Is the Gold Bull Market Over?

Most experts speculate that the gold bull market will continue through 2013. Some, however, disagree with this perspective. Comparing their arguments should help you decide whether you think now is a great time to invest in gold.

Bear Market: Growth in the US Economy Means Falling Gold Prices

Gold Market

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Some market speculators believe that gold prices will fall as the US economy stabilizes. US economic growth will mean that more investors around the world want to buy USD instead of gold. This will drive up the value of US currency while causing the value of gold to fall slightly.

Bull Market Response: The World Economy Suggests Higher Gold Prices

Gold Bull Market

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Yes, the US economy will likely grow somewhat in 2013, but that growth will come at a slow pace that will not excite investors around the world. Unemployment remains high; the government cannot take control of its debt; and wages have not risen to match inflation. All of this spells bad news for USD.

It’s also important to note that the price of gold doesn’t rely on the US economy alone. Half of the world is stuck struggling through a recession. The rest is stuck in economic depression. When seen from a global perspective, investors simply cannot put as much faith in currency as they can in gold.

Bear Market: As Interest Rates Rise, Gold’s Value Will Fall

Gold Bear Market

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During the 1980s, the price of gold fell as interest rates began to climb. Assuming that the Fed will begin to raise interest rates as the US economy improves and needs less assistance, the price of gold will fall during 2013. As the value of gold begins to slip, investors will likely panic and sell it at lower rates. This will lead to a steady decline in value.

Bull Market Response: Gold Maintains Value in all Economic Conditions

Gold Maintains Value

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Yes, there is some chance that higher interest rates could mean that the value of gold falls somewhat. This, however, is based on pure speculation. There simply isn’t enough historical evidence to support such a conclusion. It’s also important to look at the data from the 1980s. While one can find a general correlation between rising interest rates and falling gold prices, the chart is inconsistent. In some years, interest rates and gold prices were equally high.

The fact of the matter is that gold maintains value in all economic conditions. Buying gold is always the safe bet. Even if the value were to fall slightly in 2013, it would eventually rise again. What’s important is for investors to recognize the difference between short-term profits and long-term stability. It seems most likely that gold’s value will increase next year. Even if it doesn’t, though, it still offers more long-term stability and growth than other investment options.

Now that you have seen both sides of the argument, do you think that the gold bull market is actually over, or are you ready to start putting your money in a precious metal that will give you short-term profits as well as long-term stability no matter where the economy heads?

What Kind of Gold Do You Really Have? Understanding the Differences Between Gold Items

It’s malleable but strong, aesthetically inspiring, and never tarnishes. Since prehistoric times, people have used gold to fashion a variety of objects. But it’s also rare and expensive, and so different items are made of differing amounts of gold and other metals.

“Solid Gold” Is Not Pure Gold

Pure Gold

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When an item is made from “solid gold,” this means the item consists of one piece of gold or gold alloy. It is not layered or plated on top of anything else. A pure gold item will be marked 24 karat (24K).

Gold is often alloyed with other metals including copper, silver, palladium, or others, partly to create a harder metal that won’t wear as easily and partly to lower cost. Twenty-four karat gold, which is nearly 100 percent pure, is 24 parts of gold per 24 parts of metal. The karat number divided by 24 equals the percentage of gold in the alloy. For example: 18K = 18/24 = 79.2% gold. A refinery can melt down the alloy and separate the gold from the other metals.

Gold bars are 24K. Bullion-grade gold coins are between 22K and 24K. Jewelry is made of many different alloys, and the color of gold in jewelry depends on the percentages of the other metals used. The law requires jewelry manufacturers to mark the karat weight on their pieces, but sometimes marks are counterfeited. Dental scrap in the form of gold teeth, fillings, bridges, etc. may contain between 60 percent and 100 percent gold, determined through chemical testing.

Gold Filled Items May Be Valuable

Gold Filled

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Some items consist of a layer of gold or gold alloy that has been fused to a core of base metal. The law states that these items must be labeled as gold filled. The ratio of gold alloy to base metal by weight ranges from 1/5 to 1/40. If an item is marked as “1/10 GF 14K,” this means that one-tenth of the weight of the object is 14K gold, and the other nine-tenths is base metal.

Corporate jewelry, including award pins for employees’ years of service from the 20th century, is sometimes made of 1/5 filled gold. Wire-framed eyeglasses often contain 1/10 filled gold. Refineries can reclaim a meaningful amount of gold from these items.

The terms “gold filled” and “rolled gold” are sometimes used interchangeably, but they are not exactly the same thing. If an item is marked “RGP” (rolled gold plate) or “HRG” (heavy rolled gold), the gold layer is thinner than it is on filled gold pieces. Refineries may refuse to process such items.

Gold Plate Contains Little Gold

Gold Plated

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Some items are mostly base metal, but have a thin layer of gold or gold alloy applied to them by an electrical process. Items will be marked as “GP” or “EP.” If the layer of gold is somewhat thicker, it is known as “heavy gold electroplating” and marked as “HGP” or “HGE.” In either case, any process to recover the gold from these items will not be cost effective, so a refinery won’t accept them.

Apart from jewelry, dinnerware and silverware are sometimes gold plated. Some collectible “gold” coins are also made this way. Cellphones and other electronics contain some parts that are gold plated to guard against corrosion.

Jewelry is sometimes made by electroplating gold over sterling silver, and this is called “vermeil.” Refineries can reclaim the silver, but not the gold, from vermeil jewelry.

All gold objects are not the same, so watch out for clues to the differences.

What to Know Before Buying Colored Gold

Most people know there are at least a few different colors of gold. However, did you know that gold actually comes in at least 12 different shades? If you are going to purchase gold, especially if you want to then resell it for a profit, there are a few things you need to know about purchasing colored gold.

Yellow Gold

Yellow Gold

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Yellow gold comes in a variety of karats. The higher the karat rating on a piece, the more pure the alloy is. 24 karat gold is the purest that is available for jewelry and commercial use. It is also the most expensive. Yellow gold comes in other karats, such as 22 karat, 18 karat, 14 karat, and 10 karat. The karat rating is equivalent to how many parts of gold are in the alloy, up to 24.

Yellow gold has been the most common through history. When considering gold, most think of this traditional color. Because of that, it has a much stronger connotation as something of value for most. This color of gold is frequently mixed with silver, copper, and zinc to make the color right and the alloy stick. Finding jewelry, coins, and other pieces in yellow gold is much easier than some of the other colors.

Rose Gold

Rose Gold

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Over the last few decades, rose gold has gained significant popularity. Today, it is used for many jewelry pieces, including wedding and engagement rings, as well as pendants. Rose gold is usually created as an 18 karat gold. The gold is mixed with copper and silver to achieve the pink color that is now highly prized.

Rose gold is used in many things other than jewelry as well. For example, many high-end flutes are either made of, or plated with, rose gold. This can be a great investment for those looking to purchase gold to then refine. A rose gold flute attained at a good price can yield a large profit.

White Gold

White Gold

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There are different levels of quality when it comes to white gold. Some white gold is created by mixing the gold with 25 percent palladium or platinum. This is generally the more expensive white gold. However, it can also be created with a mixture of palladium, zinc, and nickel. Many people who like the look of silver, but the prestige of gold will purchase white gold jewelry. However, they probably don’t know what elements it is mixed with.

When sending white gold to be refined, you may get more than you are bargaining for. It will depend on which alloy the metal was created with, however.

Purple Gold

Purple Gold

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How often have you seen a piece of purple gold jewelry? Most likely, the answer is never. This alloy has proven to be difficult for many jewelry makers to perfect. The color is frequently splotchy, and many have found it to be extremely porous. Because of this, purple gold is difficult to come by, and may be very expensive to pick up. Purple gold is composed of 80 percent gold and 20 percent aluminum.

Gold jewelry is an important part of our culture. Because of this, there is a lot of it going around. All gold is worth refining, all you have to do is find it.

Testing Gold: Electronic, Acid or Touchstone?

Any time you’re serious about buying gold, even if it’s from a trusted friend or family member, it’s important to determine three things. First, is it real gold? Second, is it pure gold or gold-plated? Third, what Karat gold is it? Testing is important because it determines the value of the piece. People may misremember where they got the item, or it may have been a gift the recipient assumed was real gold but isn’t. There’s also a possibility the person doesn’t think it’s as high quality as it actually is. To be fair to both yourself and the seller, always test every gold piece before buying. Here are your options.

Electronic Gold Testing

Electronic Gold Test

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Testing gold electronically is the newest method for determining purity. You’ll need an electronic circuit, testing plate and a bottle of testing acid, which are available in all-inclusive kits. Put a small scratch in the item before testing. The reason for scratching is to determine if the piece is solid gold, not just gold-plated.

Put an entire bottle of testing acid on the plate. Dip the gold item into the solution without touching the test plate. The advantage of the electronic method is you only need a single bottle of acid to test for Karats 9k to 24k. The disadvantage is you have to use a new bottle for every item you test.

Acid Gold Testing

Gold Acid Test

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Acid testing is the most common method, but its name is misleading because all methods require acid. You’ll need a bottle of test acid for each Karat (9k, 10k, 12k, 14k, 18k, 22k and 24k), a color matching chart (which usually comes with your acid) and something to scratch the gold item with, such as a pocket knife or file.

Scratch the gold (to make sure you’re testing underneath any possible plating) and begin with the lowest Karat acid. Apply the acid and compare the color it turns to the colors on your chart until you spot a match. Normally, real gold stains brown and imitation pieces turn green or bubble. After testing, wash the acid off with water and use a pencil eraser to buff off the stain.

Touchstone Gold Testing

Touchstone Gold Test

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Touchstones are usually made of finely textured glass, fieldstone or slate. You’ll need gold testing acid and actual gold sample pieces of each Karat, to compare the test item to.

Rub the test item across the touchstone and do the same with one of the sample pieces to make side by side marks. Apply testing acid to each mark until you get a match. Touchstone testing is best reserved for cases where you’re already sure the item is gold, but aren’t sure of the exact Karat.

A Word About Magnet Testing

Magnet Gold Testing

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Many websites and amateur testers recommend testing gold pieces with a magnet before you buy. However, this is a bad business practice if you’re serious about investing in gold. Magnets are drawn to fake gold and not to real gold, so it’s fine to use a magnet before performing a touchstone test. But never depend on a magnet test alone to price gold. Because you can’t be sure of its purity, there’s no way to offer a fair price. Test Karats using electronic, acid or touchstone methods.

Scam Alert: Fake Gold Bars, Phony Investments, and Shrinking Portfolios–Oh My!

Scams are everywhere. From late-night commercials selling you products that don’t live up to the hype, telemarketers toting the next best thing and then disappearing, to criminals hawking fake jewelry and knock-offs, who can say what’s true and what’s a scam? The most recent wave of scams involve imitation gold bars. They look real and the promise of money is alluring, but buyer beware—this may not be a genuine purchase. Here is background information you need to make sure you aren’t a victim of such a scam.

How it Works

Gold Bars

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Counterfeit gold bars are being created. They look legit, even weighing the proper amount. They can pass through all the necessary tests, including X-ray and weight assessments. They are created from real gold bars—from the outside, they appear in perfect condition. But they are filled with tungsten—a compound that costs merely $1 an ounce and feels just like gold.

Even serial numbers and the paper from the original gold bar come with it, fooling even the most discerning eyes. They are polished and sealed to perfection. Such gold bars have appeared in America and the U.K., which means buyers need to take notice.

Look for These Warning Signs

Authentic Gold

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Buyers should heed this advice prior to making any gold bar purchases:

  • Companies that promise large returns on your gold bar investment are not to be trusted. No investments are guarantees.
  • If you deal with a high-pressure salesperson that wants cash immediately, say no. They may take your money and run.
  • Telemarketers from offshore companies are a red flag. It’s best to garner as much information about the company and contact the Better Business Bureau. If you are still unsure, it is always a sound idea to stick with companies that have already earned a good reputation.
  • You must ask about fees and commissions—know where your money is going. If you don’t, you may be charged an excessive amount of dollars off the original quote.

Look for an Alternative

Gold Alternative

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Rather than buy physical gold and risk purchasing a fake–exposing you to a loss of potentially thousands of dollars–you can invest in gold funds instead. Such funds include Market Vectors TR Gold Miners (NYSE Arca: GDX), RBS Gold Trendpilot ETN (NYSE Arca: TBAR) and PowerShares DB Gold Fund (NYSE Arca:DGL).

Buyers should always be armed with as much knowledge as possible when making major purchases. You are putting your own financial future at risk if you don’t know the warning signs. It is always good advice to follow your instincts when it comes to decisions like these—if you feel any doubt, it’s best not to invest. Following this mantra may save you from losing thousands of dollars, which would take years to re-coop.