Physical gold is an element and a mineral. Historically, the value of gold was rooted in its relative rarity, ease of smelting, minting, and working, its resistance to corrosion and other chemical reactions, and its distinctive color. As a precious metal, gold has been used for coinage, jewelry, and other arts throughout recorded history, both for religious relics, and political signs of authority and wealth. It’s also been linked to health. In the past, a gold standard was often implemented as a monetary policy, but gold coins ceased to be minted as a circulating currency in the 1930s, and the world gold standard was abandoned for a fiat currency system after 1976.
Gold can often come in the following forms…
Gold Bullion gets its value from its purity and weight, as opposed to jewelry or antiques, like the 1932 Bulova wristwatch, where other factors such as aesthetics, colors, design, history, and novelty can come into play and affect the price of the item. Gold bullion is useful for gold investors as well as gold fabricators.
Gold Bullion Bars: Gold bars often take rectangular shapes, although gold bars can take a multitude of other shapes as long as they’re refined. Gold bars are classified into two subtypes: cast and minted. Gold bars that are cast and therefore thicker are generally called gold ingots while gold that is stamped and thinner/flatter can be referred to as gold wafers. Gold bars come in many different shapes and sizes and can generally be split into 55 categories. Only about 30 types of gold bars are in general circulation around the world with the Good Delivery gold bars being the most popular. Good delivery bars that are held within the London bullion market (LBMA) system each has a verifiable chain of custody, beginning with the refiner and assayer, and continuing through storage in LBMA recognized vaults.
Gold Bullion Coins: Coin-shaped gold bullion are usually much smaller in weight than gold bars. Many different countries produce their own gold coins with national emblems embedded onto them but the most popular ones in the market today include Eagles, Maples, Krugerrands, Chinese Gold Pandas, Britannias, and Sovereigns. The Krugerrand is the most widely held gold bullion coin, with 46 million troy ounces in circulation.
Numismatic Gold Coins
These types don’t have a fixed weight or purity to them and tend to be old gold coins that are no longer in production. They can be bought and sold online from reliable dealers like California Numismatics, which has a buy/sell spread of as little as 2.8%. Louis E. Eliasberg, Sr. (1896-1976), the Baltimore businessman, actively collected coins from the mid-1920s until the late 1970s.
Gold exchange-traded products may include exchange-traded funds (ETFs), exchange-traded notes (ETNs), and closed-end funds (CEFs), which are traded like shares on the major stock exchanges. The first gold ETF, Gold Bullion Securities (ticker symbol “GOLD”), was launched in March 2003 on the Australian Stock Exchange, and originally represented exactly 0.1 troy ounces (3.1 g) of gold. As of November 2010, SPDR Gold Shares was the second-largest exchange-traded fund in the world by market capitalization.
Gold in its raw state is naturally unrefined and can take different forms. Gold nuggets for example, are naturally occurring pieces of gold in the wild. Unrefined gold can also be in the form of gold dust, or other types of gold deposits, like gold veins. The Welcome Stranger nugget with the Canaã nugget being the largest recorded natural nuggets.
Scrap gold refers to any gold item that has more value for the gold inside it, than its worth as an item. Usually broken gold jewelry is a good candidate as well as old ‘things’ lying around the house like an electric item with gold plated pieces inside, etc. Many different grades and types of gold scrap exist with names such as Electro Plated Gold, etc.
Gold leaf is gold that has been hammered into extremely thin layers. Usually 22K or 24K gold is used as thin gold layers/sheets to decorate art work and jewelry. You can recognize gold leaf jewelry by the irregularities of the foil surrounding the item.
Vaulted gold denotes gold bullion which is stored in professional bank vaults. By acquiring vaulted gold, institutional or private investors obtain outright ownership of physical gold but do not hold the gold in their hands. Vaulted gold comes with withdrawal or delivery options, i.e., investors can request delivery of their holdings or pick up holdings directly from the vault. Providers of vaulted gold may charge fees for withdrawal or delivery. In practice, only a small percentage of investors request delivery or withdrawal of vaulted gold holdings. Historically, vaulted gold was primarily offered by wealthy private banks, e.g., Swiss private banks, in the form of gold accounts. However, in recent years, new providers including both banks and non-banks have started to offer vaulted gold or savings plans based on vaulted gold to private investors. For example, some of the first gold accumulation plans were introduced by the precious metals trading company Tanaka Kikinzoku Kogyo during the 1980s.
Gold Mining Stocks
When you purchase gold stocks you’re not actually buying gold, but instead are purchasing a share in a gold mining company. This means that the share prices don’t necessarily rise in conjunction with gold prices and are subject to a number of other factors, including; performance of company management, auditors, and geologists as well as the cost basis and the environmental and economic risk of the company.
Companies such as Digix Gold and DinarDirham offer a tokenized form of gold, hosted on the blockchain (such as the DinarCoin). These gold-based tokens are “digitized gold” or “tokenized gold” as they represent a quantifiable amount of physical gold. By using Ethereum’s ability to create custom tokens, companies are able to offer all the efficiencies that come with transacting in virtual currency, with the trust and stability offered by physical gold.