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Guts for gold

If gold can’t hold the $1,200 level, where will it go?

It is not a pleasant thought for any owner of the precious metal.

Perhaps Russian central bank purchases, Indian jewelry purchases and Chinese investment will keep the price stable. Perhaps not.

The price has essentially been skittering along the $1,200 line on the chart for two years, ever since the metal played Titanic and sank $200 in a few days in April 2013.

There is no other major bottom until you reach back to a time a bit over six years ago and see one occurred along the $800 line.

Bottoms become support levels that either hold or are broken.

This one was the reaction after the first time gold reached $1,000.

Is there another short, sharp decline in store?

Or will we continue to experience the slow grind of the kind that has been going on in recent months? Up a little, down a little and never moving very far from $1,200?

As they say in any casino, place your bets, please.

This morning’s $1,171.30 gold price reported on the Kitco website in a slow grind environment might mean it is time to buy again for the next small pop over $1,200.

But unless you are playing with huge amounts of gold with low brokerage fees, the gains simply are insufficient.

It is perhaps a time for all individuals who own significant amounts of gold to do a gut check. Is what they own insurance against inflation or calamity, or is it a short-term bet on making a profit?

For personal insurance ownership purposes, if gold drops to $800, it is merely a price swing, albeit a big one.

Presumably in such an environment, the economy will be so good that gains in their houses and their stocks will more than fill the financial hole that any decline in gold would dig.

The coin market is affected by this.

When gold is moving sideways or declining, the number of transactions tends to decline and this reduces dealer cash flow.

Many collector coin dealers are also in the bullion business to one degree or another.

Less cash means they are less aggressively pushing numismatic deals.

Many are also saving their funds for the first installment of the huge Pogue Collection sale later this month.

This auction will be a triumph. It is historic. But triumphs need cash-paying customers.

This also will divert U.S. attention away from gold bullion.

A final factor is market psychology.

This has always existed, but because of the Internet it has never before affected so many people at once.

It seems that many persons check the price of gold in the morning to see how they should feel each day.

On mornings like this, they are not feeling happy.

Buzz blogger Dave Harper is winner of the 2014 Numismatic Literary Guild Award for Best Blog and is editor of the weekly newspaper "Numismatic News."