Gold price isn't deterring buyers
Many who wanted to cash in on the gold rush of 2009 apparently have already done so. But the high price of the precious metal — a record of $1,119 per ounce on Wednesday — hasn’t deterred buyers.
“We can’t keep enough gold on hand,” said Jim Hausman, owner of The Gold Center Inc. on West Iles Avenue in Springfield. “Gold Buffaloes, Gold Eagles, Swiss gold bars...”
In March 2008, when gold passed the $1,000-per-ounce barrier, he said, “we had lines of people selling gold scrap.”
Hausman said the store typically had 75 to 100 people a day coming in to sell gold jewelry and other scrap last year. That’s down to 35 or 40 people now, he said.
But many more are showing up to buy.
“We can’t understand people buying gold at this level,” Hausman said. “But the big commodities houses are predicting it will hit $1,200 an ounce by Christmas.”
Gary Durchholz, a broker with Assist Investment Management in Springfield, also questioned whether gold prices will continue to climb.
“We’ve seen such a big run-up, and some of the so-called experts say it can go even higher,” he said. “But it doesn’t appear that it is sustainable.”
Commodities prices have been rising as the price of the U.S. dollar has dropped. Gold prices are up 26 percent compared to this time last year.
Thursday, gold closed at $1,106.60 on the New York Mercantile Exchange. That broke an eight-day string of increases, as the dollar gained some strength.
Federal Reserve officials Wednesday indicated they will keep interest rates low to support the economic recovery. Low interest rates tend to weaken currencies, including the dollar, and encourage investors to put their money in higher-yielding assets like gold.
Investors also use gold as a hedge against inflation, which the market seems to see as a certainty.
“If somebody feels it necessary to hedge against the dollar or inflation with gold, probably the most economical way is to buy an exchange-traded fund instead of the actual bullion,” Durchholz said. “There are funds indexed to the price of gold.”
Hausman said he doesn’t think the price of gold will go down, “as the deficits get larger and inflation kicks in.”
Although The Gold Center isn’t taking in a new mother lode of scrap gold, someone, somewhere, apparently is.
“Our refining division has three induction furnaces, and we’re melting up to 8,000 ounces a day,” he said. “It’s coming in from all over the country.”
Chris Dettro can be reached at (217) 788-1510 email@example.com.
Gold price history
Selected annual average spot gold prices, per ounce, since President Richard Nixon took the U.S. dollar completely off the gold standard in 1975.
Source: World Gold Council and Kitco.com