GOLD up up and ?

J

JustMeUC

Recycles dryer sheets
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Jul 21, 2007
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I have a little side business where I have been buying old jewelry from individuals for a bit more than the local pawn and jewelers pay then send it off for refining getting 95% of that days close. It puts a few hundred extra in my pocket each week but I have started getting a bit greedy by sitting on it lately as I have watched it go from $800 - $1185 in a short period of time.

Can someone explain to me in somewhat simply terms why they believe this is happening. (not me being greedy, but the huge jump in gold "value")
:)
 
More people want to buy gold than sell it.
 
I hypothesize that a large number of people think the world is going to hell in a hand basket and they think that gold will save their behind. When I sold my gold coins to a local dealer last year, he told me people were buying gold "in a frenzy" the like he's never seen before. When I asked why, he replied that most of his customers bought gold because they were terrified of the future (and that was before Lehman went kaput, so I can't imagine what it's like now).

Interestingly, my mom's condo was burglarized recently. They didn't take a thing, not even her brand new laptop computer. The police said that the burglars belong to a new kind of gang specializing exclusively in the theft of cash and gold (jewelry, coins that people stash in their home, etc...). Fortunately, her gold jewelry/coins were very well concealed and they didn't find them.
 
If it walks like a bubble and looks like a bubble, then it's a bubble. I have friends who bought gold 5 years ago and are now loving it. I hope they sell before the price crashes.
 
I used to send it in every few days. Now, I force myself to send it in at least every two weeks no matter what, it has become more and more difficult however when I see gold jumping daily. But, I am turning around about 40-50% on my money as is so I know that it is just me being greedy.

I just wonder how long before the bubble does burst? If I was sitting on a lot of gold from 5 years ago I would sell now and be happy as punch!

I can see how a thief would want gold versus a laptop. It is untraceable and easily sold. Even if you are not in the trade and can't sell it to a refiner any pawn or jewelry store will buy it no questions asked.
 
If I were in your shoes and had more than pocket change tied up in gold, I would seriously consider hedging my downside risk with option or shorts.
 
Just a little side business to make some extra money. Mostly buying a couple ounces or so a week from individuals. I have never had more than 3 or 4K worth at the time.
 
FIREdreamer said:
When I sold my gold coins to a local dealer last year,.
Click to expand...

FIREdreamer, how did you sell your coins, local coin shop? Did you get the spot price? I am sitting on a few coins which I want to sell but it seems too complicated or to expensive in charges to sell. Many places buy $50 under spot and sell $50 over PER COIN. But that seems like a lot of fee to me, my stocks trade free at Wells Fargo, even full service brokers don't charge that much. If I sell 5 of these thats $250 and really for not much risk since even more than stocks gold is a 'store' of value. And then if I sell a certain number (3, I think) in my own state (CA) I have to address CA state tax issues. Gold does not seem simple to me it seems complicated.
 
yakers said:
FIREdreamer, how did you sell your coins, local coin shop? Did you get the spot price? I am sitting on a few coins which I want to sell but it seems too complicated or to expensive in charges to sell. Many places buy $50 under spot and sell $50 over PER COIN. But that seems like a lot of fee to me, my stocks trade free at Wells Fargo, even full service brokers don't charge that much. If I sell 5 of these thats $250 and really for not much risk since even more than stocks gold is a 'store' of value. And then if I sell a certain number (3, I think) in my own state (CA) I have to address CA state tax issues. Gold does not seem simple to me it seems complicated.
Click to expand...

Yes it was a local jeweler/coin collector shop. A $50 commission on the sale or purchase of a $1,000+ coin (or 5%) seems to be very standard to me. I don't know any dealer who will give you spot. You have to shop around and negotiate with the dealer to try and reduce those commissions as much as you can. Local dealers may not be the cheapest. IIRC, I sold my coins 7% or so below spot. I had a huge gain on the sale, so I decided it was worth it, especially when I took into account the hassles of doing business with an online dealer (shipping, insurance, etc...) who was still going to charge me 5% commission anyways. With my local dealer, I got money on the spot and went on my way.

I found one way to buy precious metal below spot: auctions. I have bought a lot of silver below spot over the years.

Gold is really not that complicated, but it is true that there are some pitfalls. Selling and buying is relatively easy (and anonymous for those for whom it is important), but the gains are taxed at a higher rate than other long term capital gains, and it is expensive to trade. I bought gold as an investment in 2003 and, even after commissions and taxes, the return was still well worth the extra work.
 
My understanding (which could be completely wrong) is that the rise in gold is being demand led:

1. investor demand (including India's large purchase recently)
2. large miners unwinding hedge positions (including Barrick)
3. ETFs effectively increasing the accessibility of gold to investors

#2 will not continue indefinitely.

At least some of the investor demand is being driven by the fall in the USD in which gold is nominally priced.

The supply side has seen modest falls in production by miners and sales by central banks being reduced or limited.

I do not hold gold.:(
 
1. investor demand (including India's large purchase recently)
2. large miners unwinding hedge positions (including Barrick)
3. ETFs effectively increasing the accessibility of gold to investors
Click to expand...

You're exactly right, at least as far as I can see.
 
I heard somewhere recently that since 1980, gold when adjusted for inflation has been one of the worst performing asset classes, and the recent run up in price is mostly due to speculation.
 
Bubble, bubble..toil and trouble! If I were going to buy gold equities it would be in the machinery that digs out the gold more than the gold itself.
 
"worst performing assets classes"? I bought all my gold and silver in the late '90s and it has quadrupled since then. My Platinum went up 10 times and I sold it (to Tulving.com), and then it fell by half. Think of precious metals as money because as the dollar slides down the metals keep going up. The world's central banks are running the presses so all hard assets will continue to rise (long term). I think silver is especially still undervalued. There is more physical gold on the surface than there is silver, yet gold is selling for 63 times the price of silver. According to the US Geological Survey the earth will be depleted of silver in less than 35 years. This is a critical metal in many industrial, high tech, and military applications, and now being used by the medical industry because of it's antibacterial qualities. Silver is consumed, gold just accumulates. When gasoline is 20 bucks a gallon it won't matter to me because my metals will be worth a lot more.
 
I'm not particularly adept at investing, I have no special skills or knowledge in the area, except that I guess I'm aware of my own ignorance and that limits the stupid things I can do. I started investing in the late 90s, and thank the deity that I've had money in the gold and real estate bubbles along with the portion I've had in stocks. Gold and real estate have made up for stocks during the last decade since the stock market is essentially where it was 10 years ago, in only nominal dollars of course.

Got out of real estate in 2005 and have been slowly getting out of gold over the past six months. I'd rather be good, but I'll take (somewhat) lucky.
 
Maybe it could have something to do with governments printing and borrowing huge sums.Some believe this will lead to a decrease in the purchasing power of currencies of countries with no fiscal responsibility.
 
I have a question for all those people who are buying gold and expect to use it during a very bad depressed time. How are you going to use a one ounce coin to buy any of the normal staples, like food, gas, etc. ? Would you expect change for a tank of gas, loaf of bread ?
 
frayne said:
I have a question for all those people who are buying gold and expect to use it during a very bad depressed time. How are you going to use a one ounce coin to buy any of the normal staples, like food, gas, etc. ? Would you expect change for a tank of gas, loaf of bread ?
Click to expand...

Plenty of dealers out there that pay cash for bullion. ?? On larger quantities you can deliver directly to a smelter, for cash, if previously arranged. Hundred dollar bills still work in the grocery store. Besides, what I have been reading in this thread is not about depressed times, but rather about inflated times. Hard assets which store value vs paper assets which lose value when currencies are being "cheapened".
 
NBC Nightly News had a story on gold last night, which is a good bubble indicator.

The best part of the story was a shot of the reporter holding a block of gold in his hands. The block had a value of 1.5 million dollars.
 
I have often told the story of how some of my Libertarian friends (I am an independent) were so sure of economic doomsday in the early 90s. They even went as far as withdrawing their 401k, taking a big tax hit in order to buy physical gold to keep at home. This was before the advent of various gold ETFs which would allow them to transfer the 401k to an IRA and buy these gold instruments from there.

Perhaps they were 15-20 years ahead of their time. Paying more than $400/ounce back then, they sold lower to buy stocks in the late 90s when the doomsday scenario did not play out. Oops...

Here's my total gold possession: a wedding band on my finger, two American Eagle coins bought at $400 in 94 as a lark from my friend when he was selling some to pay taxes, and more recently as another lark 100 shares of GLD in Jan 2008 at less than $88/shares (roughly same as $880/oz).

Can't sell my wedding band. The two coins, I intend to give to my children later on as keepsakes. The 100 shares of GLD, I will sell at some point, but not yet. I have had only 31% gain on it. Want to see more... Greed is good...
 
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