History

The history of gold begins in remote antiquity. Without hard archaeological evidence to pinpoint the time and place of man’s first happy encounter with the yellow metal, we can only conjecture about those persons, who at various places and at different times first came upon native gold. Experts of fossil study have observed that bits of natural gold were found in Spanish caves used by the Paleolithic Man about 40,000 B.C. Consequently, it is not surprising that historical sources cannot agree on the precise date that gold was first used. One states that gold’s recorded discovery occurred circa 6000 B.C. Another mentions that the pharaohs and temple priests used the relic metal for adornment in ancient Egypt circa 3000 B.C. However, it is curious to note that the early Egyptian’s medium of exchange was not gold but barley. The first use of gold as money in 700 B.C. is claimed by the citizens of the Kingdom of Lydia (western Turkey). Surely, you remember the kingdom of the famous fortune seeking King Croesus - circa 550 B.C.

Recent History

In 1792 the U.S. Congress adopted a bimetallic standard (gold and silver) for the new nation’s currency - with gold valued at $19.30 per troy ounce. This basically remained unchanged until 1834, when the price of gold was raised to the $20.67 level which held for the next 100 years. It was not until 1934 that President Franklin Delano Roosevelt devalued the dollar by raising the price of gold to $35 per ounce. Relative to today’s world economic conditions, it is imperative to remember that F.D.R.’s stated purpose for dramatically increasing the value of gold was to boost commodity prices (especially farm products) and create more employment for the millions who were suffering the devastating effects of the Great Depression.

In December 1971 representatives of the ten most industrialized nations met in Washington D.C. These representatives had in mind to take whatever measures necessary in order to improve international economic conditions. The now famous Smithsonian Agreement accorded an immediate hike in the value of gold from $35 to $38 per ounce. President Richard Nixon hailed it as “the most significant monetary agreement in the history of the world.” Unfortunately, it resulted in a measure too little and too late. International economic conditions continued to deteriorate, forcing the U.S. Government in 1973 to devalue the dollar a second time by raising the official price of gold to $42.22 per ounce.

Finally, all international currencies were allowed to “float” freely against gold. By June of that year the London Gold Fixing had risen to an unprecedented $120 per ounce. Exploding demand during the following months set the stage for the creation of gold futures trading on the COMEX in January 1975. A worldwide feeding frenzy for gold translated into an all-time high of $850 per ounce on January 21, 1980. No doubt, speculative excess had carried too far. Since that date the price of gold has been in a downtrend for more than 13 years. Naturally, there have been periods of respite, when prices rebounded slightly. However, on balance the long-term bear market remained intact until April 23, 1993. On that date the June 1993 COMEX Gold futures contract closed at $347.50 - which, in our opinion, heralded a reversal of the 13 year downtrend. In 1999, fifteen of Europe’s largest banks signed the Washington Agreement on Gold, a six-year deal in which the signors agreed to voluntarily limit dishoarding. This agreement is generally regarded as a success and has helped stabilize the price of gold.

General Overview of Markets

Gold trades in many markets around the world. Any time of the day or night a current market price is being established somewhere. Two of the most important world markets, however, are in London and New York.

The London market is one of the oldest in the world and is the largest market for physical gold. Since September 12, 1919 the price of gold has been set at “the London gold fix” and this price is used in contract arrangements around the world. Today, the gold fixings take place at 10:30am and 3pm and provide published prices which are used as official pricing medium by producers, consumers and central banks.

The New York market opens as the second London fix takes place and gold then trades throughout the day. The New York market is particularly noted for the volume of “paper gold transactions” such as futures contracts that are traded on the exchanged. The Comex division of the New York Mercantile Exchange is the center of these activities. Other important gold markets are in Zurich, Tokyo, Sydney, Hong Kong and elsewhere – thus gold is being traded somewhere 24 hours a day.

Impact on the Overall Economy

Gold plays a key role in a number of rapidly developing technologies that are important to the nation’s economic health. Billions of gold-coated electrical connectors are used throughout the computer, telecommunications and home appliance industries. Weather and communications satellites depend on gold-plated shields and reflective apparatus for protection from solar heat and electrical interference while in space. Advanced laser technology used in a variety of industrial and medical applications employs interior gold coatings to concentrate its powerful light energy. The automobile industry depends on gold-coated contacts for sensors that activate automobile air bag systems. Modern medicine also relies on gold in a wide variety of procedures ranging from the monitoring of heart functions to the chemistry related to diagnosis and treatment of cancer, viral and bacterial diseases and allergies. All of these uses are critical to the global economy.

The gold industry makes a significant contribution to the U.S. economy.

Why own Gold?

As a global currency, an investment and simply a thing of beauty, gold has held an allure for thousands of years. For the investor, that allure is largely to do with gold’s proven ability to preserve value over time and be a good diversifier within a portfolio. Gold has many uses in a diversified portfolio, none more important than as a risk management component. Below we have outlined some of the main reasons for an investor to consider holding gold.

Top reasons to invest in precious metals

• Diversification of assets; a central theory of portfolio theory is asset diversification. By spreading ones assets across multiple asset categories, returns can be stabilized and down side risk can be reduced. Many economists believe that gold should be included as part of a well diversified portfolio.
• Macroeconomic hedge; as the world becomes increasingly integrated in terms of economics, resources and culture – systemic risks become far more transient in nature. Events in one part of the world can have an immediate and lasting effect upon many other parts. Highly integrated economies, such that have emerged in North America, Europe, may offer many advantages in terms of economic use of services and materials but at the same time they are increasingly prone to single events. These events may cause a cascade of knock on events through the wider global economy. The Asian monetary crisis of the early 1990’s is a case in point. Fred Bergsten of the Institute for International Economics
• Hedge geo-political risk; the enormous trade imbalances that are currently evident in the global economy may lead to geopolitical tensions. Currently the US is running a trade imbalance of $800 Billion per year; this amounts to borrowing $5Billion each working day, just to keep the lights on. The rising oil price followed by Chinas ascension as an economic powerhouse means that the global economic landscape is changing. No one yet knows how it will play out, but one can be certain - change is upon us.

Gold is a hedge against a shift in paper by trading opposite the stock and equities markets Gold provides a safe harbor when inflation and a weak dollar threaten to erode spending power and savings alike.
Presently outperforming most paper based assets by a considerable margin, Gold today remains real money. Often associated with wealth Gold, it is not intended to make an individual rich although under current geo-economic conditions there is tremendous opportunity for profit and growth. Gold is considered a portfolio’s best friend in an uncertain market.

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Certain types of Gold offer ownership privacy cannot be confiscated under current constitutional law, and are more downward resistant than other types of precious mental. Numismatic and Semi-numismatic coins have become some of the last truly private assets allowed by law.

Bullion, also known as government Gold can also provide certain protections form economic uncertainties. Favored for a close relationship to the spot market and low acquisition cost, this asset is suitable for investors willing endure the highs and lows of the spot markets. While Bullion is subject to government confiscation as well as full reporting of both purchase and liquidation it may have a place in certain types of portfolios depending on financial objectives.

Call a Superior Gold Group Account Representative today to discuss whether a Gold investment is right for you and how you could add platinum to your investment portfolio.

Superior Gold Group Account Representatives are normally available between 8:30am and 6:00 pm Pacific time each Monday through Friday (except national holidays)…and on many weekends.

You’ll see why Superior Gold Group has been Building Wealth You Can Touch, With People You Can Trust™ since 2000.