Categories
Gold & Silver

Gold Bullion

We will discuss what gold bullion is, the history of gold, gold price predictions and why having gold as a part of your investment portfolio may be considered wise.

What is Gold Bullion?

Bullion is gold and silver that is officially recognized as being at least 99.5% pure and is in the form of bars or ingots. Bullion is often kept as a reserve asset by governments and central banks. – Investopedia.com

Gold bullion or gold bars are created from gold that has been mined from the earth. Bullion is typically heavier and larger than a gold coin. Gold bars can vary in size from as small as one gram to larger than 25 lbs. For example, a 1 kilogram bar of gold weighs approximately 2.2 lbs and is about the size of your iphone. One kilogram of gold is valued at approximately $65,000!

The purpose of creating gold bullion is for easy storage. The gold bullion bars are easily stackable and transportable. Specifically, banks and governments can store the bullion in secure vaults easily and safely.

History of Gold

The use of gold as a commodity and as money dates back at least 4,000-6,000 years. Approximately 4,500 years ago, the Mesopotamian artisans made jewelry from gold. However, it’s believed that gold was being used even prior to this era. For example, gold was used as a construction material to decorate walls, burial sites and masks of cultures such as the Egyptians, the Greeks and the Romans.

Gold for Trading and Exchange

It is believed that around 1,500 B.C. in Egypt, gold was being used as the official currency of exchange for merchants and traders. Shortly thereafter, gold took its place as the primary trading currency throughout the world. Mining for gold became a major industry world-wide. Coins made of gold were produced and distributed throughout Europe and Asia.

Gold Standard Dollars

Fast forward to the year 1792. The United States passed the Coinage Act which dictates that silver and gold will be used as the standard for valuing currency. The Act defined the U.S. Dollar as equivalent to 24.75 grams of gold and 371.25 grams of silver. The paper currency printed in the United States was officially backed and redeemable in silver and gold.

While individuals use gold coins for exchange, governments have historically used gold bullion or gold bars as a reserve asset. Gold bullion stored in vaults was considered to be the anchor that gave paper currency it’s strength. In fact, paper gold certificates in the United States used to have “payable in gold” stamped on them. This let users know that they could potentially redeem the piece of paper currency for real money – gold. These paper gold certificates were considered equal to other currencies in value until 1933 when the US Government took the Dollar off of the gold standard.

$10,000 Gold Certificate By National Museum of American History – Image by Godot13, Public Domain, Courtesy of Wikidpedia.com

Then in 1971, the U.S. Dollar was devalued in price and the program of conversion of dollars back to gold for foreign countries was discontinued. In other words, U.S. Dollars were no longer backed by gold. The gold price forecast has always been upward and it continues today.

The Beauty and Utility of Gold

Shiny gold coins and jewelry have been considered beautiful for centuries. Women and men have donned gold jewelry for as long as we have kept track of history. From a physical perspective, gold is malleable and easily altered to make jewelry, coins or even thin sheets. Scientifically, gold is non-reactive and non-corrosive, both of which are highly desirable characteristics. Gold is even safe to use in the human body. For example, dentists have used gold for years to repair teeth.

Gold Bullion Has a Limited Supply and Growing Demand

The Supply of Gold Bullion Is Finite; Demand for Gold Includes Industry, Jewelry and Money

There is a limited supply of gold on Earth. Moreover, gold miners throughout the world have a finite quantity of gold available for mining. At some point, the amount of gold removed from mines will diminish and become zero.

At the same time, gold bullion demand continues to grow. For instance, gold has many uses in technology, jewelry, medicine and money. Jewelry made of gold has been popular for millennia. In addition, gold continues to grow in demand and popularity, especially in Asia. In fact, 70-80% of gold mined today goes to create jewelry. All of these factors influence the gold price forecast.

Also, there are many industrial uses for gold including electronics, aerospace and medicine. For example, gold is a very efficient conductor of electricity. This property is utilized in many electronic components such as cell phones and computers. In addition, gold is a superior element to work with in dentistry. More important, gold is non-reactive, malleable and has anti-bacterial properties.

Finally, gold bullion and gold coins remain in demand all over the world. Coins made of gold have been used for hundreds or thousands of years. They are easily recognizable and highly desirable. More importantly, gold coins have withstood the test of time and continue to be sought after in the 21st century. Real money is sound money. Obviously, gold is real, sound money.

Five Reasons to Buy Gold Bullion:

  1. Gold is a store of value. National currencies (even the U.S. Dollar) come and go. But Gold has been around for thousands of years as real money. 
  2. It is a liquid asset. Gold bullion (and other metals) can be easily bought and sold in most large cities around the world. It can be exchanged for most currencies this way.
  3. Gold bullion is a tangible asset. You can hold gold coins and gold bullion in your hand or put them in your safe. No waiting for the bank to open to get them. No worrying about destruction by fire or a hacker.
  4. It is a hedge against inflation. Gold tends to thrive during a crisis. Investors tend to jump into gold when stocks go lower.
  5. Gold bullion is private. No other asset offers privacy like a gold coin. A transaction in gold between you and another person is truly a private affair.

Gold Bullion in Your Portfolio

It is common to hold anywhere from 5-10% of an investment portfolio in physical gold bullion. In fact, there are some very large international investment portfolios that hold as much as 30% of assets in gold.

Buy Gold as Physical Coins/Bars or Gold Stocks

Investing in gold has never been easier. Gold merchants and brokerage firms are competing for your business online. If you want to purchase physical gold, you can do this at your local coin shop.

Another option for purchasing gold is buying online. Buying from a website has become more secure in recent years, but you must do diligent research to verify the buyer. Only buy from established suppliers that have been around for a long time and have positive feedback. Preferably you can get a recommendation from a friend.

Finally, buying gold stocks is just as easy as buying stock in GM or Amazon. Many online brokerage firms offer the ability to buy these shares for a reasonable fee. With the gold price forecast looking positive, now may be the best time to invest.

Future of Gold

Unemployment, Debt, 0% Interest and Fed Money Printing Drive Gold Prices Higher

We at Piggy Bank Coins believe that gold (and silver) has a bright future. Holding a real money asset such as gold will always be highly regarded by investors. In addition, having gold in your investment portfolio is considered by many to be a safe and secure option. It’s important to grow your wealth while minimizing risk. Specifically, gold is a real, tangible money that can be a store of wealth for a lifetime.

We believe the gold price forecast indicates that demand will continue to grow and that investors should continue to hold gold and silver. With the political and economic instability created in the United States, gold prices will likely increase. For instance, investors will continue to move toward safe harbors. Make no mistake, gold is the safe harbor.

Second, since 1944 the US Dollar has operated as the world reserve currency. However, the US economy appears to be faltering with high unemployment, high national debt, near-zero percent interest rates and inflation from Federal Reserve money printing. As a result, investors will be looking for something safe to hold on to, and precious metals may be that rock.

The Gold Price Forecast Predictions

Four Gold Price Predictions: $2,300, $3,000-$8,000, $15,000 and $26,000.

Goldman Sachs raised its gold price forecast in July 2020. The investing firm believes that gold will hit $2,300 per ounce as investors flee other falling price investments such as real estate.

According to Jeff Clark, Senior Analyst at GoldSilver gold has a 95% likelihood of going higher in 2021. In addition, he is predicting $3,000-$8,000 gold in the next 5 years.

In an interview with Kitco News in mid-2020, Investor Jim Rickards predicts that gold will rise to $15,000 per ounce before 2025. He bases his prediction on inflationary forces.

In the same interview with Jim Rickards, Investor Peter Schiff predicted gold will rise as high as $26,000 per ounce. He bases his prediction on extrapolating DOW Jones trading values in relation to gold in 1932 and currently.

Learn More about Gold and Silver

Get a copy of the “Free Gold and Silver Buyer’s Guide” today. It’s free and has some great information in it about investing.

If you want to learn about the history of money, check out Mike Maloney’s free “Hidden Secrets of Money” video series. It’s a goldmine of information that can help you better understand money and where the world stands today financially. Highly recommended!

Read More:

Best Silver Coins to Buy

Best Gold Coins to Buy

The Cheapest Way to Buy Silver

Wealth Building Cornerstones

Best Investing Books of All Time

How to Become a Millionaire from Nothing

How Much Savings You Should Have at 40

Disclaimer: It is important to note that Piggy Bank Coins does not provide financial advice. We don’t endorse or recommend any financial investments. Instead, we provide information for educational purposes to those seeking knowledge regarding personal finance. However, in the spirit of transparency, note that the author is an investor in cryptocurrencies, precious metals and some equities.

In addition, The Federal Trade Commission (FTC) requires that Piggy Bank Coins disclose to readers that we may receive commissions when you click our links and make purchases. However, this does not impact our reviews and comparisons. Moreover, we try our best to keep things fair and balanced, in order to help you make the best choice for you.

Categories
Economy

Types Of Inflation

We will discuss the three different types of inflation that can occur and how it can affect you personally. We will also review some ways you can fight back against inflation by looking at deflationary assets.

What is inflation?

Inflation is the decline of purchasing power of a given currency over time. A quantitative estimate of the rate at which the decline in purchasing power occurs can be reflected in the increase of an average price level of a basket of selected goods and services in an economy over some period of time. The rise in the general level of prices, often expressed as a percentage means that a unit of currency effectively buys less than it did in prior periods.

Investopedia

In order to simplify understanding inflation, we will discuss three types of inflation:

  • Demand-Pull Inflation
  • Cost-Push Inflation and
  • Built-in Inflation

Understanding Inflation

There will be more detail given about the three types of inflation later in the article. For now, we will discuss how inflation can affect you when you buy something. There are many simple ways to understand inflation. But here is one true story that may help you understand how inflation affects you on a personal level.

In the Piggy Bank Coins article entitled, “How Much Was a Dollar Worth in 1960?” we discussed the purchasing power. The purchasing power of a Dollar in 1960 was compared to that of 2020. We shared the story of Mike Maloney’s father who bought a home in the late 1950s at a price that was equivalent to his annual salary.

As an example, Mr. Maloney displays his father’s 1955 tax return. His father was an auto parts store manager in Salem, Oregon during this time. He earned approximately $9,600 per year.

What’s interesting is the average home cost during this time period in comparison with his [Maloney’s Father’s] salary. According to US Census Bureau data, the median price for a single-family home in Oregon ranged between $6,800 in 1950 and $10,500 in 1960. Moreover, his father’s annual salary was almost equal to the median home price during this time. Now, consider the average salary today and the price of homes. In contrast, could you purchase a home with your annual salary? Clearly things have changed and Americans are becoming poorer.

-Piggy Bank Coins article entitled, “How Much Was a Dollar Worth in 1960?”
-“Hidden Secrets of Money: Episode 6” by Mike Maloney of GoldSilver.com

Basically, in 1960 the cost of a simple home was equal to a manager’s salary. We all know that you can’t buy a home today on a manager’s salary! This is the power of inflation.

Currency Inflation

One thing that significantly affects inflation and purchasing power is money printing. When the US Treasury and the Federal Reserve Bank coordinate to print large amounts of money, it causes inflation. Inflation is simply an increase in the money supply. The bigger the money supply, the less the money in your wallet is worth. Moreover, inflation is a hidden tax. As a result, money you have in your bank account loses purchasing power when money is printed by the government.

On March 23, 2020, it was announced that the US Government would be giving out stimulus checks to Americans. In addition, they planned to give money and loans to businesses hurt by the COVID-19 epidemic. Almost overnight, approximately $2 Trillion in loans and grants were printed out of thin air. As a result, the internet went viral in creating money printing memes. One of those memes was the now infamous “money printer go brrrr” meme.

Money Printer “BRRRR” Meme

Consumer Price Index

According to the US Bureau of Labor Statistics, the consumer price index has increased 1.3% in the past 12 months (before seasonal adjustment).

“The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Indexes are available for the U.S. and various geographic areas. Average price data for select utility, automotive fuel, and food items are also available.”

-The US Bureau of Labor Statistics, Definition of Consumer Price Index (CPI)

A consumer price index value of 1.3% seems reasonable for 2019-2020. If inflation or the CPI were only 1% per year, that means that in 100 years one US Dollar would lose about half its purchasing power. For example, $100 in 1920 would only purchase $50 worth of goods in 2020. However, real inflation for items we buy every day is much higher. In addition, we’ll soon see what the real inflation values are, and they are not pretty.

The United States Federal Reserve Bank Aims For 2% Inflation

The Federal Reserve Bank believes that we must have inflation to promote stability and predictability in the economy. Their goal is to have 2% inflation each year.

The Federal Open Market Committee (FOMC) judges that inflation of 2 percent over the longer run, as measured by the annual change in the price index for personal consumption expenditures, is most consistent with the Federal Reserve’s mandate for maximum employment and price stability. When households and businesses can reasonably expect inflation to remain low and stable, they are able to make sound decisions regarding saving, borrowing, and investment, which contributes to a well-functioning economy. – Federal Reserve Website

The Federal Reserve’s Tools of Inflation: Money Printing and Interest Rates

The Federal Reserve Bank’s most powerful tool for creating inflation is a two-pronged approach. First, they have the power to raise and lower interest rates. Increasing or decreasing interest rates has the effect of accelerating or decelerating the American economy. If they raise interest rates, people tend to borrow less and it becomes more expensive to do business. As a result, there is a chilling effect on the economy; however, if the Federal Reserve lowers interest rates, individuals (and businesses) find it easier to get capital to do business, and the economic machine is powered up, so to speak.

The other powerful tool that the Federal Reserve has is to print money. Typically, when they print more money, there is more money in the economy. The velocity of money increases and people tend to have more money. With more money in the system, the economy is stimulated.

Inflation Calculator

The US Dollar Has Declined in Purchasing Power Since 1913; The Stated CPI Does Not Reflect Real Price Increases

In addition, the US Bureau of Labor Statistics provides a handy Inflation Calculator. Using their calculator, you can estimate what purchasing power (based upon inflation) is today compared with years past. For example, $10 in 1960 is equal to $88.71 today. That means that in the 60 years prior to 2020, the dollar has suffered 887% inflation over time.

Since the Federal Reserve Bank was formed in 1913, the dollar has been in steady decline. The dollar’s purchasing power has decreased dramatically since 1913. Using the US Bureau of Labor Statistics CPI calculator, the US Dollar has lost approximately 96% of its purchasing power since 1913. This is an alarming statistic.

How Inflation is Measured by You

Sometimes when we think about inflation, we think of what can be purchased directly with our national currency. For example, we might notice that last week fuel cost only $3/gallon, whereas, this week a gallon of fuel increased to $3.50. This is how consumers most often notice inflation. However, don’t get too caught up in measuring inflation by just using currency.

Three Types of Inflation

As stated earlier in the article, there are three types of inflation: demand-pull inflation, cost-push inflation and built-in inflation. These types of inflation are provided as a generalized example so that you can better understand the types of inflation. However, economists and financial experts have other names for types of inflation. Let’s talk about these three types of inflation.

Demand-Pull Inflation

One of the types of inflation is called Demand-Pull Inflation. This kind of inflation happens demand for goods and services outpace the production capacity. In effect, a gap is created between supply and demand in the economy, which puts stress on the price. As a result, prices go higher following the demand from people or businesses who want a good or service. This leads to price inflation.

Cost-Push Inflation

Another one of the types of inflation is called cost-push inflation. When prices increase in the production process, it forces people to spend more and leads to inflation of money. For example, imagine a bakery that uses sugar to make cookies. If the price of sugar doubled in a short period, it would cause the bake to have to increase the price of the cookies she sold dramatically to maintain profitability. This is one of the most common types of inflation.

Built-In Inflation

Finally, one of the last types of inflation is called built-in inflation. When the price of products or services increases, workers want to increase their wages. For example, if it cost a worker more to drive to work because of high gas prices, and it cost more to buy clothing for work, then a worker will want to earn more money at his job.

How Do You Win Against Inflation?

Seek Shelter in Deflationary Assets Such as Gold, Silver, Bitcoin and Real Estate.

There are some investments and things that you can own that weather inflation better than currency. For example, for hundreds of years, owning gold and silver has been a way to avoid currency inflation. Gold and silver both have a long history of maintaining their value when currencies became inflated.

Bitcoin

Another alternative to gold and silver that many consider inflation-proof is Bitcoin. In the past few years, many have begun to use bitcoin like gold – a store of value. In fact, Bitcoin has many of the positive properties that gold has. It is a store of value, it can be a medium of exchange, it can be a unit of account, there’s a limited supply, it is uniform, acceptable, divisible and portable, etc.

Both Bitcoin and gold have a finite, limited supply. As a result, this means that they cannot be subject to inflation. If there is only so much gold, silver and bitcoin, it is by definition, deflationary. Being deflationary means that as the supply of the commodity dwindles, the value and demand for each increase. This is not true of currencies like the US Dollar.

Real Estate

Even something like real estate can have a deflationary affect when compared to US Dollars. Real estate has a long history of maintaining its value over time as compared to the Dollar. However, choose wisely; many believe that there is currently a bubble in the United States real estate market. Prices for real estate in many cities today are considered to be over-priced and inflated.

Final Thoughts on Inflation

As you can see, inflation is a real phenomenon that can affect your personal finances. There are three types of inflation that can occur. Each of these scenarios can quietly steal money from your savings. As a result, it is important to have a plan to address inflation and a place to invest to fight back against the types of inflation.

Read More:

US Dollar History: How the Dollar Became the World Reserve Currency

How Much Savings You Should Have at 40

Ways to Save Money on a Tight Budget

Best Budget Planner

Home Buying Power

Purchasing Power Risk

Disclaimer: It is important to note that Piggy Bank Coins does not provide financial advice. We don’t endorse or recommend any financial investments. Instead, we provide information for educational purposes to those seeking knowledge regarding personal finance. However, in the spirit of transparency, note that the author is an investor in cryptocurrencies, precious metals and some equities.

In addition, The Federal Trade Commission (FTC) requires that Piggy Bank Coins disclose to readers that we may receive commissions when you click our links and make purchases. However, this does not impact our reviews and comparisons. Moreover, we try our best to keep things fair and balanced, to help you make the best choice for you.

Categories
Gold & Silver

Best Gold Coins to Buy

Our picks of the best gold coins to buy, five reasons to buy gold coins, the history of gold and where to find gold coin dealers.

Wondering if you should buy gold coins? Find out the answers to your gold questions, such as:

  • Why you should buy gold coins
  • History of gold
  • Best gold coins to buy
  • Best gold bars to buy
  • Gold coin dealers and coin shops

Why Buy Gold Coins?

First, buying gold coins means you are buying something that you can hold in your hand. This may not seem important to you now, but it may be critical in the future. Cash can be destroyed and loses value. In addition stocks go up and down in price. In addition, Banks and businesses fail every day. Living things, such as livestock and farm crops die. However, threats such as these do not impact gold.

Five Reasons to Buy Gold Coins:

  1. Store of value. National currencies (even the U.S. Dollar) come and go. But Gold has been around for thousands of years as real money. 
  2. Liquid asset. Large cities throughout the world trade gold and silver on a daily basis.
  3. Tangible asset. You can hold gold coins in your hand or put them in your safe. No waiting for the bank to open to get them. No worrying about destruction by fire or a hacker.
  4. It is a hedge against inflation. Silver tends to thrive during a crisis. Investors tend to jump into silver when stocks go lower.
  5. Privacy. No other asset offers privacy like a gold coin. A transaction in gold between you and another person is truly a private affair.

Gold in Your Portfolio

It is common to hold anywhere from 5-10% of your investment portfolio in gold. In fact, some very larger international portfolios hold approximately 30% of their assets in gold.

History of Gold

Circa around 4,000-6,000 years ago, gold was first used as a commodity and as a money . Then, approximately 4,500 years ago, the people of Mesopotamia made jewelry from gold. Some historians believe that the use of gold is much older. Cultures such as the Egyptians used gold for purposes such as to decorate walls, burial sites and masks of cultures such as the Egyptians, the Greeks and the Romans.

Gold for Trading and Exchange

Circa 1500 B.C., gold was the official currency of exchange for mearchants and traders in Egypt. Shortly thereafter, gold began to take hold as the superior trading currency throughout the world. Mining for gold becomes a major industry world-wide. Europe and Asia begin using gold coins for payment.

Gold Standard Dollars

Fast forward to the birth of the United States. First, in 1792, the United States passed the Coinage Act.The Coinage Act requires that silver and gold are the new standard for currency valuation. The Act defines the U.S. Dollar as equivalent to 24.75 grams of gold and 371.25 grams of silver. Next, the paper currency printed in the United States was officially backed and redeemable in silver and gold.

Once again, fast forward again, approximately 180 years. First, in 1968, the U.S. Government removed gold from backing the Dollar. Then in 1971, the price of the U.S. Dollar was devalued. Then, US Currency was no longer convertible to gold. As a result, gold does not back the American Dollar any longer.

The Beauty and Utility of Gold

Humans have long believed that gold jewelry and coins were things of beauty. For instance, women and men have donned gold jewelry for as long as we have kept track of history. Moreover, from a physical perspective, gold is malleable and easily altered to make jewelry, coins or even thin gold sheets. Scientifically, gold is non-reactive and non-corrosive, both of which are highly desirable characteristics. Gold is even safe to use in the human body. For example, dentists have used gold for years to repair teeth. In conclusion, gold has many uses.

Best Gold Coins to Buy

Now that you understand the history and significance of gold and why buying real gold coins is important, let’s explore the best gold coins to buy.

There are four important one-ounce gold coins that are important to buy. The four recommended gold coins are:

  • American Eagles
  • South African Krugerrands 
  • Canadian Maples
  • Austrian Philharmonic

The aforementioned coins are the finest gold coins available. The respected governments of each country oversee the minting and distribution of these fine gold coins. All four of these coins are well-known and recognized world-wide. As a result, gold coin buyers and sellers hold these four coins in high regard.

Best Gold Bars to Buy

If you have more money to buy gold and don’t want to have stacks of coins lying around, then buying gold bullion or gold bars is an option. Gold bars have a few options that make them desirable when compared to gold coins. Gold bars take up less storage space than a comparable Dollar value of coins. In addition, bullion bars have lower premiums compared to gold coins. And gold bars come in varying sizes from one gram up to 400 ounces.

Smaller to medium size bars are recommended for several reasons. Large gold bars are not very divisible. For example, how do you pay for dinner with a 400-ounce gold bar (currently valued around $800,000)? In addition, larger gold bars require assay when exchanging and there is also a higher rate of counterfeiting with large bullion bars.

Gold Coin Dealers and Coin Shops

When buying and selling gold coins, you have several options. The first option is to search for reputable coin dealers near where you live. To start, ask friends or look online for reviews of the local shops that buy and sell gold coins. Next, visit several coin dealers or coin shops in your area and get to know who they are and what they offer. Find a dealer who you enjoy dealing with and who is knowledgeable about gold and silver coins. Finally, ask questions, like how they determine gold spot price or how their fees are determined. Get comfortable with whom you are dealing and get to know them.

Want to learn more about how to invest? Check out The Best Investing Books of All Time.

Read More:

Best Silver Coins to Buy

Best Gold Coins to Buy

The Cheapest Way to Buy Silver

Wealth Building Cornerstones

Best Investing Books of All Time

How to Become a Millionaire from Nothing

How Much Savings You Should Have at 40

Disclaimer:

It is important to note that Piggy Bank Coins does not provide financial advice. We don’t endorse or recommend any financial investments. Instead, we provide information for educational purposes to those seeking knowledge regarding personal finance. However, in the spirit of transparency, note that the author is an investor in cryptocurrencies, precious metals and some equities.

In addition, The Federal Trade Commission (FTC) requires that Piggy Bank Coins disclose to readers that we may receive commissions when you click our links and make purchases. However, this does not impact our reviews and comparisons. Moreover, we try our best to keep things fair and balanced, in order to help you make the best choice for you.