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Types of Precious Metals - Investing in Gold Bullion

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Gold is one of the least reactive chemical elements, a fact which means gold can be found in nature in its free elemental, or native form, for example gold grains or gold nuggets. Gold seldomly forms compounds with other elements. Gold is soft, ductile, and very dense, with a bright yellow color that does not tarnish in water or air. Gold is one of the few metallic elements whose color is not some variety of silver or grey. Gold is element 79 and has the atomic symbol Au, from the Latin “aurum”.

History of Gold

Since the beginning of human civilization, gold has been used as money, as a way to store wealth, and as a means of indirect exchange. Gold has also been widely used in artwork and in jewelry. The first gold coins struck for circulation date back to 600 B.C. Along with silver, gold continued to be used as a coinage metal until the 1930s.

Gold was replaced after the Second World War by a system of convertible currencies with fixed exchange rates, a system known as the Bretton Woods system. Even under the Bretton Woods system, however, currencies that were pegged to the US Dollar were still indirectly tied to gold as the dollar was still convertible to gold. That arrangement ended, though, in 1971, when the United States began to refuse to redeem dollars in gold. Since that time, direct convertibility of currencies to gold has been abandoned by world governments and replaced with fiat currencies.

What Determines the Purity of Gold?

Gold, especially when used for coinage or jewelry, is often alloyed with another metal, usually to increase hardness or alter color. Common gold alloys are copper-gold and silver-gold. The gold purity of jewelry, especially, is measured in carats (or karats), a unit of measurement for indicating gold purity with the symbol K or kt. Carat purity is determined by taking 24 times the pure mass of gold, divided by the total mass of the object. Thus, 24 carat gold is the highest purity under the carat system.

Increasingly, especially for measuring the purity of gold bullion, the carat system is being superseded by the millesmial fineness system. In this system, the purity of the precious metal is denoted by the parts per thousand of pure metal in the alloy. For example, 18 carat gold, which is 75% pure, would be denoted as having a millesmial fineness of 750.

Uses of Gold Today

Today gold is used as an industrial commodity, where, because of its unique chemical properties, it has many useful applications, in jewelry, art, and as an investment. The production of jewelry still uses large quantities of gold. Bullion investors buy physical gold as a way of spreading risk and as a hedge against inflation. Taken together, these uses account for nearly all the annual consumption of gold.

Future of Gold Prices and Investing in Gold

Like all commodity markets, the gold market and the price of gold are subject to volatility due to speculation and futures contracts. Investors who buy physical gold bullion do so mainly in the form of gold coins and gold bars. New sources of gold are scant, and annual mining output barely registers a 1% annual increase. With demand very high and sources being depleted, gold prices can be expected to continue their upward trajectory. More about gold prices, answers to questions about gold price fluctuations, and an interactive gold prices chart can be found on the CBMint Gold Prices Page.