Gold closed above the $1,000 mark Sept. 11 and then skittered along just above it in the three trading days following, closing at $1,018.90 Sept. 16.
Twice before, in March 2008 and in February 2009, gold traded above $1,000, but failed to hold.
Will this time be different?
Pat Heller of Liberty Coin Service, Lansing, Mich., thinks there is a good chance that the price will hold.
“If it doesn’t this time, it will not go under $1,000 by very much or for very long. By the end of the month, it will be over $1,000 to stay,” Heller declared.
What’s making this happen?
“The economic factors pushing the price up are getting stronger each time,” he explained. “The announcement by a Chinese official that the government is going to adopt a partial gold standard and a technical default by Barrick Corp. on its gold hedges are new factors pushing gold prices higher that weren’t factored into the market before this month.”
So far though, there has been no surge in buying of gold bullion coins to accompany the increase in price.
“Right now we are seeing a sharp increase in people selling to us,” Heller said about his business in Lansing. “We have had some people buying from us, but we haven’t seen any particular increase in people buying from us.”
Heller said the reluctance to buy into this rally will likely end if gold surpasses the $1,035 mark.
Why is that number significant?
“That’s approximately the intra-day high of March 2008,” he replied.
In the meantime, for those who were looking to buy one-ounce American Eagle gold bullion coins, he was charging 5.7 percent over spot price on 10-piece quantities for immediate delivery.
When asked what the significance of gold over $1,000 is, Greencastle, Ind., dealer Julian Jarvis replied, “It’s about time” and chuckled.
Why is it happening?
“Everything that’s being done by the congress in Washington, D.C.,” Jarvis said. “You can’t spend our way to prosperity. It’s going to kill the dollar.”
He’s seeing people selling off their scrap gold because of financial problems.
“They are selling for a fraction of what it is worth,” Jarvis said, citing some of the common mass promotions to buy gold that have been seen on TV and elsewhere.
Jarvis also said there is no shortage and no wait for gold. In fact, the markup on gold bullion coins is “the cheapest its been for two years.”
Jarvis is asking $50 on a single one-ounce American Eagle.
“That’s a 5 percent markup,” he said, “$45 on 10 to 50 coins.”
Physical supplies of silver bullion coins are much tighter, he thought.
John Kamin, editor of the Forecaster Moneyletter of Tarzana, Calif., was in a somewhat playful mood when he was asked to comment about the gold market.
“Well, you want me to play devil’s advocate?” he asked.
“I’ve heard that true collectors are not interested making money on coins ... That would mean that all those so-called true collectors need not be concerned about the gold price,” Kamin joked.
He warned, “people who expect a one-way trip (higher) are unrealistic,” but then went on so say, “It’s not that gold is better, but that the dollar is worse. It’s sick. It’s being pushed down so that recession-flagged American companies can sell more cheaper American products overseas.”
Kamin said potential buyers of gold include the Chinese, OPEC oil producers and Russia.
Kamin noticed another set of buyers.
“Lately, I’ve had large rental property owners trying to diversify from troubled properties and one method they use is to buy some gold coins.”
Whether gold goes up or down from the present $1,000, if you are betting prices will go higher by buying gold bullion coins, you are paying premiums over melt value that are the lowest in a long time.