Different Forms of Gold

Christopher Columbus once said: “Gold is a treasure, and he who possesses it does all he wishes to in this world, and succeeds in helping souls into paradise”.

Gold has been treasured as a valuable commodity since the times immemorial. Early human civilizations used barter system but soon understood the notion of setting up a common unit of account. A native element and precious metal, Gold has long been prized for its beauty but it was gold’s durable and versatile nature that actually helped it to achieve the status of money. Gold standard acted as a monetary system for couple of centuries but modern world has resolved to use paper currency due to larger convenience that’s offered by it. Although gold has been abandoned as form of currency but gold still holds its importance as a valuable asset class. Gold has proven to be a safe-haven investment option not only because it being a hedge against inflation but also due to its low correlation with other asset classes.

Gold is often used as a unit of store (a means to store wealth) and its monetary equivalent depends on its purity. Karats system is universally accepted for measuring the purity of gold in fraction of 24. Karats are measurements of purity in relation to the mass of an object. Visualize a scale of 1 to 24; 24 is the top. 24K has 24 out of 24 parts gold. It is 100% pure gold (99.9%). In comparison, 14K indicates that there are 14 parts gold out of 24 total parts (14/24). That means that your 14K gold ring is 58.33% gold and 41.67% some other alloy.

Here’s a table of Karats
22K = 91.66% gold
20K = 83.33% gold
18K = 75% gold
14K = 58.33% gold
10K = 41.66% gold

Example: a 10K ring, weighing a total of 10 grams will contain 4.166 grams of gold.
The karat system is increasingly being complemented or superseded by the millesimal fineness system, in which the purity of precious metals is denoted by parts per thousand of pure metal in the alloy; e.g. 18-karatgold, 75% Au, would be called 750.

Gold jewelry is not pure gold. It is an alloy; a mixture of metals. Gold jewelry can be alloyed with silver, copper, zinc, palladium, and nickel to create different gold colors. The most common gold colors are: yellow, white, rose, and green.

Yellow gold is made by mixing pure gold with silver, copper, and zinc. It is the purest color, the most hypo-allergenic, and requires the least maintenance of all the gold colors.

White gold is made of gold and platinum (or palladium). White gold can also be made of gold, palladium,  nickel and zinc. White gold is more durable and scratch-resistant than yellow gold. It is also more affordable than both yellow gold and platinum.

Rose gold (or pink gold)  is alloyed with gold, copper, and silver. Rose gold is more affordable than the other gold colors because it uses the inexpensive copper for its rose color. Due to its copper content, rose gold is more durable than yellow or white gold.

Green gold (or Electrum) is mixed with gold, silver, and sometimes copper. Silver is what gives the gold alloy the green nuance.

Gold has many advantages over other forms of investment. With the passage of time, owing to the limited amount of gold resources in the world and its increasing demand in market, in modern economy, investors have an option in form of Paper Gold.

The term Paper gold means you have a piece of paper acting as a substitute for the physical gold.  With paper gold, you don’t own the gold; you own a promise to receive physical gold.  In plain English, it means you are a creditor of the corporation issuing the paper gold certificate, thus subject to counter party risks.  Owning the physical gold has no counterparty risk and is fully under your control.

Examples of paper gold are gold certificates issued by banks and mints, pool accounts, futures accounts and the NYSE listed exchange-traded fund.  With these products you own a piece of paper rather than physical gold.  These paper products give you exposure to the gold price; you can make a profit by selling them to someone wishing to own paper gold, however when the music stops and nobody wants to purchase paper anymore, it becomes worthless since you may not able to redeem your metal.

As the discussion takes a U turn again on the metallic gold which is preferable than paper gold as the person secure himself when that paper gold becomes worthless. Here the article also endeavors to help to identify the real gold, as we never know when we get caught in this dilemma between fake and real. We should always keep a safe hand in such things as everyone knows this famous saying “everything glitters is not gold. So here the article provides you five ways to identify the real gold and spot the fake one:

⦁    STAMP TEST:  This is a small stamp inside the real gold jewelery that marks the karat or purity of that particular piece. The stamp should also be accompanied by the manufacturer’s stamp.
⦁    ACID TEST: After scratching on your gold place a small drop of liquid nitric acid onto it. If it turns green, it is not real. If the spot appears milky, you have gold over sterling silver and lastly, when it stays unaffected, it is a real gold.
⦁    MAGNET TEST: Gold is not magnetic so if you apply a stronger magnet to the fake gold it will soon get attracted which will mark it as a fake one.
⦁    FLOAT AND RUST TEST: Real gold is heavy and will sink while the fake gold will float. The real gold will never rust.
⦁    SKIN TEST: If your skin experiences discoloration then it is not real gold. The fake will decolorized into black and green

Lastly, here the article sea offs the readers with a profitable idea of investment in gold. World gold council in their “Gold investment research” analyzes that the gold acts as a portfolio diversifier, vehicle of risk management and store of value. Investors are attracted to the gold as solid, tangible and long term store. The research also determines that modest allocations to gold of 2 per cent to 10 per cent can protect and enhance the performance of an investment portfolio. A 5 per cent to 6 per cent allocation is optimal for investors with a well-balanced 60/40 portfolio. Thus, gold is a unique asset which enhances a wide range of investments. Why not buy gold and store our money for a long and enough period of time.

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