Archive for the PRecious Metals Category

Update Jewelry Insurance to Reflect Rising Gold Prices

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Update Jewelry Insurance to Reflect Rising Gold PricesIn the past ten years, the price of gold has nearly quintupled and some experts are warning of another price bubble – one similar to the inflationary mania that impacted high-tech in the ’90s and the rise in residential real estate less than ten years after. Other experts are certain that gold has a strong position near $1,200 per troy ounce and could continue to rise into 2014.

While the dramatically rising prices for gold and other precious metals has helped many investor portfolios, it’s important to consider the impact on your jewelry. Adjusting your insurance to account for the higher prices is necessary – otherwise, you could be in for an ugly surprise if it has to be replaced due to loss or theft.

For those owning valuable jewelry collections, the price spike in gold has sparked an increase in prices of other precious metals, including silver and platinum. While most investors know the price of gold on any given day, they are far less likely to be aware of how the price of gold and other precious metals is affecting the value of their own jewelry collections. Gerald Escobar, principal of Asset Archives, recently indicated they had seen clients under-insured across all categories of valuable collectibles, including wine, fine art, antiques – and yes, jewelry. According to Escobar, clients who don’t proactively manage their valuables can be under-insured up to 40 or 60%.

  1. The first step in updating your jewelry insurance is to get an updated appraisal.
  2. Then, you’ll want to update your insurance coverage.

Update Appraisals

Clients need an updated inventory of their valuables if a loss occurs, and they should keep multiple photographs of their collections in a bank safe deposit box and at home. Accurate inventory record-keeping is vital to determining exactly what was lost and to obtaining an accurate claim settlement. An independent appraiser can be invaluable in determining current replacement value for your articles, including providing adequately detailed descriptions.

Update Coverage

With updated appraisals in hand, review your insurance policy to ensure you have adequate coverage. For exceptional items that were scheduled on a valuables policy, the value stated in the policy should be updated to reflect current replacement cost.

Top insurance companies offer valuables policies with a little extra protection for their clients, including:

  • Valuables policies with built-in buffers against market value appreciation. The additional coverage is a cushion in case market appreciation causes the coverage to be too low at the time of loss. For this buffer to be adequate, however, it must be periodically updated.
  • Valuables policies with built-in annual inflation adjustment. Of course, when gold prices are quintupling every ten years, their standard 2 or 3% increase simply isn’t enough protection. So, even with this protection, you’ll want to make periodic updates.
  • Some home insurance policies include higher sub-limits, such as up to $10,000 for jewelry, but these may still be inadequate if you own a gold bracelet originally purchased at $4,000 ten years ago, which is now appreciated to $16,000.
  • Many insurance companies allow grouping of similar valuable items, such as wine or art collections, to be covered under a blanket policy. With this approach, you would set a coverage amount for the entire collection without having to estimate the value of each and every item, making the overall policy easier to manage.
  • Valuables coverage also has the advantage of no deductible.

While you may need to increase coverage for your jewelry and other valuable items, you can manage the cost of your insurance by changing storage locations. It’s much cheaper to insure jewelry that is stored in a bank safe deposit box rather than at home. Clients with valuable jewelry that is infrequently worn should consider keeping those items at the bank. Use is on a limited basis, but that may well fit your needs anyway.

Finally, once you have updated your valuables coverage, consider scheduling a reassessment every three to five years as a rule of thumb.

The Gold Bugs are Biting (again)

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Gold dollar signAs worries about the European debt crisis mount, many investors are still looking for investment safety. Gold has always been seen as a hedge against all kinds of economic woes, and as you’re probably aware, gold prices usually surge in times of crisis. True to form, gold prices have jumped 15 percent since February and are nearly double the prices of late 2007.

The recent surges in gold buying are encouraged by a host of fresh advertising hawking gold on television, and through the internet and telemarketing companies.

So, is it time to start buying gold?

Not so fast. Of course, we all know that much of the current hype is designed to prey on the public’s fears of inflation while promoting gold as a safe and valid method of hedging against financial losses. That explains why some of the most popular gold funds have attracted large numbers of new investors and their dollars within the last year. But, it’s important to recognize that while gold does benefit from being classified as a ‘hard’ asset, which is different from securities or paper currency, it is still extremely volatile as an investment.

Some of the most significant price drops in gold have occurred quickly after the largest financial crises, including the inflation crisis of the 1970s. Specifically, in 1976, gold prices started to rise from a low and peaked at $850 in January 1980. Shortly after, the price quickly fell below $500 and continued a long slide, finally bottoming out at $263 in January 2001. That’s a relatively short time frame for such dynamic price changes.

Still, some investors feel that owning the precious metal is like ‘money in the bank’. Whether you want to invest in gold or not, there are a number of ways to do it safely. We can’t emphasize careful investing enough and we’re here to help you do do just that so your financial wealth will be available for you down the road.

Just for the record, ‘cashing in on the gold rush’ is just another investment illusion.

Filed Under: PRecious Metals

As Good as Gold

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In an article in Smart Money, Jack Hough recently pointed out that we associate gold with wealth and safety only because its chemical properties once made it ideal for making coins by hand. Gold is incredibly malleable, doesn’t corrode, tests easily for purity, is exceedingly rare and has relatively few industrial uses. It’s perfect for just sitting around and representing value. But that value must come from somewhere, and today that value comes primarily from perception, not reality. Today gold value is primarily driven by fashion and speculation, the latter made easier than ever by companies that that hawk investment funds and comemorative coins.

Before you rush out stake your claim, you need to identify the primary reasons behind your desire to join the gold rush of 2009.

COLECTIBLES–If you are looking for a collectible item that you can pass on to future generations, or one that might improve in value due to excess demand for a unique item, then you would be wise to avoid purchasing anything offered online or in a television commercial. Despite their promised 10-coins-per-household minimum, there is in fact an endless supply of these items, and therefore they hold no value in excess of the current price of the gold used to cast it. If you are looking for something with collectible value, go to a reputable dealer of rare coins and spend your money there.
EMERGENCIES–If you subscribe to some of the doomsday scenarious where the modern banking system as we know it implodes and our society is reduced to a barter economy and you think that gold coins will be a convenient mode of trade, unless you want to be caught looking for someone to break a full-ounce coin to purchase your groceries or toilet paper, you would be wise to consider buying tenth ounce coins instead. Inidentally, that is how the term quarter started. The first quarters were literally an ancient Roman coin cut into four pieces to facilitate trade in small denominations. You might be better off spending your money now on things necessary for survival if the financial world really does implode. Food, water, toilet paper, jeans, Advil, toothpaste, and the like. These are items that you and your family will need anyway, and will more than likely be the primary means of trade in any basic barter economy. Who knows, maybe a Snickers bar will have more intrinsic value to soemone who is really hungry than one ounce of gold.

INFLATION–If your desire to buy gold is as a solution against the inevitable inflation lies around the corner, you would be well advised that without any actual value, gold’s price might soar or plunge during inflation, depending entirely on whether people believe or stop believing the continually perpetuated gold myth. Isn’t it better to own the goods you’ll need to live and enjoy life, or at the very least own the companies that make those goods? Along those lines, the best inflation-fighting investments are stocks. Specifically stock in companies that make, sell, and distribute goods and services that people need including food, medicine, oil, and the like. As prices rise, which is what happens in an inflationary environment, the values of these companies will also rise in direct proportio, which will effectively hedge your portfolio against inflation.

So, while precious metals, mining stocks, and yes possibly even some gold is part of a well-balanced wealth management strategy, it is not the only solution out there and should be managed with some wisdom and forethought.

Filed Under: PRecious Metals