Here at Kamaaina Loan, we say the price of gold will either go up or it will go down, or it will stay the same, but we never can predict which.
Over the weekend, it went down, in a big way, although, to put it in perspective, even after the big fall the price was still higher than it was in September 2011, when the long bull market began. Then it was at $1319 an ounce. Since then it has been as high as $1900.
According to Bloomberg News, gold really is a commodity, not merely a form of “hard money.” Although 30 percent of the world’s gold is bought by investors, 40 percent of annual turnover goes into making jewelry. (That’s where Kamaaina Loan comes in. We buy old jewelry and either resell it or send it to melters who then sell the ingots to jewelers.)
India is the biggest jewelry market. You might suppose that as India gets richer, that would push up the overall demand for gold. Probably it has. But something else is pushing it down.
“Anybody who did some buying before this big drop is probably in some pain,” said Donald Selkin, who helps manage about $3 billion of assets as chief market strategist at National Securities Corp. in New York. “The perception is that gold is not really needed as a safe haven. People are looking at the stock market and they’re stunned, and there’s no inflation. So people are saying ‘What do we need gold for?’ ”
So, where does that leave you, the Maui resident who owns some gold, whether in a ring, a coin or a bar of bullion?
If you bought recently, you are showing a paper loss. If you don’t need greenbacks, then, for pete’s sake, don’t realize your loss. Hold your gold. It won’t rust.
But suppose you do need some ready cash. This is where your pawn shop can help. Don’t sell your gold. Borrow against it. Pay off the loan (in 30 or 60 days, usually), and get it back. Hang on to it.
Of course, if you want to sell, we will buy. But a pawn broker, unlike the pop-up gold buyers, gives you an option.
(For another opinion about gold, calling the selloff a “panic” – people have opinions about gold the way dogs have fleas — read here.