Grab some popcorn. Pour a beverage of choice. Sit back. Relax. Watch the gold market.
Federal Reserve taper talk turned into taper reality yesterday.
Will that have any impact on the price of gold in the long run?
This morning, gold has weakened to $1,202.50 an ounce, according to the Kitco website.
Whichever way the market moves, thin holiday trading will make any move less than definitive.
Does the Fed matter?
If you have a long memory, you might recall that it was the Federal Reserve aggressively tightening monetary conditions by raising interest rates that put an end to gold’s then record rally to $850 an ounce in January 1980.
While taper is tightening, it seems hardly worth noting compared to interest rates that were pushed up to a 21.5 percent prime rate in late 1980.
While you ponder that, consider also that actual buyers of gold coins rather than Exchange Traded Funds or futures contracts made their peak purchases in the present up cycle four years ago in 2009 when they grabbed 1,325,500 one-ounce gold American Eagles. If you add in the tenth, quarter and half-ounce purchases, the quantity is even higher.
Demand for gold one-ounce Eagles this year has bouncse higher by roughly 10 percent from last year, but the 2012 number of 667,000 one-ounce Eagles was half the number sold in 2009.
What does that tell us?
Coin buyers feel less need for additional gold?
International demand by people in India and China are factors affecting gold that were much more limited in 1980.
Then there are the activities by central banks.
You shake all these factors up and what do you conclude?
Probably that you need a beverage that is stronger than soda pop.
Buzz blogger Dave Harper is winner of the 2013 Numismatic Literary Guild Award for Best Blog and is editor of the weekly newspaper “Numismatic News.”