Silver Values

Is Gold Used For Anything Today?

With all of the hype about the recent gold bull market, it is interesting to take a step by and figure out some really good reasons for the market increase.  After all, I can barely pass a street corner without seeing a We Buy Gold sign or watch TV without seeing a similar advertisement! It is only natural to have some questions about the true value of gold, and also about the recent upswing in the value of this precious metal.

Jewelry

Seventy-five percent of gold is used for jewelry. Rings, watches, necklaces, etc. are made with some percentage of gold to make them shiny and valuable. While this may be culturally important to some people, most of us have to agree that we can live without gold. We do not need it to eat, care for our children, or fill up our tanks.

The Uses For The Other Twenty-Five Percent Of Gold

• Electronics industry (11%)
• Gold Investors  (14%)
• dental industry (1,5%)

Why Is Gold So Expensive?

What Is Gold Used For Today?

Well, I am not any sort of professional analyst, and I cannot claim any special psychic powers either.  Actually, when it comes to an “emotional” commodity like gold, the psychic powers may be the most useful. The best answer I can actually come up with is that people regard gold as “money”. It is considered a safe haven when other investments are so unpredictable.

It might be safe to say that one reason gold is so expensive because of fear.  However, you cannot ignore the cultural importance of the shiny stuff around the world. It is hard to say how long that will support the price of gold, or even drive it further up.

US investors are not the only ones interested in gold’s value. China and India are too very large and well populated countries that like it too!

Is the price of gold and silver bullion any real reflect of their “worth”, or is it more of a symptom of larger problems?

Louis Gargour, chief investment officer at LNG Capital reported that 2 fears drove up the price of gold:

• Fear Of Inflation – Bullion tends to hold real value, regardless of the ups and downs of the value of the paper dollar in your pocket.
• Fear of Currency Fluctuations - This is not just the value of one particular currency, but the value of that currency against other currencies is hard to predict. Some investors may have invested in other currencies in the past, but they are getting hard to predict.

So it may be hard to figure out the value of the dollar bill in your pocket. It may be hard to predict the value of that dollar bill against the Euro or the Yen. But people purchase gold bullion, and silver too, in order to purchase a stable currency. So that means that gold has become a sort of secondary currency in its own right.

What Are We Scared Of?

Well, the unstable situation in the Middle East and the US debt crisis are a couple of things to start with. When people get nervous about financial situations or world stability, they still turn to bullion as a way to preserve asset value.

It may not be surprising that the rich are stocking up on gold. It may be more surprising that the average investor is starting to wonder about precious metals too!

However, I think we can draw one conclusion. Gold and silver have become more popular, and more expensive, because they are becoming a base currency, and not because they have suddenly developed more intrinsic worth. So that is a word of optimism and caution. Gold and silver will have the value that the market says they will have.

How Can You Buy Silver Cheaply?

There is a lot of excitement in the bullion community about the high price of silver. You can check today’s silver value here. If you are holding onto the silver ounces you purchased for $5 – $6 a few years ago, you are probably gloating. If you cashed out at $12, you may not feel that happy.

But no trains have left the station yet! There are still ways to purchase cheap silver if you are willing to do a little work. We’re not saying you can find bargain prices at the coin store or from bullion sellers. We are saying you can look for other sources of silver bullion!

1. Make sure you know the current value of an ounce of silver. The only way to figure out if you are buying bargain silver bullion is to know how much it is worth!
2. Consider items that contain silver like jewelry, silverware, candle sticks, sterling dishware. You need to find markings on the items that tell you what the silver content is. Be wary of getting fooled by silver plating, or even by pewter that just looks like the more precious metal!
3. Where to look? Try thrift stores, garage sales, estate stales, etc. I have snapped up silver candlesticks at a yard sale for $3!
4. “Junk” silver refers to coins with silver content. They are usually not high graded coins, but are valuable because of the precious metals they contain. Any US dime, half dollars  or quarters that are dated before 1964, are 90% silver. Many people do not realize that half dollars from 1965 – 1969 are still 40% silver. Also note that “War Nickels” minted between 1942 and 1945 are 35% silver! Some people comb through rolls of coins from the bank to look for treasure. Again, you can use our silver coin calculator to figure out the current value of “junk silver”.
5. Learn more about scrap silver from electronics or photography.
6. If you’re not sure about a purchase, either have a smart phone or somebody at home who can check the internet for similar items and markings.

Got any other tips to treasure hunt for bargain prices silver? Comment here and let us know!

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One of the biggest questions that most people have, and which we are revisiting now in November of 2010, is why is gold climbing this high. Now pay attention. The inflation price of the 1980′s gold spike of about $850 would be over $2k. So that may make you think.

There are industrial uses for gold. The computer on your disk contains a little gold. But at current prices, many companies are looking for substitutes. Most experts do not believe that industrial uses for gold justifies the price increases lately. Of course, gold is also used in jewelry. But most of us do not think that gold jewelry is such an urgent need that it would account for a price increase either.

So we keep coming back to one argument. Gold has the value that the market determines. When investor confidence in other markets is low, gold tends to spike.

Why is Gold Worth so Much?

I have been asked this question a few times recently. Just now we are seeing gold that is topping $1200 an ounce, and of course the optimists are hoping for $1250, or even $1500! But we know that we cannot eat this shiny metal, it does not appear to cure cancer, and we certainly cannot burn it for heat. Is the value of gold a leftover from some more primitive times when it was valuable because it was shiny and scarce?

Well, keep in mind that paper money is only valuable because we all agree it is. I guess we could burn it for warmth, but it would take a lot of dollar bills to keep us warm this winter. Hey, it takes a lot of dollar bills to pay the utility company anyway.

Gold Demand

Gold does have some industrial applications, but most of the demand seems to come from jewelry. We Americans like gold jewelry, but most of us could live without it. But in the far east, gold jewelry is more ingrained in the culture, and that demand is huge. Even though we don’t really think we need gold, people from other cultures do not regard it the same way.

Gold is Rare

I read an article that said all of the gold ever found could fit into a 150 foot square. I cannot authenticate that particular statistic, but is does provide an interesting visual image. Imagine a square about the size of 3 average sized home lots on each side. Now imagine that square is coverd in gold. It seems like a lot, but not when you try to divvy it up between all of the people on earth!

Gold is Money

For 5,000 years, civilizations have considered gold as money. Our US currency is not backed by gold, but the federal government. And yet we still do have stocks of gold.

You have to learn to think about the price of gold like this. It isn’t that the price of gold really varies so much. What fluctuates is the value of the currency (i.e. the dollar).  Many people believe that gold holds its value.

This is a very general example, but consider a $20 gold coin. In 1880, when a $20 gold coin had that value, a worker might earn that much in 2 weeks. Now that same 1 ounce coin is still about 2 weeks wages at the value of $1,200. This example is not exact, and is easier to do with silver.

So What Makes Gold Valuable?

Just like paper money, gold has value because the market says it does. Beyond that, it is used in industry some, and it a traditional precious metal used for jewelry.

Why Do PMs Cost So Much More Than Spot?

I have seen this question all over the internet: Just why are the prices for precious metal bullion so much higher than the spot price? When the silver metal, palladium, cannot move over $200 an ounce, palladium bullion coins on EBay reflect twice that price. And you would be lucky to find platinum bullion for less than a 30% markup, and it is not uncommon to see a 100% markup. But even the more common staple PMs like gold and silver do not seem to reflect the spot prices in their sales or Buy it Now prices on the most popular online auction: EBay.

I think we need to look at three reasons for the inflated prices.

• A suspicion that Spot prices do not reflect the price of actual bullion, but are tied to the price of paper or digital bullion. In other words, the gold and silver funds are trading paper that do not reflect actual metal in a buyer’s hand. These prices are low and should be regarded with a jaded eye because who really knows how many times the same ounce of gold or silver (or platinum or palladium) are being traded? I have no idea if this is correct, but neither do a lot of people. Can we actually see the stores of precious metals that back up paper or digital bullion?
• EBay and Paypal Fees are so darn high that sellers have to sell for much more than spot price or they will go broke. Well, I know that there is a lot of truth to this one. I am tired of seeing potential bullion buyers accuse sellers of greed, when they really should be examining EBay’s methods. If a buyer thinks the price or shipping fees are too high, they should shop elsewhere. And no, I am not actively selling on EBay now. I have just examined the way the system works. And many complaining buyers also note that they cannot find lower prices on bullion, or any bullion at all, in their local coin shops.
• This one is more complex, but has to do with faith. Sellers have to source their bullion for somewhere, and may have purchased during a spike, just like a lot of us did. They refuse to sell at a loss, especially when they are confident the price will increase soon. Buyers must believe that the bullion is scarce, and that it will be an increasingly valuable commodity at some point in the future too. They are willing to pay a premium because they believe that holding gold, silver, palladium, or platinum is worth it.

Now you can find other ways to purchase precious metals. Your local coin shop, individuals in your community who want to sell, members of online forums, and online precious metal stores. It is up to you to find reliable sources at the best cost, and that is all part of the game. But if you are frustrated by high premiums, you need to consider the reasons for the markups and decide if you believe they are valid.

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Well, those of us who hold a little bit of precious metals as insurance against a total meltdown of the US dollar and stock market are probably a bit relieved to see the price (as stated in US dollars) of gold rebound a bit. As of this writing, it is a hair over $900, and I’m not sure we believed we would see that price again soon. Oh, I know lots of us will argue that we’d rather hold strong dollars and see gold looking cheap, but if we can’t have that, well we have something…..

But here’s the thing. A lot of silver watches argue that the white stuff has not made the same rebound as the yellow stuff, and that the price should be at least $17 an ounce now, and not just over $13. Of course, we cannot always pinpoint the price of silver by the price of gold, but they tend to move together in a loose way.

So, is this the time to load up on silver? My crystal ball got damaged in hurricane Ike. If you have an idea, feel free to comment here!

It is an old saw in precious metals trading. Sell in May and Go Away. That was the traditional wisdom, and I even saw it repeated during the dip a couple of weeks ago. However, if you are still holding your stash, you may want to rethink that traditional wisdom this year.

James Turk says that the logic does work about 75% to 85% percent of the time. It works most of the time, but that does not, as he admits, work all of the time. In general, the 1st and 4th quarter are stronger, while the 2nd and 3rd quarter are softer. Now we did reach a peak in March which would conform to the logic, but we are net getting a clear pattern of any sort of bullish market yet. In fact, so far this year, a sale in March and repurchase in April would have been a great strategy. But if you, like me, missed the March boat, keep your eye out for the next one.

A weaker dollar, more expensive oil, and a stream of financial problems are supporting the price of your shiny stuff. Do Your Own Due Dilligence, but if you can hold onto your silver and gold this summer, consider it strongly, despite conventional wisdom.  A gold or silver sale in May, may just be a sale you regret by July.

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Is the Dollar Better Now?  

We keep looking for signs that the value of our good old US dollar is finding support, and maybe even rising. In such a case, it might be time to put our silver and gold investment on the back burner again, and jump into more “normal” investments.

 In other words, maybe we should just keep a small percentage of our savings in PMs like silver and gold as a hedge for the future, and go about our business as usual. However, many experts tell us that despite the way the news and government downplay the facts, we are not anything like close to being back to business as usual.

How Much Should A Person Save in PMs?

Most advisors will say to only put a fraction of savings into precious metals anyway. They tell us to allocate 10 to 15 percent of our savings into gold, silver, platinum, or palladium because of the value as a hedge against inflation.

 Gold and Silver Bugs, or those that would rather put 85% of their savings into PMs, and maybe keep 15% as liquid cash think differently. They see PMs like gold and silver as the standard around which the dollar fluctuates, and not the other way around. These savers are all about hedging. Of course, in the last several months they have seen a great return on their PM investment, though historically the stock market indexes performed much better.

Most of us, who do appreciate the ability of PMs like gold and silver to retain some value no matter what happens, or maybe just like having a very shiny stack that goes “clink”, probably fall somewhere in between the true gold bug and the standard investment advice. And of course, we do watch the market and try to adjust accordingly.

Seeking Alpha is not seeing any signs that anything the fed has done will turn the tide on inflation in the near future.  In fact, the recent drop in gold and silver prices may be a time to look for some physical PM deals. If you have some extra cash, or an investment that is not doing very well right now, and you know you can afford to wait before you cash in any precious metals you buy with that investment, look around to see what you can buy.

What did I do? Well, I could not resist picking up a Gold American Eagle yesterday (GAE). I found a deal, a bit over spot but under the posted PCGS price for the MS69 GAE. I think gold may be losing its shine for some fair weather friends, and they are raising cash for other uses. I did spend money I could afford to “wait for”, and I did shop around for a purchase that I thought was a good purchase.

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The Declining Value of Your Dollar

I think that one thing illustrates the declining value of money very well. Simply look back at a point of time, and consider the amount of money took to purchase ordinary things that we still use every day. Then take a look at the amount of silver in $1 of US silver coins that actually circulated in currency. We have mentioned before that $1 of US silver coins contains .715 of an ounce of silver. So, for use as a standard, we shall call that a “standard” dollar, even though a quick look at the US silver coins calculator shows that today, that .715 ounces is worth about $12.23 of the coins or paper money you probably have in your pocket.

Now, with even The Wall Street Journal writing about potential food price increases, and that maybe we should stockpile food as an investment, we must look at some food items! Let’s take a common box of Cheerios cereal. It was .39 in 1963, but today that same box of Cheerios breakfast cereal tops out at $4.39. A loaf of Wonder Bread, the plain bread standard, was .29, and now it can sell for $2.89!

In 1963 a gallon of gasoline cost .29, and yes, I am just old enough to remember this. Where I live that same gallon of gas is about $3.30 today. Who knows what it will be tomorrow? Somehow I assume it will be closer to, or more than today’s price, and not closer to the 1963 price.

What is Silver Worth?

But look, $1 bought 3 gallons of gasoline or loaves of bread back in the early to mid sixties. That would have bene $1 in US silver currency (minted on or before 1964). Now the $12 and some change that the .715 ounces of silver in $1 of US silver currency is worth today, will buy about 4 loaves of bread or gallons of gas.

It may be time to consider hedging against inflation with some precious metals, and of course I like silver because it is, after all, the poor man’s gold! Or maybe we should just all go to the grocerty store and stock up on peanut butter and Cheerios. They store very well, and if the price inflation continues, may turn us a nice profit on the future breakfast cereal exchange or black market.

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