15% in the 1970s) took place amidst its biggest bull market in history. It also ended flat by the end of the financial crisis in early 2009, which was its second-biggest bull market. In other words, we have historical precedence that silver could do well in a stock market crash if it is already in a bull market. Otherwise, it could struggle.

The overall message from history is this:

• Odds are high that gold won’t fall during a stock market crash, and in fact, it will likely rise instead. Silver might depend on whether it’s in a bull market.

So, why does gold behave this way?

Gold’s Yin to the Stock Market’s Yang

The reason gold tends to be resilient during stock market crashes is that the two are negatively correlated. In other words, when one goes up, the other tends to go down.

This makes sense when you think about it. Stocks benefit from economic growth and stability while gold benefits from economic distress and crisis. If the stock market falls, fear is usually high, and investors typically seek out the safe haven of gold. If stocks are rockin’ and rollin’, the perceived need for gold from mainstream investors is low.

Historical data backs up this theory of negative correlation between gold and stocks. This chart shows the correlation of gold to other common asset classes. The zero line means gold does the opposite of that investment half of the time. If the line is below zero, gold moves in the opposite direction of that investment more often than with it; if it’s above zero, it moves with that investment more often than against it.

Stocks Have a Negative Correlation to Gold

You can see that, on average, when the stock market crashes (U.S. Equities on the chart), gold has historically risen more than declined. Gold has also historically outperformed the cash sitting in your bank account or money market fund. Even real estate values follow gold only a little more than half the time.

This is the practical conclusion for investors:

  • If you want an asset that will rise when most other assets fall, gold is likely to do that more often than not.

This doesn’t mean gold will automatically rise with every downtick in the stock market. In the biggest crashes, though, history says gold is more likely to be sought as a safe haven. So if you think the economy is likely to be robust, you may want to own less gold than usual. If you think the economy is headed for weakness, then you may want more gold than usual. And if you think the economy is headed for a period of upheaval, you may want to own a lot.

There’s one more possibility we have to consider…

What if the Stock Market Doesn’t Crash?

It’s not always easy to predict if stocks will fall off a cliff. So what if they don’t? Or what if the market is just flat for a long period of time? You might think that’s unlikely, given the number of risks inherent in our economic, financial, and monetary systems today. But look at the 1970s — it had three recessions, an oil embargo, interest rates that hit 20 percent and the Soviet invasion of Afghanistan. Here’s how the S&P performed, along with how gold performed.

Gold Rose 2328% Trough to Peak While the S&P 500 Was Flat

The S&P basically went nowhere during the entire decade of the 1970s. After 10, years it was up a measly 14.3 percent (excluding dividends). Gold, on the other hand, posted an incredible return. It rose from $35 per ounce in 1970 to its January 1980 peak of $850, a whopping 2,328 percent.

In other words, gold’s biggest bull market in modern history occurred while the stock market was essentially flat. That’s because the catalysts for higher gold were unrelated to the stock market — they were more about the economic and inflationary issues occurring at the time. We have to allow for the possibility that this happens again and that citizens are drawn to gold for reasons unrelated to the performance of the S&P.

The Investor’s Best Strategy

Anything can happen when markets are hit with extraordinary volatility. But regardless of what stocks might do, is it wise to be without a meaningful amount of physical gold and silver in light of all the risks we face today? I don’t think so.

Perhaps the ideal solution is to have a stash of cash ready to deploy if we get another big decline in precious metals — but to also have a stash of bullion already set aside in case the next crisis sends gold off to the races.

Original by – Jeff Clark, Senior Analyst, GoldSilver

Creative ways to invest in property

Not sure if you can afford to invest in property? Here are some creative strategies to reduce the capital requirements needed to get you started.

Investing in property is invaluable, offering long-term rewards and is still regarded as one of the safest permanent investments. Most people would like to diversify their property portfolio but think they won’t be able to afford it or that they will not have the money for a deposit.

“Purchasing investment properties can be capital intensive, but there are ways to reduce the capital requirements by approaching the investment in an informed manner.” says Craig Hutchison, CEO Engel & Völkers Southern Africa.

When it comes to property investment, there are many strategies to adopt, depending on your personal situation and goals. We look at a few creative ways to approach your real estate investments:

• Partnerships: a typical way of obtaining financing.
It is the way many young real estate entrepreneurs go about financing their projects. By finding investors who can put the money up and split the profits on the upside. This also limits your risk and makes the money go further.

Private Lenders: a less risky alternative to a better cashflow.
This is because you can often arrange the terms of repayment with the private party. They can be anyone such as a friend or business acquaintance. The loan’s terms are agreed upon by the two parties, which can make purchasing a property with little or no money a likely possibility.

• Rent-to-own or lease with an option to buy.
This option is especially great when considering how to buy first rental property. If you have a lease-option for 5 years, at the end of that time, you will need to purchase the house and can get a bank loan then. Meanwhile, you can use the time to fix your credit and/or save for a down payment. Some contracts may put some or all of the rental amount towards the deposit.

Read more: Rent to buy, can it work for you?

• Use a home equity line of credit from another property:
If you have equity in another property, you could use that as a deposit on purchasing another investment property.

• Borrow against your own home:
Some people in this situation choose to extend their mortgage to release the cash to invest elsewhere. Some financial institutions will be happy for you to borrow more against your house in order to invest in property. Once you are able to buy an investment property, you can refinance it in one year.

• Rent rooms in your home:
If you own your own home, you can raise money by renting out a spare room. If you’re willing to put in more work, you’ll get higher returns by renting your room through a short-term lettings agency. The profits can be very high if you live in an area with decent tourist, student or business demand.

• Borrow money for a deposit from a relative:
If you are fortunate to have a relative with some extra funding and you really know your stuff and can produce a compelling business case, it might be worth a shot, asking them for funding towards/for a deposit to purchase the property.

• Invest with friends:
If your friends or business partners are also have a passion for property, you could always invest together. If you do decide to invest with someone you know, make sure you’re 100% aligned, discuss what you want to do, and all those scenarios that could go wrong. Plan what will happen if someone wants to sell and the other doesn’t – or one person needs their money back unexpectedly, and get it all down in writing.

• An instalment sale:
Is an agreement, documented in a water-tight contract between a buyer and a seller that the buyer will pay off the purchase price in monthly instalments within 5 years. This enables a buyer to acquire a property by paying the seller in more than two instalments (in usual bank-financed transactions there are two instalments: the deposit and the final settlement amount) and over a period longer than one year, but not longer than five years. Once a buyer and a seller have agreed on a price, the payment arrangements and the terms and conditions, a special purchase contract is drawn up by attorneys that specialise in ALA transactions, which meets all the requirements of the ALA to ensure the transaction is legal and protects the interests of all parties.

Only a handful of investors will make it past their first investment whilst climbing the property ladder even though their intentions were to make it big in real estate.

“Establishing and expanding your property portfolio needs to be done with careful forethought to ensure you get the most out of it” Craig concluded.

Original

How minimalism can simplify your finances — and help you grow your wealth

If your closet is bulging, your basement is cluttered and you can’t seem to save money, it’s time for a little minimalism — especially when it comes to your finances.

Use less. Spend less. Accumulate less. That’s what minimalistic money management looks like — and it leads to more money, more fulfilment, more clarity and better organization. It’s also better for the environment and your mental health.

Tidy up your financial clutter

Do you have accounts scattered across several banks and dozens of different money managers? Streamline your account structure.

In the majority of cases, Canadians need one chequing account (where your paycheques go into and bills are withdrawn from), one emergency savings account (don’t link this to your debit card so you won’t accidentally spend it), one general savings account (this is for short-term purchases like vacations or a car repair), two credit cards (one is a primary and the other is a backup, which should be from a different provider), an RRSP and a TFSA.

Having too many accounts is confusing and gets difficult to track. It also means you’re paying unnecessary fees, and scattered investments tend not to be optimized to your risk profile and overall goals — which means you’re not going to achieve your full investment growth potential.

Spend with intention

If your money seems to be evaporating into thin air every month, it’s time to pull back on your spending. More than likely you’ve got too many transactions running through your accounts for things you probably don’t need. Get organized by drafting up a budget (how you intend to spend). Cut your daily shopping trips down to one planned-out event per week, which means you’ll need to use a checklist. Keep a tally of your spending so that as you close out each day, you know exactly how much you spent that day. Intentional spending triggers the financial awareness you’re going to need in order to break overspending habits.

Purge your space and sell what you’re not using

Having more things doesn’t make you more powerful, smarter, a better person or more popular. In fact, it can have the opposite effect, and it’s financially unhealthy.

Make space in your life for financial abundance by clearing out the physical clutter in your living space. By selling your goods online or through a consignment shop, you’ll make money that can be put toward savings. If it doesn’t sell, donate it to a local charity. Many even have a pickup service.

So, dig out that old exercise bike, humidifier, area rug, patio set and toboggan, and list it all for sale. If you’re not sure whether to purge something, I recommend asking yourself “have I used this in the past twelve months?” If the answer is “no,” it’s got to go.

Minimize your advice circle

Having too many people weighing in on your financial plans is not optimal, especially if they aren’t qualified. Your dream team should include a financial planner who focuses on building a realistic financial plan based on growing net worth throughout the long-term; an insurance agent who can advise on how to best protect your assets and family in case something derails your plans (damage, illness or death); an accountant, if your finances are complicated, to focus on tax-reduction and preparation strategies; and a lawyer — whom you hopefully won’t need often — to advise on wills, property transactions, prenuptials, trusts, estates and other legal matters that might surface.

It will take a bit of effort to minimize your finances in the beginning, but I guarantee it: Less confusion and complexity in your finances will eventually lead to better financial health.

Original By Lesley-Anne Scorgie

Tracking Gold Using Blockchain Technology

The process of delivering and tracking gold is suspected to go through some substantial changes soon. Most of these changes pertain to the incorporation of the innovative blockchain technology. This is the same technology that powers the equally innovative creation of cryptocurrencies. Both of these creations are making headway in other industries, like mortgages and competitive gaming.

In simple terms, blockchain is a ledger that functions like an online journal that is impossible to tamper with. The ‘blocks’ are pieces of data and the ‘chain’ is the public ledger itself. As soon as something is added to the ‘chain’, the information remains there for public consumption from then on.

Already there are a substantial amount of companies that want to utilize this technology to secure gold transactions. Among them is Emergent Technologies Holdings, which is developing a blockchain that tracks the origin of gold. What’s more, it can track where it is going. On top of this, the company is introducing a digital token, going by the name of G-Coin. This is a digital title of ownership specifically for physical gold that EmTech’s blockchain is tracking.

Think of it as blockchain logging every stage, from mining to end market to digital wallets.”

The clout blockchain technology has on pre-existing industries is staggering

Blockchain technology is in the midst of completely reinventing both gold and diamond industries. On the whole, these industries contain complex ecosystems that rely heavily on supply chains. This is where cargo typically passes through an array of geographical locations before ultimately reaching its destination.

Since its inception, this technology has been responsible for the avoidance of corruption. Moreover, it improves the overall quality by way of tracking valuable assets at every milestone throughout their journey.

By effectively encoding gold in blockchains with digital methods, central banks and private holders alike will benefit from the process. They are able to account for every portion of the asset during its delivery. Those who are experts in this technology claim that blockchains have the potential to overthrow the current banking system. This is due to traditional banks essentially being the gatekeepers of these ledgers. Blockchains are capable of allowing both transaction participants to update the data on the ledger without middlemen involvement.

An asset as valuable as gold needs proper monitoring

Gold, as we know it, is one of the most valuable and expensive resources that exist in the world. It possesses substantial trade and intrinsic value and its price per ounce is currently over $1,480. Central banks employ the use of a “trust” system for every instance in which foreign central banks store gold. As popular a method as it is, it is not the most reliable; especially when storing such a valuable asset as gold. As a case in point, the central bank of Germany couldn’t immediately repatriate some of its precious metals from the U.S. back in 2013.

With the use of blockchain technology, the act of storing and tracking gold would comparatively be more secure. Should Emergent Technologies prove to be successful with its incorporation of blockchain into gold delivery, the trust system could become archaic.

Admittedly, they are not the first company that was hoping to use blockchain technology as a means to track gold. Regardless of that, Emergent Technologies claims that their particular approach is “fundamentally different.” This is largely due to the core focus of their mission is to track gold that is “responsibly-sourced.”

Mitch Davis, the Chief Commercial Officer at EmTech, clarifies that notable characteristic of the company fully embracing that specific gold. To elaborate, where there is a noticeable increase in the demand and premiums for gold mined under such practices. This is something that is easier said than done, though. Making a guarantee that gold is what it claims to be – in the imposed quantity and quality – is difficult. Moreover, it’s hard to make sure that it is mined and perfected in a way that conforms with strict standards. Specifically, that of human rights, environmental, industrial, financial, and legal standards.

Britain’s involvement

Among the many companies that are jumping on this bandwagon is Britain’s Royal Mint. It is starting to allow businesses and investors to buy and sell digital tokens that are representing gold through blockchain transactions. The primary intent of the Mint is to make gold into a more attractive investment. They plan to do this by making trading a lot easier and cheaper, especially when you compare it to alternatives. Such alternate methods include exchange-traded funds (ETFs) or directly purchasing and storing gold bullion.

The Royal Mint is responsible for manufacturing the U.K.’s currency. On top of that, it also sells bullion, commemorative coins, and an array of other products. By utilizing its new blockchain system, the Mint aims to make gold transactions easier by having them be more transparent. What’s more, it hopes to make these transactions economical. 

The development of this new system was a collaborative effort with the Chicago Mercantile Exchange. In addition, there was also the application of technology deriving from two blockchain startups. This brand new system transacts blockchain tokens that go by the name of ‘Royal Mint Gold’ (RMG). Each one of these tokens is a digital representation of one gram of actual gold in storage at the Mint’s facilities.

The Mint states that the price of RMG will closely track the spot price of gold. At the time of this writing, this spot price is roughly $48 per gram. Pre-launch reports from last year imply that the Mint could potentially create up to $1 billion in tokens.

Investors will have the ability to buy and sell RMG digital tokens by way of an institutional trading platform. Furthermore, the official recording of these trades will be as blockchain transactions.

gold blockchain

The benefits from Mint transactions

According to the Mint, transactions that occur in its blockchain system will offer a variety of advantages. Moreover, these advantages will be comparatively more beneficial than other gold trading methods. For instance, it claims that there are no annual fees for being the owner of RMG tokens. This is noteworthy especially when you compare it to annual fees of 0.25-0.5% for gold ETFs. Relating to that, there are also the annual fees for secure storage for gold bars of roughly 0.12-0.25%. That will translate into a higher return on investment for RMG. The reason for this is that, as time goes on, the compounding effect of fees gradually diminish the overall return.

With the use of RMG, traders are also able to purchase smaller amounts of gold in blockchain transactions. In addition, there is the available real-time pricing that exists during exchange opening hours. The Mint says that, unlike shares in a gold ETF, RMG is exchangeable for physical gold. Be that as it may, there will be a “fabrication charge” for anything that’s smaller than a 400-ounce gold bar.

The director of new business for the Royal Mint, David Janczewski, states the following:

While things have improved in terms of gold trading over the centuries, it’s our view that it still remains difficult and relatively expensive as a commodity to invest in … Gold is known in the industry as a negative-return investment … What we’re trying to do with the announcement of Royal Mint Gold – or RMG – is to really address this issue and offer a better way to invest in solid digital gold.”

Fixing a prominent issue

The London Bullion Market Association (LBMA), an over-the-counter market for trading gold and silver, made an announcement during October of last year. The core focus of its plan would be to revamp and improve transparency within the industry. They aim to do this with the incorporation of blockchain technology.

The technology has the potential to help expel unsatisfactory metals from the global supply chain. To be specific, metals that are “illegally mined or traded or used to finance conflict.” Evidently, this is a prominent industry-wide issue. To better explain this, there was an incident with three NTR Metals employees back in March of 2017. There were accusations from the FBI that they were importing up to $3.6 billion worth of gold from South American countries. They were refining it, selling it, and then sending the earnings back to “drug traffickers.”

So, in March of 2018, the LBMA took the initiative and asked for proposals. Those who were asked consisted of all 144 of the association’s members. These members would include the largest gold refiners, banks, and dealers in the world. With these proposals, they could determine how to track gold from mines to its final destination. Doing so will allow them to effectively prevent any instance gold bar counterfeit.

LMBA’s solution

The association would later receive 26 proposals, all coming “from companies ranging from startups to major technology firms.” Sakhila Mirza, LBMA’s executive board director, did not disclose any specific names beyond that of IBM. The association, in general, is steadfast on not insisting on the utilization of blockchain technology. However, roughly 20 of the 26 responses were apparently open to the use of the technology in their project drafts.

The LBMA is planning to layout guidelines that will authorize and monitor technology providers. Mirza adds that:

We need to set up criteria and standards that help us understand what is a credible blockchain solution … Once those have been appropriately established, the result would be a selection of service providers that meet the minimum standards.”

JPMorgan stepping in

Last year, there were reports that JPMorgan, the most valuable bank by market capitalization, is joining in on this trend. As America’s largest bank, it’s using its enterprise version of the Ethereum blockchain that supports smart contracts – ‘Quorum’ – to tokenize gold bars.

The first announcement of Quorum was back in October of 2016 as part of the Ethereum Enterprise Alliance (EEA). The U.S. bank came forward with an innovative blockchain-powered system. The intent of this system is to reduce the mandatory number of parties to validate global payments. By doing this, they can cut transaction times “from weeks to hours.”

The transition took place just one month following the CEO of JPMorgan, Jamie Dimon, famously calling Bitcoin “a fraud.” What’s more, Dimon was of the belief that it “won’t end well.” This was a comment that he would later add to, saying that he does not care about the cryptocurrency. Though, he made sure to mention that “blockchain is real.”

During the Sibos conference in Sydney, JPMorgan made mention of the concept of “tokenizing” assets. The company’s head of blockchain initiatives, Umar Farooq, would further elaborate on the idea:

They wrap a gold bar into a tamper-proof case electronically tagged, and they can track the gold bar from the mine to endpoint – with the use case being, if you know it’s a socially responsible mine, someone will be willing to pay a higher spread on that gold versus if you don’t know where it comes from. Diamonds are another example.”

Tracking jewelry metals

During the course of 2018, leaders in the gold and diamond industry were partnering with IBM to develop a blockchain network. With this new network, they could trace the origin of any piece of jewelry. In late April of that year, a consortium of jewelry industry heads made an announcement about the TrustChain initiative.

The TrustChain Initiative is a partnership of precious metals refiner Asahi Refining, jewelry retailer Helzberg Diamonds, precious metals supplier LeachGarner, jewelry manufacturer The Richline Group, and independent verification service UL. The measure aims to provide increased transparency across the supply chain.”

This initiative draws its foundation from the IBM Blockchain Platform and the Hyperledger Project. Its design allows it to verify and track diamonds and precious metals from their origin to their retail location. It provides its users with an array of features, which include verification of process and “third-party oversight.” Moreover, it provides digital and physical product validation. Overall, its objective is to make sure that customers’ jewelry purchases are properly sourced.

Upon applying this technology, these companies have the potential to carry out various tasks. They can digitize processes and establish an unchangeable record of transactions within the network. Furthermore, they would be capable of enabling access to trusted data in real-time.

Conclusion

The number of companies incorporating blockchain technology into their gold tracking systems is continuously growing. With other precious metals like diamonds receiving the same treatment, it seems like more instances of blockchain usage are on the horizon.

Original – By Sara Joudrey  November 6, 2019

8 Reasons To Own Gold

Gold is respected throughout the world for its value and rich history, which has been interwoven into cultures for thousands of years. Coins containing gold appeared around 800 B.C., and the first pure gold coins were struck during the rein of King Croesus of Lydia about 300 years later. Throughout the centuries, people have continued to hold gold for various reasons. Societies, and now economies, have placed value on gold, thus perpetuating its worth. It is the metal we fall back on when other forms of currency don’t work, which means it always has some value as insurance against tough times. Below are eight potential reasons to own gold today.

KEY TAKEAWAYS

  • Throughout history, gold has been seen as a special and valuable commodity.
  • Owning gold can be a good hedge against inflation and deflation alike, and a good portfolio diversifier.
  • As a global store of value, gold can also provide financial cover during geopolitical and macroeconomic uncertainty.

A History of Holding Its Value

Unlike paper currency, coins or other assets, gold has maintained its value throughout the ages. People see gold as a way to pass on and preserve their wealth from one generation to the next. Since ancient times, people have valued the unique properties of the precious metal. Gold doesn’t corrode and can be melted over a common flame, making it easy to work with and stamp as a coin. Moreover, gold has a unique and beautiful color, unlike other elements. The atoms in gold are heavier and the electrons move faster, creating absorption of some light; a process which took Einstein’s theory of relativity to figure out. 

Weakness of the U.S. Dollar

Although the U.S. dollar is one of the world’s most important reserve currencies, when the value of the dollar falls against other currencies as it did between 1998 and 2008, this often prompts people to flock to the security of gold, which raises gold prices . The price of gold nearly tripled between 1998 and 2008, reaching the $1,000-an-ounce milestone in early 2008 and nearly doubling between 2008 and 2012, hitting around the $1800-$1900 mark. The decline in the U.S. dollar occurred for a number of reasons, including the country’s large budget and trade deficits and a large increase in the money supply.

Inflation Hedge

Gold has historically been an excellent hedge against inflation, because its price tends to rise when the cost of living increases. Over the past 50 years investors have seen gold prices soar and the stock market plunge during high-inflation years. This is because when fiat currency loses its purchasing power to inflation, gold tends to be priced in those currency units and thus tends to arise along with everything else. Moreover, gold is seen as a good store of value so people may be encouraged to buy gold when they believe that their local currency is losing value.

Deflation Protection

Deflation is defined as a period in which prices decrease, when business activity slows and the economy is burdened by excessive debt, which has not been seen globally since the Great Depression of the 1930s (although a small degree of deflation occurred following the 2008 financial crisis in some parts of the world).. During the Depression, the relative purchasing power of gold soared while other prices dropped sharply. This is because people chose to hoard cash, and the safest place to hold cash was in gold and gold coin at the time.

Geopolitical Uncertainty

Gold retains its value not only in times of financial uncertainty, but in times of geopolitical uncertainty. It is often called the “crisis commodity,” because people flee to its relative safety when world tensions rise; during such times, it often outperforms other investments. For example, gold prices experienced some major price movements this year in response to the crisis occurring in the European Union. Its price often rises the most when confidence in governments is low.

Supply Constraints

Much of the supply of gold in the market since the 1990s has come from sales of gold bullion from the vaults of global central banks. This selling by global central banks slowed greatly in 2008. At the same time, production of new gold from mines had been declining since 2000. According to BullionVault.com, annual gold-mining output fell from 2,573 metric tons in 2000 to 2,444 metric tons in 2007 (however, according to Goldsheetlinks.com, gold saw a rebound in production with output hitting nearly 2,700 metric tons in 2011.) It can take from five to 10 years to bring a new mine into production. As a general rule, reduction in the supply of gold increases gold prices.

Increasing Demand

In previous years, increased wealth of emerging market economies boosted demand for gold. In many of these countries, gold is intertwined into the culture. India is one of the largest gold-consuming nations in the world; it has many uses there, including jewelry. As such, the Indian wedding season in October is traditionally the time of the year that sees the highest global demand for gold (though it has taken a tumble in 2012.) In China, where gold bars are a traditional form of saving, the demand for gold has been steadfast.

Demand for gold has also grown among investors. Many are beginning to see commodities, particularly gold, as an investment class into which funds should be allocated. In fact, SPDR Gold Trust, became one of the largest ETFs in the U.S., as well as one of the world’s largest holders of gold bullion in 2008, only four years after its inception.

Portfolio Diversification

The key to diversification is finding investments that are not closely correlated to one another; gold has historically had a negative correlation to stocks and other financial instruments. Recent history bears this out:

  • The 1970s was great for gold, but terrible for stocks.
  • The 1980s and 1990s were wonderful for stocks, but horrible for gold.
  • 2008 saw stocks drop substantially as consumers migrated to gold.

Properly diversified investors combine gold with stocks and bonds in a portfolio to reduce the overall volatility and risk.

The Bottom Line

Gold should be an important part of a diversified investment portfolio because its price increases in response to events that cause the value of paper investments, such as stocks and bonds, to decline. Although the price of gold can be volatile in the short term, it has always maintained its value over the long term. Through the years, it has served as a hedge against inflation and the erosion of major currencies, and thus is an investment well worth considering. (For related reading, see “Has Gold Been a Good Investment Over the Long Term?“)

By TONY DALTORIO Updated Jun 22, 2019

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8 Mindsets That Will Set You on the Path to Success

We’ve all met people who are full of negativity and skepticism, who always second-guess everything and criticize those around them.

Their negative mindset is like a wet blanket, smothering anything productive or beneficial before it can ignite.

A positive mindset is critical to achieving your goals and dreams in life, according to mindset expert Angie Zimmerman, author of 7 Steps to Master Your Mind to Increase Sales and Boost Productivity. This kind of mindset can be cultivated, but only if you are willing to open yourself up to new ways of thinking.

I recently sat down with Zimmerman to discuss some of her observations about what it takes to put your mind on the path to success.

1. Have a growth mindset.

According to Zimmerman, the most important thing you can do is to embrace a growth mindset. This is the mindset that will allow you to dream big and push the boundaries of your ideas to new levels.

Related: 7 Essentials for Making Your Strategy Succeed

She subscribes to the maxim, “Everything on the way rather than in the way,” which comes from leading educator Dr. John Demartini.

Instead of judging experiences in terms of failures and successes, frame them in a positive light. You will have challenges and obstacles along the way. Recognize that all of them can help you grow and become a better person.

Another mindset expert, Carol Dweck, explained that if you aren’t in a growth mindset, you probably have a fixed mindset, which is dangerous because it will ultimately stifle your ability to reach new achievements.

“A fixed mindset is when people believe their basic qualities, intelligence, talents and abilities are just fixed traits. They have a certain amount and that’s that,” Dweck said.

With a growth mindset, people believe that their talents and abilities can be developed over time through experience and mentorship, so they push themselves and “go for it.”

“They’re not always worried about how smart they are, how they’ll look or what a mistake will mean,” Dweck explained. “They challenge themselves and grow.”

2. No risk, no reward.

“Sometimes you just have to jump off of a cliff,” Zimmerman said.

Do something completely out of your comfort zone and your mind will become more nimble. As a result, you’ll learn to push yourself to new heights. Those who fail to get out of their comfort zone often end up with a rigid mindset.

An unwillingness to take risks stymies progress, and you will ultimately fizzle out.

Just like the high achiever from high school — the person voted “most likely to succeed,” but who doesn’t accomplish anything beyond that — you have to push yourself or you will fail to launch.

“They become afraid of making mistakes. They become afraid of tarnishing their image,” Dweck said.

3. Embrace your mistakes and move on.

Part of taking risks is being able to learn from your mistakes. A blunder can also be an amazing blessing because you can use your misstep as a jumping-off point toward something new.

Related: Positive Thinking Is Powerful But Delusion Is Fatal

“The universe gives us gentle reminders of what we need to do,” Zimmerman explained. “However, if we ignore that advice for too long or fail to understand the message and take action, that is where we receive our greatest life lessons.”
 
Instead of trying to hide or make excuses, consider what you can take away from these experiences as you go forward.

4. Curiosity will keep you thirsting for more.

No matter what your level of education, you should never stop learning. According to Zimmerman, a thirst for knowledge is something that can never be quenched, and should be a lifelong quest.

She explained having an endless supply of curiosity is key to seeing beyond what’s in front of you, discovering what you are truly capable of and keeping yourself in a growth mindset.

“I can honestly say that no amount of knowledge is ever enough to quell my thirst in life to know, have and be more than I am today,” Zimmerman said.

5. Find gratitude, celebrate others’ successes.

“Another important factor is to cultivate gratitude by celebrating and sincerely being happy for other people’s successes,” Zimmerman said.

Acknowledging and delighting in others’ successes will help you shirk feelings of bitterness or resentment, and will allow you to focus on the positive things you have accomplished as well.

“In life, you cannot receive that which you resent,” Zimmerman added. “Therefore, if you resent or are upset about other people’s success, this leads to you being unable to achieve the level of success you desire.”

6. Shun the negative, feed the positive.

As a rule, you reflect the characteristics of the people with whom you surround yourself. As motivational speaker Jim Rohn has said, “You’re the average of the five people you spend most of your time with.”

In the same way, your mindset will reflect whatever information you feed it. That’s why it’s key to fuel your mind with positive information on a daily basis.

“Most importantly, you must surround yourself with positive influences that can help you live your best life and become your best self,” Zimmerman said.

7. Be healthy in mind and body.

Don’t discount the importance of both physical and mental agility.

Zimmerman recommends embracing both, since they work together to keep you alert and focused.

Related: How Positive Thinking Can Make You a Better Problem Solver

She says being fit and healthy creates more positive thoughts than negative and helps you to take the daily action necessary to achieve your priorities.

“What I mean by that is, by staying fit and healthy, you have endless energy and enthusiasm for life, and act in a more loving way.”

8. Keep your energy high.

When you are feeling low on energy and neglect to work out for a little while, your enthusiasm and positivity wanes, which in turn allows negative thoughts to take hold. 

Zimmerman likened those negative thoughts to a river of energy running out of your body. “You lose your vitality and you are far less likely to attract all the positive things, people and opportunities that you want from life,” she said.

Energy equals momentum, which is particularly important in business. It’s about having the drive and endurance to manage your daily activities.

“Physical exercise and positive thoughts assist with that, and give you a constant boost of ‘feel-good’ endorphins,” Zimmerman explained. “It all works to make it easier to attract positive circumstances into your life.”

Original

Deep Patel