1:26 pm - Sunday October 22, 2017

About Gold – An Introduction

Currencies have failed, Countries have failed. Why even civilizations have failed. But GOLD has never failed. You may agree.

Gold (chemical symbol Au from the Latin word – Aurum) is one of the rarest elements having unique qualities, attributes and applications. It is virtually indestructible, its physical properties making it impervious to ageing and deterioration. It is valued for its high density, ductility and malleability. Its alluring beauty is most visible in jewellery form – this industry usually accounts for all newly mined Gold every year. Apart from other important industrial uses, its application in electronics and dentistry need not be emphasised.

Gold has from the beginning of civilisation held a singular, almost mystic, fascination for mankind. It is to Gold that people turn in times of political and economic uncertainty – a safe haven that provides portable store of value, the classic insurance hedge against inflation and turmoil. People in all walks of life always consider it as an ultimate multipurpose asset and source of liquidity and preferred form of savings.

Gold is mined in Gold mines, mainly situated in South Africa, erstwhile USSR, Australia and North America. The basic ore mined as above is treated chemically to obtain a concentrated form of Gold – called Dore, which is 80% to 90% pure Gold. Refineries extract pure Gold from Dore – in purities of 99.99%, 99.9% and 99.5% and marketed through Bullion Banks in bars (large bar of 12.5 kgs., one kilo bar), biscuits (TT bar), coins (with different weights ranging from 0.5 gm to 100 gm) and other ingots.

Normally Gold business will throw open following risks:

  1. Price Risk
  2. Counter Party Risk
  3. Counterfeit Risk
  4. Operational Risk

Price Risk: A dealer in Gold is exposed to price risk when the price of Gold so acquired by him changes by the time he is in a position to dispose of.

Counterparty Risk: Counterparty Risk is said to arise when the buyer-customer backs out without fulfilling his obligation to lift the Gold by making full payment after the price is fixed. It is a combination of credit risk and price risk.

Counterfeit Risk: Counterfeit Risk can be avoided by going in for Gold purchases from leading Bullion Banks.  One may also avoid this by purchasing of only London Good Delivery Bars which have the assayer certificate as approved by London Metal Exchange.

It is pertinent here to explain the terms ‘assaying’ and ‘hallmarking’. Assaying is testing of Gold, either as ore, bullion, coin or jewellery, to determine its fineness or purity. Hallmarking is mark, or number of marks, made on Gold jewellery or plate to confirm its quality.

Operational Risk: Operational risks arise mainly on account of transportation, storage and handling Gold.

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