dlp@akgua.UUCP (02/01/84)
If you are interested in buying gold try this: Advertise in the local paper that you will buy gold at market value. Then purchase your gold coins etc. that way. Why do this you ask? When you buy gold coins you pay a premium on the coin depending on the type of coin. Krugerands have more of a premium than Canadian Maple Leafs for example. When you sell gold you sell at a loss by selling at wholesale (below market value). Thus the above. The seller sells at market value and does better than otherwise, you the buyer do better than otherwise by buying at market value thus avoiding the premium. As another plus, brokerage houses will charge you a fee for storing your coins but if you actually take delivery of the coins you have to pay sales tax. Both of these charges have to be subtracted from your final selling price to figure your profit. Obviously, you avoid both charges by the method mentioned.
pvlm@hou2f.UUCP (P.LAMASTER) (02/01/84)
The suggestion to deal directly in gold (through newspaper ads) is one to consider, but also consider that brokerage houses usually guarantee the assay of the gold. If you buy and sell on the "open market", you need to either pay an assaying service to determine the purity of the gold or be very careful of those with whom you deal. Remember also that buyers of your gold have the same dilemma: do they trust you or do they insist on an expensive assay? Pete LaMaster BTL NJ (201)949-4604
foster@nsc.UUCP (Jerry Foster) (02/18/84)
Owning gold for its own sake has been popular for centuries
and it has been used as a medium of exchange for even
longer. It offers a hedge against inflation and is a good
long term investment. In the short term, gold prices fluc-
tuate rapidly, and day trading in gold (or any precious
metal for that matter) is better left to those with strong
stomachs and heavy pocketbooks. If you can afford to keep
it for awhile, it will appreciate (long term trend is
upward) and make you feel good while you are waiting for the
price of gold to reach $2000 per ounce. So for those who
wish to posess a small quantity of this valued metal, the
following information is offered.
If you wish to buy gold for investment and not for adorn-
ment, then you have a choice of two forms; non-numismatic
coins or bullion. Non-numismatic coins are those which have
no value other than their gold content (such as Krugerands
or Canadian Maple Leafs). Bullion is gold in the form of
bars or ingots. Another form of gold is numismatic coins,
these are coins which have a value greater than their gold
content alone (historic or nostalgic reasons). Numismatic
coins are like stamps, diamonds, or paintings in that their
value is not easily determined. They are good investment
items, but not because of their gold content, so I'm not
including them.
Non-numismatic coins are the most common form of gold to own
in the U.S.A. Popular coins in this catagory are shown in
the table below along with their gold content.
COMPARATIVE WEIGHTS OF POPULARLY TRADED GOLD COINS:
Type of Coin Net Gold Weight (troy oz)
--------------------------------------------------------
Austrian 100 Corona .9802
Austrian 20 Corona .1960
Austrian 4 Ducat .4438
Austrian 1 Ducat .1109
British Sovereign .2354
Canadian Maple Leaf 1.0000
Colombian 5 Peso .2354
Hungarian 100 Korona .9802
Mexican 50 Peso 1.2057
Mexican 20 Peso .4823
South African Krugerand 1.0000
U.S. $20 double eagle .9675
Note that only two coins have exactly one ounce of gold in
them (Canadian Maple Leaf and the South African Krugerand).
This makes it easy to determine their minimum value and is
probably why they are the most popular coins.
Price of gold coins is based on their gold content (not
their absolute weight). When you go to buy a gold coin you
will be charged for the gold content times the current price
of gold (quoted per troy oz) plus a PREMIUM. The premium
should be about 3 to 7 percent on buy. A volume coin or
currency broker will have premiums in this range for the
most popular coins. Premiums include the cost of minting the
gold into coins and distributing them. The difference in
buy and sell premiums is where brokers or gold dealers get
their profit. A good broker will always offset any gold he
sells by buying more at approximately the same time to keep
his costs the same. There is no quantity discount on gold
coins, the broker pays the same price per ounce for gold as
you do, except for the premium. Examine the sample quote
below to see how premiums work.
Prices from Deak-Perera Currency Brokers in Los Angeles
based on New York afternoon fixing Feb 15th of $384.50 per
oz.
BUY SELL (dollars)
-----------------------------------------------
Maple Leaf/Krugerand 403 391
Austrian Corona 381 368
1 oz gold bar 397 384
The Maple Leaf and Krugerand both contain one ounce of gold
and carry the same premiums. To buy a Maple Leaf you would
pay $384.50 for the one ounce of gold it contains plus
$18.50 premium (4.8%). If you were selling a Maple Leaf,
you would get $384.50 for the ounce of gold it contains plus
$6.50 premium (1.7%). The difference is the brokers fee.
The sell premium is based on the coin being in good condi-
tion; if it is damaged (scratched, dented, or bent) you
would not get any sell premium (it is still worth the price
of one ounce of gold).
A point to note about Canadian Maple Leafs; they are 24kt
gold (pure gold, no alloying elements). This means they are
soft and more easily damaged than other coins. Alloying
elements do not affect the value of the coin but do make it
more durable (alloyed coins can take more abuse without los-
ing the sell premiums).
Bullion is sold in many shapes and sizes. It is the tradi-
tional form of gold and is commonly found today as one oz.,
ten oz., and 100 oz. bars. Larger bars are available if you
want them, but are harder to trade (difficult to make
change). If you examine the price quote you will see that a
1oz gold bar has a 3.25% premium to buy and no premium to
sell. The point to watch for here is an assay certificate;
get one when you buy and keep it with the bar. If the bar
appears damaged (like the Maple Leafs it is pure 24kt gold
and soft), a new assay certificate may be required to deter-
mine weight and gold purity (seller pays).
GENERAL NOTES:
No sales tax in California on non-numismatic gold coins if
the purchase value exceeds $1000. 3 Krugerands or Maple
Leafs purchased together will not pay sales tax at the
prices quoted.
Sales tax always charged on bullion sales in California.
Sales tax can be avoided entirely by buying out of state
mail order. Be cautious and try to get information about
the company before sending your money (caveat emptor).
Premiums on Krugerands and Maple Leafs should be 3-7% from a
volume coin or currency broker. Shop around!
Krugerands are full rands, there are also tenth rands, quar-
ter rands, and half rands; they cost less than full rands
but the premiums can run as much as 20%.
Stock brokerages will sometimes buy and sell gold coins as a
"favor" to their customers, watch out for high premiums or
quantity restrictions.
Gold brokers usually expect payment before handing over the
gold. By this I mean pay in cash if you want immediate
delivery. Checks (even certified or cashiers) will have to
clear before you can have the gold you paid for (this
varies, maybe if you have an honest face they will trust you
but don't count on it).
When buying gold remember to get a receipt. To report capi-
tal gains or losses to the IRS you will need proof of what
you paid for the gold just like stocks and bonds.
1 TROY ounce = 31.103 grams
12 TROY ounce = 1 TROY pound
32.15 TROY ounces = 1 Kilogram = 2.2046 pounds (avropois)