Gold market rises as economy falls
During economic uncertainty, luxury items are often the first thing to go, but local businesses that specialize in gold are seeing growing customer interest as the value of gold increases. The dollar demand for gold spiked to more than $1,000 per troy ounce in the first quarter of 2008, representing a 20 percent increase over that time last year and more than double the level of four years earlier, according to the London-based World Gold Council.
The price has since gone down to around $900 per troy ounce, which has stimulated investors.
Nancy Neeter, co-owner of Bellingham’s Bayside Coin & Jewelry, said she has been working in the gold business since it became legal in 1974. Up until that point, a 1933 executive order from Franklin D. Roosevelt banned possession of large gold caches in an effort to boost the United States’ then-depressed economy. Neeter said just like any stock or commodity, when the price of gold goes up — investors look to sell.
“There are a lot of people trying to sell their gold and silver coins right now,” Neeter said. “People are looking to sell whatever they have.”
Gold goes up when economy dives
In times of economic distress, Neeter said, gold has always been a hot commodity.
“Money is backed by nothing these days,” Neeter said. “Gold is something solid that is recognized around the world.”
Neeter said the economy has always been a factor in the volatile gold market, which explains why previous spikes in gold prices have mirrored national economic distress such as oil crises and high inflation in the mid- to late-‘70s, which led to an all-time high of $850 per troy ounce in 1980. That would amount to $2,000 per troy ounce in today’s dollars.
The World Gold Council said in a May 20 press release that the global gold exchange has seen an increase in demand due to continuing instability in equities markets, the weak U.S. dollar, rising inflation and an increased understanding of gold’s investment attributes.
Most people who own gold are not investors; they own jewelry such as old rings, necklaces, watches and scrap gold items. Those items could pay off because they are about as valuable as they have been in 20 years.
R.B. Wick, a sales representative at The Stamp and Coin Place, said since the spike in gold prices, the business has been seeing more people interested in buying and selling gold.
“Whenever there is movement in the bullion market, we see increased traffic into the store,” Wick said.
A golden opportunity
After the first quarter of 2008, the World Gold Council reported that the world supply of gold was up 6 percent from last year because of increased scrap supply, which it called a “reaction to the rising gold price.”
Arvin Ahn, owner of Northwest Pawn, said with the tightening economy he has seen a lot of people needing a few extra dollars.
“We have definitely been taking in more gold,” Ahn said. “[The high price of gold] has been all over the news over the past couple months.”
However, Tim Adams, owner of The Trading Post and Checkmate Pawn, said he thinks the increase in gold at pawnshops has more to do with the rise in gold prices and less to do with the economy.
“The price in gold went up before the economic downturn occurred,” Adams said.
Wyatt Danichek, manager of Checkmate Pawn, said there has been an increase in the amount of gold the shop is taking in.
Danichek said lately he has seen a lot of necklaces, broken rings and other assorted gold scraps. He has even seen a few gold teeth come through.
Overall, Danichek said he has seen more and more people come in with gold and other items just to get some extra cash.
“I see a lot of people who say they have never pawned anything before,” Danichek said.
The high price of gold has also affected the amount people can get for their gold. Danichek said when he first started working at the pawnshop, the price of gold was around $350 to $400 per troy ounce and the shop gave out $3 to $4 per gram of gold.
“We have had to raise that accordingly,” Danichek said.