The government of Cyprus (a small island country near Turkey) announced they want to charge a one time tax on all their citizens’ savings and checking accounts, up to 9.9% of their balance (O_o) This is so the country can qualify for a $13 billion bail out package which they so desperately need. It certainly sets a very controversial precedent for countries facing bankruptcy. Cyprus citizens rushed to the banks to withdraw their cash so they won’t be taxed only to find out the government has ordered financial institutions to stay closed for fear of a bank run.
If it’s not even safe to store your money in the bank anymore, where CAN you put it? The Fed is continuing its money easing policy and with an increased supply of cash and credit in the economy we will inevitably see some kind of inflationary pressure in the future. I was recently looking at the price of gold and noticed that it has really come down from a year ago. It also seem like the price of gold has found a support level at around $1550/oz. Well today gold is roughly at $1600/oz. I like to buy stocks when they are undervalued. But right now it’s hard to pick a good company because the US stock market is at an all time high, lol. However gold is near its 52 week low. And historically it has been a great store of value, and a hedge against uncertainty and inflation. So I think this is a golden opportunity for me to start accumulating some physical gold.
But what kind should I buy? There are gold bars which are pretty boring. Then there are collectible gold coins which usually demand quite a hefty premium over the spot price of melted gold. Finally there are the globally recognized 99.99% gold maple leaf coins made for high liquidity and circulation purposes. Last year I posted about the Royal Canadian Mint’s 100 kg (220 lb) 99.999% pure gold coin with a face value of $1 million. It holds the world record for being the largest fine gold coin ever created, and it’s purity is unmatched. Well for those who can’t afford the best in the world the mint has also made miniature 1 oz versions of this coin with the same design, quality, and purity. Sounds pretty good to me (^_^)
So earlier today I went to the local bullion exchange and bought myself a one ounce .99999 fine gold maple coin. This shiny little bullion can be sold at any gold dealership. But it also has some properties that make it unique like a collectible coin. For example it’s 99.999% gold which the Mint said is unrivaled for its purity, compared to the standard maple leaf coin in circulation at only 99.99%. It also has a mintage so it’s more rare than the massively produced standard coins. Due to these special features it’s 2.2% more expensive than the standard maple leaf coin. But for an unmatched work of art and engineering I think that’s very reasonable. I spent $1750 on this little beauty today. The cost fluctuates depending on the market price of gold but the place I bought mine from, VBCE, has a website that lists their current spreads so you can check online for the latest prices. Click image below to enlarge. I included a toonie and quarter in the shot to show scale.
I already own gold mining companies like Goldcorp, but this is my first time investing in the commodity directly. It’s quite amazing to hold something so small in my hand and know it’s worth more than everything in my closet, lol. It’s hard not to feel emotionally attached to gold after seeing it up close in its purest form like this. It’s just so pretty (゜o゜) I think gold is interesting from both a scientific and investment perspective. As an element gold is known for its stable properties. It doesn’t break down, burn, or corrode so all the gold that has ever been extracted from the ground since the beginning of civilization, which is 171,300 tons (or 5 billion ounces) according to the World Gold Council, is still being used somewhere today. There’s 7 billion people on earth. So if all the discovered gold was evenly distributed each person would claim roughly 0.7 ounces. Which means as of today I own more than my fair share since I have a whole ounce :0) About 50% of gold mined this year will be used for jewelry, 10% for industrial purposes like semiconductors, and the remaining 40% ends up in official holdings and investments like being made into maple leaf coins for example 😀
[edit]
As you can see the gold coin is enclosed in a plastic case and set in a 5″ x 4″ laminated card. On the front the coin displays 3 maple leaves matching the design of the larger 100 kg coin. On the back the coin displays Queen Elizabeth II and a visible “200 DOLLARS” is imprinted to indicate the face value of the coin. The card represents a certificate of authenticity backed by the Royal Canadian Mint. Overall I give this coin 10/10. Great quality. Would buy again 😀 Click image below to enlarge.
[/edit]
People are over-reacting to this situation… The amount is 6.75% for most people (only goes up to 9.9% for balances over $100 000, I think) and who is unwise enough to keep the majority of their wealth in cash in a bank? I read over on another blog that the majority of the deposits are there only because of tax benefits :/
I’ve heard most of the deposits belong to people outside of the country, so tax loopholes make sense. I think you’re right. They just changed their proposal from the original agreement reached over the weekend in Brussels. Under the new proposal, people with less than €20,000 in the bank would not have to pay any taxes. Those with between €20,000 and €100,000 would lose 6.75% of their savings, and people with over €100,000 would lose 9.9%. People are protesting on the streets, ATMs are out of money, doesn’t seem like a fun place to be in right now.
supposedly most of the money in Cyprus high net worth bank accounts are Russian hot money, aka dirty money from Russian mafia. Cyprus is a well known tax haven for Russian laundering, so the tax seems like a pretty good idea to me LOL, but then again, maybe anyone who votes for it, will get their families killed by russian mafia!
That’s what I’ve been reading too. It’s a way to crack down on illegal banking practices 🙂 The mafia or whoever they may bey should think about storing their wealth somewhere else other in legal tender form. If I had €100,000 in another country I would go there and buy some gold or colored diamonds and then put that in a safety deposit box. Money doesn’t hold value very well over time and you risk these types of situations.
I like how the gold coin is sealed up… you can’t actually touch it! Too precious!! That’s one good looking coin! What is the mintage on that coin? Makes me want to buy one too!
Thanks for reminding me about the seal. I just realize I didn’t really describe the packaging lol. I’ve edited the post and included a photo of the back side now with specifications like weight and diameter 😀 The RCM didn’t say what the exact mintage is because they’ve been making these every year since 2007 I believe. The best guess is however much they can make with their available 99999 raw gold.
I invested in forex gold 7 years ago below $600, with leverage. It went up, down, freaked me out and I can’t get over my emotional decision to sell back then!!
That sounds intense. I think I’m going to hold onto my gold and use it for emergencies only. The price of gold is definitely affected by peoples’ emotions.
I have never owned physical gold or paper gold in my life. (I’ve only held Barrick stock)
However, over the last few years, I have thought about doing this more and more.
I would do it to provide some diversification for my portfolio, but also because I do worry about the erosion of the value of our currency.
That was a nice purchase you made.
I was thinking about it for awhile too. Then only decided to take the plunge now. It’s pretty exciting, at least for me, to be buying tangible gold for the first time 😀 I was a little nervous coming home from the bullion exchange though and tried not to make eye contact with anyone on the bus lol. I’m thinking about opening a safety deposit box at the bank if I decide to buy more in the future. Great point about the erosion of currency. I’m planning to write a post about this topic later this year but here’s something to think about. 20 years ago in 1993, the minimum wage in Ontario was about $7 per hour. The price of gold at that time was about $400 per ounce. If someone were to have been paid with gold instead of money their wage would have been 0.0175 ounce of gold per hour ($7/$400) Today in 2013 however gold is trading at $1600 per ounce. And a piece of gold that weighs 0.0175 ounce is worth $28 in melt value (0.0175 oz at $1600 per oz) Meanwhile minimum wage today is only $10.25/hr. So money depreciates. Wages don’t keep up… Read more »
How are you charged 1750 when gold is near 1600 today?
The $150 premium is due to a combination of quality, rarity, special packaging, exchange rate, and vendor commission. Gold was trading at roughly $1600 USD when I bought it. And that’s equivalent to about $1650 CAD. The remaining $100 difference is because it’s really hard to make a .99999 pure gold coin and there’s not many of them around 🙂 and the bullion store I bought it from has to charge a fee for their services. So a more common .999 gold bar would have saved me some money 😉
It sounds like the Russians may be working on a deal to bail them out, so I would be inclined that they have some sort of skin in the game. That said, regardless of your view of where to put money, it should be criminal to go into peoples bank accounts and “tax” them. I’d probably be getting myself arrested if I lived there. 😉
I wonder how it will all play out for them. Normally countries have deposit insurance. In Canada if you have $100K or less money in a bank the government will guarantee that nothing will happen to it even if all the banks go bankrupt themselves. I believe there’s a similar rule in the US. This makes bank deposits even safer than GICs or government savings bonds. I heard the reason the insurance didn’t trigger in Cyprus is because the banks didn’t actually go out of business. But I think it kind of defeats the point of having insurance.
Ah, the true definition of hard currency… It is about bloody time to bought some. I hold a few “coins”. I have been a buyer since 2001 of gold bullion and silver. It is something special to think just one of those coins could be exchanged for a beater car out on the road… Certainly brings in itno perspective. I know the gold coin weighs an ounce, but does it not see odd how heavy it is in relation to it’s size… Ah… i have dream and aspirations of purchasing a 100oz silver bar… Just have not found an interesting argument to convince my wife we could use a neat looking door stop (O>o) – Cheers.
100 oz silver sounds like a lot. Must hurt like crazy if it was accidentally dropped on someone’s foot lol. Good thing silver is much cheaper than gold. I’m thinking the next precious metal purchase I make will either be a 10 oz silver bar, or 32 oz silver collector coin.
That is a nice coin. I have a couple of the 1/10 oz gold maples. Could not quite stretch my finances to the 1 oz. I don’t ever intend to sell my coins – I just like collecting them but the option is always there.
I probably wont sell my gold and silver coins either unless it’s for an emergency. Many people like to have cash in the bank they call an emergency fund. But I prefer to hold my emergency fund in the form of hard assets. I can take my coins back to the bullion dealership today and get cash for them. But if I don’t run into an emergency my fund doesn’t lose any purchasing power due to inflation. But it’s good to have a little bit of liquid cash on hand as well because the price of gold and silver is always fluctuating.
That is a neat looking coin you picked up today. I was going to ask you where in the world you would keep the coin especially if you wanted to buy a few more until I read that you might get a safety deposit box. I’d be nervous just keeping that in the house but what do they charge to hold a safety deposit box at the bank?
I think safe deposit boxes are usually $50 a year to rent. I have content insurance for my home anyway. In the event somebody breaks in and steals all my stuff, or if there’s a fire and I lose everything, the insurance company will cover up to $30K of damage, including rare coins and collectibles. Right now I barely have $10K worth of stuff in my apartment haha. Simple life is best 😀 I don’t like clutter.
Gold’s plunge to $1,350 / oz is truly a scary occurrence. I’m legging in now, but am losing money. Hope thing stabilize and rebound!
I’m waiting for a rebound and then buying gold stocks like Goldcorp 😀