In the past six months, inflation has become much more of a concern for Americans. In February, record inflation was observed with the CPI indicating a 7.9% increase year over year, a number not seen in 40 years. Obviously, inflation makes everyone nervous, but it especially makes investors nervous. We do not know if this period of inflation will be short lived or longer term, but in the meantime, the price of gold is rising. Does the relationship between inflation and gold prices tell us anything? 

Inflation and Gold Prices

In the past few months, the price of gold has increased - briefly hitting $2,070 an ounce - but it has also experienced some volatility with announcements by the Federal Reserve about interest rates and the war in Ukraine and sanctions against Russia both escalating. Obviously, there’s more going on than just inflation, but in insecure times people tend to look to gold as a hedge or a safe haven. 

Gold is a highly coveted precious metal that has held its value over time. Grand Rapids Coins buys and sells coins and currency, but we also buy scrap gold and sterling silver. If you’ve ever wondered about the value of your gold jewelry or silver items, in this blog we will go through the differences between types of gold and silver. We will also discuss how scrap gold is processed into investment grade gold bullion.

Different Kinds of Scrap Gold

Gold is a very precious metal that has held value over time, unlike many other mediums of exchange. There is currently a great deal of interest in gold because the price of gold has been high and rising for some time. That high price is an incentive for people who may have jewelry or other gold items lying around that they do not use. Those items can be sold as scrap gold for cash. 

It must have been my lucky day. I couldn't sleep the other night, and I turned on the television. The first channel I caught was running a commercial for a coin dealer offering a very limited number of rare coins for sale. The first question I asked myself was, “How can these coins be rare if there is enough supply to run the same commercial several times?” While there are certainly many rare and valuable dates on most coins series, there are infinitely more common dates in uncirculated condition. Unfortunately, high bullion prices are bringing out the sharks, so would-be coin investors better be wary of the “good deals” on coins right now.

Morgan Dollars, Gold Eagles, and Double Eagles were minted in large numbers and are readily available in mint state condition for more years than not. In the past, not unlike today, most people preferred to use paper money instead of coins for their daily transactions, with the exception of those in western states. When was the last time any of us received a Susan B. Anthony or Presidential Dollar for change? Most of these coins were used for bank-to-bank transactions thus preserving these coins in their mint state. My definition of a rare coin is a coin that is not readily available for sale with years passing before one might become available. 

While supply and demand are the primary factors in determining the price of most goods, including coins, the price of gold and precious metals is affected by a number of more complex variables. One of these is political or economic instability. The U.S. economy has experienced a great deal of instability over the past decades and was nearly brought down entirely by the Financial Crisis of 2008, the worst economic disaster since the Great Depression. The fear that accompanies these types of events directly impacts the price of gold. This is why we saw the price of gold skyrocket in the years following 2008.

For anyone who has accumulated any wealth, asset security is a real concern. For decades the stock market was seen as a place where one could get a reasonable return on an investment, especially over longer periods of time. After multiple stock market crashes, the collapse of the tech bubble, and the near total collapse of the market in 2008, that is less true. Risk averse investors will now accept a lower rate of return for the assurance that their assets will not disappear overnight, and gold is one of the safe havens they flock to when currency markets are volatile. Gold coins and bullion at least are tangible assets in a way that paper stock shares can never be. It’s hard to have true confidence in numbers on a computer screen. It’s not like holding a bar of gold in your hands.

In an earlier blog we discussed the various forms of physical gold that buyers can purchase and invest in and how their value corresponds to the market “spot price” at any given time. Gold has always been valuable, but how valuable it is currently corresponds to any number of factors. In a souring economy or one with unstable investment options, gold can look like a safe haven for the investor. In a booming economy the demand for gold tends to abate somewhat.

While gold is a solid investment choice and Grand Rapids Coins endorses the philosophy of investing 5%-10% of one’s total assets in physical gold and silver as a hedge against the unknown, it’s important to be careful when purchasing. There are many gold scams out there for the untried or unwary buyer. In fact, there are so many that the Federal Trade Commission has a page on its website addressing questions about buying gold, and recently the office of the Texas Attorney General issued its own tips for avoiding fraud in the gold market.

Buying gold as an investment might seem pretty straightforward until you begin to consider all your options.  Gold comes in many forms and values vary accordingly.  Perhaps more importantly, future values are dependent upon the form of gold you own, and whether gold prices are trending up or down at any given future time.  Let me explain.

First, you may invest in physical gold or in gold contracts.  While you can buy gold contracts, gold futures, gold stocks and other paper investments, for purposes of this discussion, we will focus on physical gold.  This is gold you take possession of and put away in a safe place.

Unlocking value from personal accumulations of gold and silver jewelry is easy to do… if you are armed with the facts, and deal with a reputable gold/silver buyer.

The Facts: (Get even more facts by downloading our free PowerPoint presentation)