Sunday, September 20, 2020

In gold we trust?

 

 

ALL THAT GLITTERS
Richard Alan
harborgoldsmith@comcast.net

In gold we trust?

Don’t get the wrong impression; I’m not about to give you a stock market tip that will change your life forever. But recently something very strange has been going on. Gold has begun to fall out of favor from the very souls who caused it to soar to unimaginable costs in the first place – namely the heavy metal market investors.

As a practicing goldsmith I handle, buy, sell and shape gold on a daily basis; I have gold dust under my fingernails. I bet the people who trade pounds of gold every day have never touched, let alone seen, the bullion that affects my life.

Gold affects others, but in my trade it dramatically affects me. Only in a different way, My birthday in March of 2008 was my day of infamy all the “experts” said. it would never happen… gold reached over $1,000.00 unbelievable! It’s been over $1,000.00 ever since.

The cost of the coveted heavy yellow metal has been a sore subject in my place of business for the past five years. It has become tedious for me to explain the dilemma in an intelligent manner to most of my clientele just why in the heck a piece of nice gold jewelry is so darn expensive.

In my opinion, from the very start, gold’s upward spiral had been an artificially inflated commodity, and interesting enough, investing in gold over the last eight years or so has not panned out financially as the investing moguls expected.

About half of the world’s supply of gold was tied up by investors who, a few years back, lost faith in stocks and paper monies. They then looked to gold that was a tangible, safe medium for thousands of years. It worked then, why not now? Anyone who thinks now is a great time to invest in gold… Nuts!

That ship sailed 10 years ago when gold was cheap. You’d have a better chance of making money by opening up an alpine ski shop on Marco Island. But years ago when that ship was waiting on the dock, the smart ones who could afford to buy large quantities of the shiny metal climbed on board. They bought it cheap, and dumped it when it hit a high of $1,896.50 on September 5, 2011.

Check this out… An investment of 100 ounces of 24 karat gold purchased in 2006 at $600 per oz., your cost would be $60,000. Wait five years and sell in 2011… A $180,000 return! Imagine the return the big guns got investing a couple million dollars!!!!

There is no other way to explain it; the investors’ greed caused the metal to skyrocket.

The other half of this planet’s gold was used by jewelers like myself to create fine jewelry and although it’s true value (cost) is artificially inflated it still is an important ingredient to jewelers everywhere. A goldsmith without gold is like a carpenter without wood.

So guess what is happening now? Not much! Gold hit an all time high of over $1,800 a few years back and even with a crippling economy, an end of days scare re-election, fiscal cliffs, and now a congressional impasse, gold has not performed as expected and predictions of costing $2,000 and higher I have yet to see!

In fact, the cost has gone down and its expected to go lower. As I speak it has been hovering around $1,300 for months now… not a very smart investment if you bought pounds of it at $1,800 per ounce.

A perfect example of large investors manipulating the metal market is when the price of gold exceeded the price of platinum. How in the name of Jove can a metal that is significantly scarcer than gold cost less? And why has the cost of silver plummeted? Plummeted to more than 50% than where it was a couple of years ago? I know lots of people now numbed who latched on to that shooting star.

I am convinced that when the investors finally decide to dump gold because it is a bad way to invest their fortunes, the price will plummet like a lead balloon. Hey, I can live with gold at $700 to $800 an ounce.

It’s a simple formula; when a goldsmith can afford to buy gold and make a beautiful piece that is reasonably priced, he or she is going to sell a lot of pretty jewelry.

Regardless of all the negative vibes of an unsure economy and a non-functional government, I have a significant amount of folks who enter my shop every day who would love to own a nice piece of gold jewelry. And not as an investment, but to just enjoy wearing it. Nice jewelry makes people feel good. And when people buy my jewelry that makes me happy!

There is a simple joy of presenting a special piece of gold jewelry to a loved one for a number of reasons, or just an individual treat to one’s self … unfortunately the current cost of gold prevents most from these scenarios from occurring.

But on a brighter note, not all jewelry is made of gold, or in many of my designs, in it’s entirety. I, for one, adapted to the madness and had to make concessions. There are still ways to create beautiful handcrafted jewelry without gold being the main ingredient.

Repairs and re-styling old jewelry has been keeping my shop very busy. Even now, before the deluge of what has by many predicted to be a great season on Marco Island. I am keeping a hopeful attitude that gold will continue to drop to a realistic level so I can continue to design and create the wonderful pieces my friends and customers expect of me.

A question from one of my readers:

Why was it when I wanted to sell some gold in Naples the price offered was considerably lower than I expected?

– J.M from Marco

I have been buying gold from the public for decades. There are many reasons for a disappointing pay out.

First is the actual price of spot gold at the time you are selling it. Gold can fluctuate up or down insanely on any giving hour of the day.

The actual karat of your gold is a big factor; expect to get less for 10 karat gold because it is only has about 30% pure gold content. 18 karat is 75% pure gold.

Where you go is the big factor, to put it bluntly, some places will simply rip you off.

Any place that buys gold is not doing it as a public service; they do it to make money. Ask around first; make sure the buyer is reputable and established – not a fly by night establishment. Just look at how many are not in existence today, here today gone tomorrow.

I pay an honest and fair price for the value of the gold, and my customers know I do. I even encourage the “Doubting Thomas’s” to shop around before selling their gold. Most come back and tell me they were offered hundreds less and sell it to me.

Another reason can be that you are selling pure gold bullion, this is where it gets confusing. Let’s say you bought a 10 once bar of pure gold in the early 80’s for $400 an ounce, plus you almost surely paid a handling fee -lets say it was 100 for the transaction. Your investment is $4,100. Now, thirty-some years have gone by, and your $4,100 investment is now worth $13,00! Pretty nice return!

Now you decide you want to dump it so you plunk down the bars at the local gold buyer and he tells you he will give you only $11,700. What?

Now here is where greed rears its ugly head. You won’t take a penny less than $13,000, and the gold buyer will tell you to take a walk. He simply is not going to give you $13,000 for $13,000 worth of gold.

Ten minutes after you walk out the door, a drop in the market could be a significant loss in his purchase. While true, a gain in price would benefit him, but not as greatly as a significant loss. Plus don’t forget the “handling charge;” no one I know considers exchanging a twenty dollar bill for two tens a profitable business transaction! So my point is $11,700 is still windfall for a $4,100 investment.

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