I want to buy a few golden bullions

Reading about inflation, devaluation of fiat currencies and the instability around the world makes buying little golden nuggets more and more tempting. Now before anyone who read this blog thinks that it's time to burglarise my place and make off with my little golden nuggets - I haven't bought any yet and when I do, it will be left at the mint vault. I won't be stupid enough to be storing them in the cookie jars in the pantry.

A few years ago a few friends and I were having dinner and we were joking about buying a few chunks of gold. Too bad we were only joking around! Gold has gone up in price and gold is looking more tempting as Greece, Ireland, Spain, the UK and the US battle their deficit demons. With the US printing money like crazy, the central banks are getting twitchy holding USD (US Dollars) as a reserve currency. A lot of central banks hold gold bullions in their vault as well. Afterall, gold was previously traded prior to nations having their own fiat currencies.

Oh well. No regrets. It's not like we've gone and blown the lot on discretionary expenditures and consumer junk. Most of us either have shares or properties or both, or a mixture of everything. And earning dividend + rental income can beat holding gold which doesn't pay an income in any shape or form.

As always, Perth Mint is quick on the uptake and has opened up a site specifically for those wishing to indulge in buying golden coins or bullions. I'd prefer bullions but any investor who has a numismatic bent, may prefer to buy the gold coins instead. I've previously written about how you can value your gold jewelleries to sell them for cash but why go flogging off the family jewels when you can wear them and over time, they go up in value as well.

I've always wanted to buy a few golden bullions in my portfolio so when I do that, I'll be sure to outline my bullion buying adventure for anyone who's interested. 2011 is the year to bling up my portfolio with some yellow metal.

Lure of gold and selling your old unwanted jewelleries

I read an interesting article from the SMH (author Lesley Parker) about steps you should take first before selling your unwanted gold jewelleries in order to obtain the best price for yourself.

"1. Make your own estimate of the value of the gold jewellery you're thinking of selling
2. Obtain at least three quotes.
3. Check that the buyer has a second hand dealer's licence and calibrated scales
4. Consider whether you'd get more selling jewellery intact rather than as "scrap" metal
... consumers should expect about 80 per cent of the spot price for gold per gram according to its carat value..."

Step one is the most complicated because it requires you to weigh and value your own jewellery yourself. First, the confusion of gold terminologies need to be cleared up:

Troy ounce = 31.1 grams and is the unit used for measuring gold
Avoirdupois ounce = 28.4 grams is the standard ounce that we typically use
24 carats = pure gold
22 carats = 916 = 91.6% pure gold (22/24=91.6%)
18-carats = 750 = 75% pure gold (18/24=75%)
14-carats = 585 = 58.5% pure gold (14/24=58.5%)
9-carats = 375 = 37.5% pure gold (9/24=37.5%)


Parker writes that using grams will simplify things and you can ask the buyer (second hand dealer) to to put their offer to you as a price per gram.

i) Separate your gold jewelleries into piles of the same purity and weigh those piles separately
ii) The amount of gold you actually have is achieved by multiplying the weight of the piles by the purity. Eg 300g of 9-carat gold jewellery would melt down to 112.5g in pure gold (300g x 0.375 purity).
iii) Now you can roughly estimate the value by multiplying the pure gold weight by the prevailing gold price. Using the example from above: 112.5g x $40/gram = $4,500 for the pure "gold" in your jelleweries.

Although gold prices are usually listed in troy ounces, Parker wrote that you can find the price per gram (instead of troy ounce) in Australian dollars at goldprice.org/gold-price-per-gram.html which would be useful if you're not great at converting grams into troy ounces.

Using the example from above, 112.5g is 3.62 troy ounces (ie 112.5/31.1).

Gold buyers usually do not want the stones and if they do, ask for an additional quote for the stone that is separate from the quote for the gold. If you're in Australia, then you can check the jaa.com.au guide for Jewellers Association of Australia for additional information.

If you're interested in buying gold as an investment then you can buy gold coins or bullions from www.perthmint.com.au or buy gold investments through the ASX.