In a market infested with scams now there is a new problem, which may be the worst case of fraud I have ever known in this market: a 1-kg gold bar that had already been certified as 99.98% pure by X-ray fluorescent tests has turned out to be fake! To be able to fool even X-rays is quite an accomplishment. As it turned out, the gold in the bar had been drilled out and replaced with the chemical element tungsten. The only reason that this was ever discovered was simply because the counterfeit bar ended up weighing two grams lighter than it should have.
It’s scary to think that, had they succeeded in getting the bar to weigh an extra two grams, the scam would have succeeded and the owner of the bar would most likely have never been the wiser and spent years believing that he had more wealth than he did. And let’s say that when he chose to sell this bar, the buyer he chose might also be unable to tell the difference and pay the full price for it. And so that bar would enter circulation, indistinguishable from other gold bars. Imagine that: a piece of tungsten so convincing as gold and valued that same as if it were gold that, for all intensive purposes, it might as well be gold!
All of this serves as a very clear reminder that storing wealth of any kind has its drawbacks, and while gold may be a more reliable form than any government-sanctioned fiat can ever be, it does come with its own economic consequences, which can lead to its own problems. Fortunately, Bullion Trading gets its gold directly from the source, and so the safest and more secure way to purchase a gold baris from a dealer who knows the business and knows the world of precious metals.

The recent Federal Open Market Committee meeting has not been very helpful for gold. The increase in liquidity programs and decline of bond buying programs did not speak heavily for gold’s future and investors have begun to stay away from the metal, allowing the trading price to go down to $100/ounce. However, the meeting did improve the outlook of growth for stocks, reducing the expectations that the central bank will begin a third round of bond buying. Let’s learn a little more about the issues brought about by this meeting and what they signify for us involved in the gold trade.
The process of creating money to purchase bonds in the open market is known as Quantative Easing (QE), specifically because investors are “eased” into purchasing gold due to the anticipation of high inflation rates. Creating money causes more of it to be spent on gold. In the event that the hedge funds do not receive any more QE they will sell at that point as the metal will no longer be an attractive asset to hold. Yet the current economic climate, including the creation of thousands of new jobs, suggests that QE would not be the best course of action at this time.
Meanwhile, the debt crisis in Europe continues to loom over us, leading to many projections about how gold will be affected in both the short and long-run; Greece in particular is still hurting and is often designated as the market to keep an eye on as it may weaken gold in the short-term. Yet, as was stated in our “7 Reasons” article, the situation in Europe really is entirely irrelevant to the gold market. To reiterate, the value of gold was going up long before this Euro turmoil occurred, and moments of financial crises, while unfortunate, are not anything new in this market. Gold goes up when the dollar goes down, and vice versa, yet this does not hurt gold’s potential as an investment. Whether or not situations in Europe are causing these changes in the dollar is a non-issue as far as investors are concerned.
The details of the FOMC meeting definitely raise a number of key issues, and for those of us with a stake in gold’s immediate performance, any announcements made in relation to QE hold significant weight to us. But I return to my ongoing point, stated various times, that gold arguably has the most stable market performance in history, as it is the only “stock” to have had several millennia-worth of business. The FOMC meeting may set a low tide for gold’s performance in the next year, but there will be another and another, because unlike Enron, Netflix, or any of their brethren, gold will never declare bankruptcy.

We’ve already discussed Austria’s famous gold coin, the Philharmonic, but the 1915 Corona 100, though no longer minted, is an important piece of history. The Austrian Mint first unveiled these coins in 1892 as legal tender. The reverse depicts the coat of arms of Austria superimposed over a crowned Imperial double-headed eagle. The date and the face value of the coin are written twice, in Latin and German. The obverse depicts the bust of Franz Josef I, who ruled as both king of Hungary and emperor of Austria, and his reign saw the beginning of the Austro-Hungarian empire.

His brother, Franz Ferdinand, is especially notable in the history books, as his assassination is regularly cited as the catalyst for World War I. One troy ounce Coronas have a 35mm diameter and 90% purity. This means they are only 21.6 Karat gold. They were minted in denominations of 1, 2, 5, 10, 20, and 100 Corona. So why is 1915 such an important year? It was then that the coin was discontinued. This would seem extremely appropriate, being one year into the Great War and one year away from Franz Josef’s death. As a result, any and all Corona coins found with a 1915 date are official restrikes from later dates. This makes 1915 a year of infamy that has continued to produce gold throughout history since long after it has ended. Today these coins remain notable collector’s items and so much a part of Austrian history that it’s no wonder gold coins were later reintroduced as legal tender in the form of the Philharmonics. Obviously, someone new to the gold scene may prefer coins that are currently active, as well as ones in higher purity, such as the Canadian Maple Leaf. Yet, a serious investor should not be deterred by the Corona’s current status but really look at the global picture. In 2008, at the height of the financial crisis, Austrian gold proved to sell better on a global basis than Eagles or Krugerrands! Austria’s unique place in history and both world wars give it a certain mystique, and perhaps this makes its gold seem to be “more stable” that those of other economies. So, with the economic future still uncertain, any investor who wishes to hedge his finances for the international market would do well to familiarize himself with the Austrian Corona.

            In previous articles, we have made mention of how gold has been valuable since the days of the world’s earliest civilizations.  Perhaps then it should be no surprise that in the Middle East, the cradle of human civilization, gold is currently being embraced as the “Real Money.”  Iran has turned to gold bullion as its dominant form of currency in international trade, and given its major oil reserves, the nation is very active in trade on a daily basis.  Everyday, Iran’s Central Bank exports oil in exchange for finances that it then uses to import food.  However, these funds may be in different national currencies, or may become frozen depending on the specifics of its institution of origin.  Central Bank governor Mahamoud Bahmani has realized that accepting gold bullion in place of these funds is an effective way of cutting out this middle-man process and ensuring the transactions proceed even quicker.

            Iran’s turn to gold has been partially instigated by sanctions placed on them by the United States government and the European Union.  Yet how ironic that, while the Euro and U.S. dollar are inflating and going through crises, Iran prospers under its use of gold.  It once seemed that purchasing gold was the only way to “preserve one’s wealth.”  Today it seems that gold is the only wealth there is, and exchanging it for cash is a major liability.  Consider the fact that a single dollar bill is no different than a hundred dollar bill; both are made of the same paper, designed with the same ink, and weigh exactly the same.  What makes the second bill worth anything more than the first?  Just that a different number happens to be printed on it.  Both are essentially worthless items that are only given value by consumer-confidence in the government that issues them, a government that could theoretically print out more if need be.  The whole system is artificial.

            On the other hand, gold is made valuable not because of any numeric designation but because of its literal content and density.  It is a scare item that cannot be printed at will and is valuable through its very existence.  Two tons of gold are worth more than two kilograms of gold not because of any random number are printed on the item, but because there is a larger physical quantity of the material.  Its greater value is obvious.

            And yet, Federal Reserve chairman Ben Bernanke was famously quoted as saying that he did not consider gold to be money and that most central banks only hold the precious metal as “tradition.”  It would seem that Bernanke is so caught up in a “traditional” mindset of the national fiat that he is not in touch with the current economy, in which a global form of currency is required and gold appears to be the only commodity with enough value and recognition to take that spot.

            Iran’s use of gold in its international trade may be a major step towards legitimizing gold as the “new money” and lead an example that the rest of the world will slowly follow once certain economies begin to recover quicker than others.  Perhaps Iran is on to something that our Federal Reserve has not yet seen because it is too caught up in “tradition.”