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Gold in for it now?

Gold’s run up to record prices earlier this year invited many comparisons to its prior record run in 1980. For me it was a chance to walk down memory lane as much as it was a chance to witness another chapter of numismatic and economic history being written day by day.

Another name just jumped out of 1980. Yesterday’s Wall Street Journal reported that Paul Volcker is a key economic advisor to the Barack Obama presidential campaign. It proclaimed this on the front page. This is one bit of nostalgia owners of gold might just want to pay close attention to.

Volcker as chairman of the board of governors of the Federal Reserve played what was probably the greatest role in bringing down the price of gold from its $850 high in January 1980 and setting it on a downward path that knocked two-thirds off its price by the bottom of the market in 2001.

There is still an election to be held and official appointments to be made, but the return of Volcker to the economic stage even in a diminished capacity because of his advanced age might be grounds for gold prognosticators to take the “1” off their $1,500 price targets.

Skeptical? Gold owners laughed at him once. They thought gold’s upward ascent was unbreakable and the dollar’s weakness assured. Then they had to wait 28 years for a new market high to be reached.

The coin market laughed at him too for a time. We lived in our version of a fool’s paradise for approximately three months after bullion’s peak until the Central States convention in Lincoln, Neb., in the spring of 1980. That’s when numismatic prices decided they were indeed influenced by gold and other elements in the real economy and buckled. I’ve never been back there, neither has another major regional show.

Some dealers never recovered their former prosperity. They were stuck with overpriced inventory. Some collectors were so disillusioned they left their hobby and never came back.

Such is the power of a single name in my memory. To me it is sufficient grounds to very carefully monitor this new development.

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