It’s easy to fall in love with gold. After all, the rich and famous have obsessed over it for millennia.
During the past two decades, gold ownership has become much more widespread. No longer a sole preserve of the elite, every day and mum and dad investors have also taken a shine to the glittering yellow metal.
Accessibility to gold through bullion bars and legal tender coins, certificates and exchange traded products makes buying and storing gold simple. Driving folk to take advantage is this new found convenience is the growing appreciation of gold’s beneficial role within a diversified investment portfolio.
Before jumping in, it’s definitely a good idea to acquire a firm understanding of the case for gold. Here’s a short quiz designed to test your existing knowledge - answer these questions correctly and you’re well on the way to being an ace gold investor!
1.How many Jumbo jets would all the gold mined throughout history fit into?
a)10
b)20
c)30
2.Gold and other precious metals are traditionally weighed in ounces known as:
a)Avoirdupois
b)Tower
c)Troy
3.Between 2000 and 2012, the price of gold went up 800 per cent. What was the approximate price of an ounce of gold at the start of the millennium?
a)USD 440
b)USD 550
c)USD 660
4.When the exchange rate between the United States and Australian dollars goes up, Australian investors are likely to:
a)Pay more for gold
b)Pay less for gold
c)Pay the same for gold
5.What purity constitutes investment grade gold for coins and bars, making them exempt from Australian GST?
a)92.5%
b)99.5%
c)99.99%
6.The gold to silver ratio (ounces of silver it takes to buy an ounce of gold) averaged 47 throughout the 20th century. What is its current level?
a)55
b)65
c)75
7.When the gold to silver ratio drops below 50, practised investors are more likely to:
a)Buy gold and sell silver b) Sell gold and buy silver
c) Divest their gold and silver holding
8.Professor Roy Jastram’s landmark statistical examination of how gold’s purchasing power has remained consistent over the centuries is entitled:
a)A Pot of Gold b) The Golden Constant
c) The Gold Standard
9.According to various portfolio theories, investors could benefit from holding anything between 1% and 15% of their assets in gold bullion. However, as part of his famed Permanent Portfolio strategy, investment analyst Harry Browne suggested the allocation to gold should be high as:
a)20% b)25%
c)30%
10.Which of these statements is false?
a)There is no counterparty risk associated with owning physical gold.
b)The market for gold bullion is highly liquid, making it easy to sell.
c)Central Banks around the world hold less and less gold.
Answers: 1.a) 187,200 tonnes, the latest estimate of gold ever mined by mankind, has a cubic capacity of approx. 9,700m3. According to this
source, a 747 -400 Jumbo jet has a combined passenger and cargo volume of 1,035m3. The gold would therefore fit comfortably within 10 of these aeroplanes.
2.c) One troy ounce equals 31.1034768 grams or about 1.0971 avoirdupois ounces.
3.a) USD 440.
4.b) If the exchange rate goes up, the AUD price of gold goes down.
5.b) 99.5% pure gold in an investment form is GST-free in Australia.
6.c) 75.
7.a) The gold:silver trading strategy suggests it’s time to buy gold and sell silver.
8.b) The Golden Constant
9.b) 25%
10.c) Central Bank’s around the world hold less and less gold.
