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Archive for Thursday, October 30, 2008

New gold rush is on

Joleen Neher, co-owner of Kansas Coin Connection, says there's been a local and national run on gold coins causing prices to skyrocket. At left is a Canadian Maple Leaf gold coin and at right is an American Eagle.

Joleen Neher, co-owner of Kansas Coin Connection, says there's been a local and national run on gold coins causing prices to skyrocket. At left is a Canadian Maple Leaf gold coin and at right is an American Eagle.

October 30, 2008

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There's a gold rush on.

Demand for buying physical gold and silver is high locally and nationally. But plan on having a long wait. Especially if you want gold. Buyers vastly outnumber sellers.

"We cannot keep it in stock. It's probably easily five buyers to one seller," said Jolene Neher, who along with her husband, Steve, own Kansas Coin Connection, 846 Ill.

Although the Neher's had some gold coins in stock this week, most all had been pre-ordered for customers and were waiting to be picked up.

Investors are especially interested in gold and silver, according to Neher and Rich Lorenzo, of Berthal Fisher & Co. Financial Services in Lawrence.

"People are hoarding it because they are worried about the world," Lorenzo said. "They are worried about the economy and inflation on down the road."

Lorenzo's firm does not have gold and silver on hand and only refers its clients to dealers. When they are able to find it, it's at a ridiculous price, he said.

Public interest in buying gold and silver has been growing for several months. But prices have fluctuated and were even falling during the recent downturn in the stock market. That is contrary to what normally happens to gold and silver during a down market. It's also contrary to the law of supply and demand because physical gold and silver were still scarce.

"We're shocked," Lorenzo said.

On Oct. 7 the price of gold on the market was $900 an ounce, according to Neher. By this week it had dropped down into the $700 and $800 range. Silver, which is much cheaper but still scarce, sold for $12.25 an ounce on Oct. 1. Friday morning its price was $9.98. Three months ago silver was selling at $17 per ounce, Neher said.

On top of the base price, called "spot price," dealers add premiums to the price. Premiums in precious metals are similar to the relationship between wholesale and retail prices on store products. Premiums, too, have fluctuated. Premiums for silver might be a few dollars over the spot price. But premiums for gold have been considerably higher.

The three most popular gold coins are the American eagle, Canadian maple leaf and the South African Krugerrand, Neher said. American eagle coins typically have a premium of $20 to $25 over the spot price. Recently the premium has gone up to $80 to $90 over spot price, Lorenzo and Neher said.

Despite the tremendous demand for physical gold and silver, an upturn in prices began only earlier this week.

"When the stock market went down, people were selling the gold and silver paper contracts to cover their losses," Neher said. "That flooded the market, which drove the prices down."

Lorenzo wonders if there is some market manipulation going on but doesn't know where it is originating.

People who want physical gold are afraid the federal government's policies will lead to high inflation.

"Investing in gold is looked at as an insurance policy against a catastrophic situation," Lorenzo said.

Comments

Ryan Shumaker 6 years, 1 month ago

my point was that since the last time gold prices were high (1980) it has been a poor store of value

Daytrader23 6 years, 1 month ago

You guys are months behind. The gold rush is over. I invested in 2001 when it was $250 an once and sold it when it was $1,000 per ounce at which I bought USD. Now I'm riding the dollar train as it has increased over 30% in value ever since the "top" in gold. Commodities is my expertise and gold is not going to see 1,000 an ounce for a long, long time. When I see articles like this appear in a non financial newspaper then I know that it's time is over. Once the "average Joe" starts to buy then thats the signal to get out. I will wait until Obama is elected then sell the last 10% of my gold.

KUnlv13 6 years, 1 month ago

While many have commented on the value of gold (commodities) in itself, I have yet to see comments regarding individual coins themselves. As a niche, rare coins among collector's circles also play a role. My family has been into collecting for a long time, and a variety of series that are nearly unattainable these days play a factor in value. Although eBay is hardly a legitimate 'circle', it is one way a layman may view just how much a little gold coin can fetch these days. Just my two cents (yeah, I know, lame finish...)

gccs14r 6 years, 1 month ago

Gold is a store of value. Its worth cannot be manipulated by the machinations of banksters. How much fiat currency it can be exchanged for can be manipulated, but only so much and for so long. Don't buy with the thought of using it to get rich, buy with the thought of having it later, but don't follow the speculators over a cliff. Stop buying when everyone wants it, and start buying again when no one wants it.

7fd78c25 6 years, 1 month ago

I can play the arbitrary choice of time frame as well.Gold has outperformed the Dow since 2001.Gold has outperformed the Dow since 1966.Gold has outperformed the Dow since 1928.Here's some visual evidence:http://www.sharelynx.com/chartstemp/DowGoldRatio.phpThat chart suggests that over the long-term, the Dow tends to outperform gold by about 2% per year. Which is what you would expect, considering that the Dow represents investment, but gold is merely money. The dollar is simply an inferior form of money.Here's some visual evidence of that:http://www.gold-eagle.com/editorials_04/images/greene032104.gifI don't recommend market timing anywhere. I recommend an asset allocation strategy with periodic disciplined re-balancing. Split your net asset value into fixed percentages of USD, gold, stocks, and bonds and stick with it. If you omit gold from that mix you will suffer over the long run, in the form of reduced returns and increased volatility.Asset allocation also helps you keep a cool head, buying more when prices or low and selling more when prices are high. It is not a magic formula, just a means of putting the long-term odds in your favor and shielding you from lemming-like behavior.

gl0ck0wn3r 6 years, 1 month ago

I've dealt with http://www.coloradogold.com/ in the past and found him very reputable.

wysiwyg69 6 years, 1 month ago

since we are not under the gold standard, why is gold any better to buy than platinum, copper and aluminum, except for the space needed for the latter.

Ryan Shumaker 6 years, 1 month ago

3/17/08 ($1,033/oz) - 10/24/08 ($681/oz) gold down 34% - dow down 29% over same period. last week alone gold was down 7.3% How safe is gold again?? Please... Whoever is buying this stuff is an idiot.

Ryan Shumaker 6 years, 1 month ago

gold holds it value over time? remeber january 1980 when it was $850/oz? to keep up with inflation it would have to be $2,208/oz today, but an economic expert would know that... & the date was not arbitrary, it was the date it set an all time high. people constantly talk about the stock market and use the "arbitrary" date of when it was it's high and how far it has fallen, what is wrong with doing the same with gold?

wysiwyg69 6 years, 1 month ago

again I ask, why is gold so valuable? the world has not been based on the gold strandard since 1933. come on just tell me.

terrapin2 6 years, 1 month ago

hawkwhatever - As if people can't look up their address in the phone book or online??? Get a clue!

gccs14r 6 years, 1 month ago

Again, carguyshu, don't follow the speculators over a cliff.

justaverage 6 years, 1 month ago

You can't "eat" metal. I'd suggest a good supply of beans, rice, drinking water, black rifles and ammo...to keep the Marxist hoards away from the first three.

7fd78c25 6 years, 1 month ago

That's right, you don't know what you're doing. In 2001, when the asset allocation strategy had you buying gold at $280/oz, how could you "know" that was a good deal, and that prices would rise from there? You couldn't. But the discipline of asset allocation forced you to buy it. Same thing with selling at $850 in 1980.Asset allocation merely imposes an overall discipline, preventing you from over-speculating in any one asset class. You still have to make decisions. For example if you keep 25% of your net asset value in "stocks", you still have choose when to buy and sell specific stocks.There are people who had 150% of their net asset value in stocks, and -50% in cash (i.e. debt, margin, leverage). That is a terrible position to have during a period of deflation. No doubt those people thought they "knew what they were doing," and probably chose a lot of the "right" stocks, but nevertheless they were poorly positioned because they mindlessly bought into the easy credit myth.If they had adopted an asset allocation strategy which forced them to maintain 25% of their net asset value in bonds, and 25% in cash, they would be much happier during this current deflation. But noooo, they "knew what they were doing," because they had god-like prescient powers to predict what markets would do in the future.

Daytrader23 6 years, 1 month ago

Asset allocation is another way of saying you don't know what your doing. A quote from Warren Buffet.

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