For centuries, people from all over the world have dealt in one central currency. Though dollars, pounds, euros, and yen are all relatively different in terms of their value, gold has been the standard by which the world’s economies derived their values. Looking back on the history of gold as money, we see a few very important events that have shaped the way we view it today. The most recent of those happened in 1971, but tracking gold to its fullest requires that we look back much further than that. We must look back to 700 BC, when the first goldsmiths started the trend of using precious metals for valuable currency. Since then, things have evolved slowly to the point where we are today.
The first gold coins
Back in 700 BC, the world saw its first gold coins and they were an immediate hit. It has been a more than 2600 year love affair between banks, consumers, and gold which has helped to shape the global economy as we know it today. Back then, the scarcity of gold as a physical resource made it the perfect means for trading. If you had gold, then you had value and it only made sense that you might be able to trade gold coins for other items within the economy. This early trade was quite rudimentary and there was no type of gold coin that was immediately the standard.
Turning physical gold into paper money
One of the most important changes in the history of gold came when some goldsmiths decided to turn gold into paper money. These individuals saw that the value of precious metals was pretty fluid in time and they also saw the need for some practical storage measures for people who owned this gold. Since consumers did not feel comfortable keeping their gold around the house, they needed a place where it would be safe. Enter goldsmiths, who would store this gold in their safes and their early vaults for a small fee. These were the first banks and they issued “gold receipts” to those people who deposited their valuable bars and coins.
These receipts were the first pieces of paper currency and over time, people became more comfortable carrying around those. People of that time became much more comfortable with these receipts, because it took away all of the risk of carrying gold and it was just a more convenient means of acknowledging your wealth. As individuals became more comfortable with the process of holding paper money, this practice became the standard. The early goldsmiths saw an opportunity, as well, and most of them transformed their businesses into rudimentary bank operations in the early going.
1971 and the big change for gold
All throughout time until 1971, people who owned gold could go back to their bank or their goldsmith (in the early days) and exchange the paper money for gold again. Though this did not happen all that often, it was an option that people had at their disposal if they felt the value of paper money was in question. President Richard Nixon changed all of that in 1971 when he closed what was known as the gold window. He changed the system and consumers were no longer allowed to convert their money back into gold. This changed the course of history for gold and helped to shape its value, as well.
When Nixon did this, gold and precious metals in general were taken out of the currency exchange for good. People were forced to start using paper money, and the banks were forced to adopt regulations. It became law that banks had to have as much gold in reserve as they had money on hand. That became common practice after a long period where banks would hand out more “receipts” than they had gold reserves, causing serious problems with the value of money throughout the global economy.
Nixon’s move shaping gold’s future
The closing of the gold window caused the price of gold to shoot up from around $35 to levels above $300. Since then, it has gone up to more than $1,000 and looks to be rising again. Today, gold’s role in the money exchange is as a guarantor. It backs up, or is supposed to back up, every dollar that is printed and every bank transaction that is completed. It has gone from being the chief item in the currency exchange to being the backbone of an exchange that now deals in paper money.
About the Author: Shaun Connell enjoys studying the history of economics of gold coins, and does so at his gold coins website. If you’re new to gold, check out Ways to Invest in Gold.
This is part of a comprehensive series on gold as an investment. Check out the other articles and learn more about gold to see if this is a right investment for you.
There are different types of annuities. In finance theory, the term annuity refers to any terminating stream of fixed payments over a specific period of time. This term is used most often in discussions of finance usually referring to the valuation of the stream of payments considering time value of money and interest rate and future value.
In finance, annuity refers to a financial product that is made available through financial institutions for individuals where funds are accepted and upon annuitization, a stream of payments are made to the individual at specified point in time in the future. These types of products are used quite often as a means of securing a steady income for those in their retirement years.
Annuities can be structured in a variety of ways. Some of the variations can be the duration of time that the payments from the annuity can continue. For example, an annuity can be created so that, upon annuitization, an individual can continue to receive payments as long as either he or she or his or her spouse is alive. Or, you can structure annuities to make payments for a specific period of time, for example 30 years.
You can also structure annuities to provide either fixed or variable payments. For those wanting variable payments, it can allow for higher payments if investments in the annuity fund are doing well. Conversely, however, if the annuity fund is not doing well then the payments will be less than a fixed plan.
Investors have come to know gold as a reliable and consistent product that can be added to portfolios for a host of different reasons. If you spend any time listening to the pundits, then you’ll know that there are many advantages of investing in gold. Though these pundits are not always right in their opinions, they do seem to hit the mark when talking about gold.
What are three major advantages to buying gold? It starts with the ability to spot a good price and it continues with the reliability that gold adds to any portfolio, large or small.
1. Buying opportunities are easy to spot
Unless you are a seasoned financial analyst, then you probably have trouble looking at charts for stocks in order to figure out a good entry point. You shouldn’t take this too hard, though, because that stuff is complicated. The nice thing about gold is that it’s much easier for investors to pick their spot. Many people refer to gold as the opportunistic investment product. This has some merit, since buying in at a low point can lead to nice profits when you finally sell your gold investments.
With gold, the things that impact its price are relatively easy to calculate. It correlates well with the US dollar, so a basic understanding of the direction of the American economy will lead you to some dips in the price of gold. Sharp investors can take these opportunities and pounce on them, producing a scenario where profits are easily made.
2. Adding a tangible asset to your portfolio
Another advantage of investing in gold is that you can add something real and tangible to your portfolio. The problem with stocks, bonds, and the like is that you can’t hold them in your hand. This can make them feel less real and you feel like you have less control. Though it does not happen often, stocks can completely fall out in terms of value, leaving investors with absolutely nothing to show for their time. Gold, on the other, hand will always retain some value. This type of liquidity makes your portfolio much more diverse and helps to limit the amount of risk you are opening yourself up to.
The best investors in the world will tell you that a diversified portfolio is the best way to make money and protect your savings. If you have lots of different types of investments going on, then you will still have some value, even when one some section of the economy takes a turn for the worst. This can also lead to better selling opportunities for those investors who want to sell their assets on high water marks.
3. The private nature of gold
With most investments, like real estate, stocks, mutual funds, and bonds, federal reporting is required. Gold provides you with a little bit more privacy. You can go out and buy gold coins from individual sellers and hold onto that asset without the regulations and mandatory reporting that goes on elsewhere. For people who value their privacy, this can make a huge difference.
Likewise, this difference in the buying and selling process can often lead to better opportunities. You have many options for when and where you sell gold. You could sell it to a jewelry company or you might sell it overseas. With stocks, you are limited to selling the item through a broker and on the stock market. This limits what you can do and how much money you can make. The idea when investing is to leave all doors open to potential profit. Gold has many open doors and it has value that goes around the world, making it a truly unique investment asset.
Ultimately, all of these things combine to create a good situation for investors that are targeting gold. There are many gold buying opportunities out there and if you happen to get in when the price is low, good money can be made on the sale. Others are buying gold for the long haul, since its price tends to go up slowly over the years.
The short term fluctuations offer buying and selling points for investors, while the long term viability offers security for people who need a more secure asset. In that way, there are items for everyone who is thinking about making this investment. With all of the different ways to buy gold and all of the different outlets where it is available, this is one product that makes sense.
About the Author: Shaun Connell writes weekly updates at his gold coins site and is a huge fan of gold investments. To learn more, check out Buy Gold Coin — an introductory article for beginners.
If a company wants to determine its gross profit, it would take all of the revenue that is generated through the sale of products and/or services and would then subtract the cost of generating that revenue. In more simplistic terms, gross profit is calculated by taking the total of all the sales and then subtracting the cost of the goods or services sold. This number tells you how much a company would make if it did not need to pay other expenses such as salary, income taxes, office supplies, rent, electricity and any other costs that are associated with running a business.
If you are looking at a company’s income statement, you will see that the gross profit number is broken down into clearly labeled categories. This is due to the rules in accordance with the GAAP or Generally Accepted Accounting Principles. If you are looking to calculate this figure on your own, here is the exact formula. Total Revenue – Cost of Goods Sold (COGS) = Gross Profit.
It is important to calculate this figure of a company’s gross profit because out of the gross profit number comes the gross margin figure. For example, let’s say a company sells a product that cost $300 retail. The original cost of item is actually $200 including merchant fees, service charges, bank processing costs, etc. The actual profit margin on the item would be $100 for each product sold. The higher the gross profit, the more money there is for the company and its shareholders.
Subscribe by Email
Loading ...