Buy Gold Dollars
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China is shifting some of its massive foreign holdings into gold and away from the US dollar, undermining the dollar's role as the world's reserve currency, accoding to a recently released WikiLeaks cable.
The cable is titled \"China increases its gold reserves in order to kill two birds with one stone\". Taken together with recent policy announcements from Chinese banking officials, it may signal moves by China to eventually replace the US dollar as the world's reserve currency.
Buying gold and allowing the yuan to be traded freely would weaken the US dollar's dominance as the international reserve currency. The move would have major implications, making it more expensive for the US government to borrow money and to run perpetual trade and budget deficits.
As a reserve currency, the US dollar is the default for international transactions. If, for example, a South Korean company wants to buy wine from Chile, chances are they will carry out the transaction in dollars. Both companies must then purchase dollars to conduct their business, leading to greater demand. The value of global commodities, such as oil, is also generally demarcated in US dollars.
In March 2011, China held $3.04tn US dollars in reserves, Xinhua news agenecy reported. It is the largest holder of US treasuries, or government debt, with $1.166tn as of June 30, 2011, according to the San Francisco Chronicle. Thus, major devaluation of the dollar would hurt China, as it would be left holding wads of worthless paper.
The answer: Buy gold. Everyone seems to be doing it. The value of the glistening commodity, useless for most practical purposes, increased almost 400 per cent, from less than $500 an ounce in 2005 to about $1,900 in September.
\"Gold has risen in value because of uncertainty in the world economy,\" said Mark Weisbrot, the co-director of the Centre for Economic and Policy Research, a think-tank in Washington. \"Normally, gold would rise due to high inflation. It is a store of value that increases if there is inflation. But in this case it is going up because nobody knows where else to put their money.\"
\"We pay our debts in dollars so we can print money to pay our international debts,\" Weisbrot told Al Jazeera. Because of the dollar's status as a reserve currency, the US \"can run trade deficits indefinitely\" while borrowing internationally without serious repercussions, giving the world's largest economy a \"big advantage\", he said.
If gold, the yuan, or a combination of other currencies replaced the dollar, the US would lose that advantage. Without a replacement in the near term, nothing will replace the dollar as the world's reserve currency in the next five years at least. But nothing lasts forever. \"When they [China] want the dollar to fall, they will let it,\" Weisbrot said. \"The dollar will fall eventually but that could be a long time away.\"
Today most of the demand for gold dollars comes from type coin collectors, who desire one each of the three different design variations. Type I gold dollars, with Miss Liberty's portrait identical to that used on the $20 double eagle, were made from 1849 through 1854, while Type II dollars, with an Indian princess motif, were struck in 1854 and 1855, plus in 1856 at the San Francisco Mint only. Type III dollars, featuring a modified portrait of an Indian princess, were made from 1856 through 1889.
In the early years, from 1849 through the Civil War, the gold dollar was a workhorse denomination. Those of the Type I design, 13 mm in diameter, were used often in everyday change, and most examples seen today show wear. In 1854 the diameter was enlarged slightly to 15 mm, to make the coin more convenient to handle. The Indian princess design, introduced in that year, created problems, as it was not possible for the metal in the dies to flow into the deep recesses of Miss Liberty's portrait on the obverse and at the same time into the central date digits on the reverse, with the result that the majority of pieces seen today are weakly struck on the central two digits (85 in the date 1854, for example). To correct this, the Type II portrait, with Miss Liberty in shallower relief, was created in 1856.
Among the three design types of gold dollars, by far the scarcest is the Type II. The total mintage of Type II gold dollars amounted to fewer than 2 million pieces. Contrast that to the Type I gold dollar, for which over 4 million coins were struck at the Philadelphia Mint in 1853 alone! Similarly, the Type III gold dollar was minted in quantities far larger than the Type II.
Collecting gold dollars can be an enjoyable pursuit, although a good bank balance is necessary to complete the task. Particularly elusive are certain Charlotte and Dahlonega mint coins, with 1855-D, 1856-D, 1860-D, and 1861-D being prime rarities. Among Philadelphia Mint coins the prize date is the 1875, of which just 20 Proofs and 400 business strikes were minted.
In general, Uncirculated gold dollars are rare for all dates prior to 1879, except that because of the enormous mintages, more Uncirculated pieces were saved by chance for such issues as Philadelphia Mint coins of the early 1850s. After 1878 a popular speculation arose whereby jewelers, numismatists, and members of the public enjoyed hoarding gold dollars (and to a lesser extent $3 pieces). Although gold dollars minted from 1879 through 1889 have generally low mintages, in proportion far more Uncirculated pieces survive than do issues of earlier dates.
As noted, the most popular way to buy gold dollars is to acquire them as part of a type set. This is as good a place as any to mention that a nice basic gold type set, consisting of major design types from the mid-19th century onward, consists of the following: three types of gold dollars, Liberty Head or Coronet quarter eagle and Indian quarter eagle, $3 gold, Liberty Head half eagle, Indian head half eagle, Liberty Head $10, Indian $10, Liberty Head $20, and Saint-Gaudens $20. Each coin in this set is very affordable. If you want to become more technical, you can expand the set to include additional varieties of $5, $10, and $20 gold coins.
Many clever counterfeits exist of gold dollars (and other gold coins), and if you are not an expert yourself, insist on buying coins from a reputable professional numismatist who guarantees everything sold. 59ce067264
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