Gold, silver shine in tough times
By Dave Dreeszen | Posted: Sunday, October 26, 2008
SIOUX CITY -- John Jackson has lost track of the number of customers who have left his coin shop here empty handed in recent weeks.
"All day long we have people looking for gold and silver bullion,'' said Jackson, owner of J&J Coins & Collectibles, 901 S. Cecelia St. "We've turned down a lot of business -- five to 10 people per day.''
A global economic crisis, coupled with volatility in the stock market, have spiked demand for precious metals of all kinds, resulting in a super tight supply. That's made it nearly impossible for dealers like Jackson to restock their depleted inventories without paying a hefty premium for them.
"We are seeing the worst product availability situation that I've ever seen, as far as us being able to buy gold from the major distributors around the word,'' said Jackson, who has been in the coin business since 1987. "We're seeing an incredible shortage.''
What's driving the latest gold and silver rush? Experts say economic uncertainty has prompted a growing number of investors to move their money out of equity markets and bank accounts and into something tangible they can hold and feel.
"It is a hedge against a total collapse,'' said Mike Moreland, vice president of investments at Security National Bank. "It's portable wealth and it has been for centuries.''
Roller coaster ride
Edwin Geels, who turned his childhood love of collecting coins into a hobby and part-time business 35 years ago, said the last time he saw investors running toward gold and silver at such a frenzied pace was in 1980. Back then, with double-digit inflation dragging down the economy, gold prices climbed to about $800 an ounce.
The market went way down after that and was kind of idle until last year, when both gold and silver took off, along with other commodities,'' said Geels, a chemistry professor at Dordt College in Sioux Center, Iowa.
After hitting a high of $1,003 an ounce in March, gold prices have zig-zagged downward. Last week, gold futures slumped to the lowest level in 13 months, at around $730 per ounce. Prices for silver and copper also pushed downward, as lower crude prices eased inflation concerns and diminished the metals' appeal as a hedge against a weak dollar and rising consumer prices.
So far, the falling prices have done little to open up the supply of the metals.
"You can't get people to sell when the price is going down,'' Jackson said. "In my talks with other dealers, we're all trying to figure out if the price of metals is going to come up dramatically to get products to come out'' on the market.
Jackson, who also operates a coin shop in Storm Lake, Iowa, said his stores normally carry one-ounce coins such as American Eagles, Canadian Maple Leaf and South African Krugerrands.
But lately, it's been next to impossible to get newer bullion, which is purchased strictly for their gold value, not its numismatic value. Citing unprecedented demand, the U.S. Mint, for instance, has halted sales of American Eagles until 2009. As a result, Jackson's gold and silver inventories has dwindled to rare coins from the late 1800s and early 1900s.
Smaller gold and silver pieces also have been few and far between on Internet auction sites like Ebay, said Geels, who regularly buys and sells coins online. What has been available has been going for a steep premium. He cited an Ebay auction last Tuesday in which the winning bidder paid about $100 for a 1985 Mapleleaf coin, which has one tenth of ounce of gold. That amounted to a per-ounce price of about $1,000, a premium of about $260 per ounce over last week's spot price for the metal.
Too big to handle?
Larger bars of precious metal are more readily available, but cost an arm and a leg. A 400-ounce gold bar, for instance, now costs around $300,000. "Who has that kind of money to buy it?'' Geels ask. A 1,000-ounce silver bar, meanwhile, goes for around $10,000, plus it weighs 70 pounds.
"Trying to pick one of those up is really hard on your back,'' he said. "A lot of people don't even want to mess with those.''
Another way to buy gold or silver in a is through an online exchange traded fund. A pool account costs slightly less, but the drawback is you don't own the metals directly. Typically, a trust holds the metals in a warehouse, and sells shares against them, which are traded on the open market.
To guard against a collapse of those market funds, Geels said he advises potential investors to physically take possession of gold.
"That's more expensive because you have to pay the shipping,'' he said. "You also have to pay to store it (in a bank vault) because you shouldn't hide it under your mattress.''
"All day long we have people looking for gold and silver bullion,'' said Jackson, owner of J&J Coins & Collectibles, 901 S. Cecelia St. "We've turned down a lot of business -- five to 10 people per day.''
A global economic crisis, coupled with volatility in the stock market, have spiked demand for precious metals of all kinds, resulting in a super tight supply. That's made it nearly impossible for dealers like Jackson to restock their depleted inventories without paying a hefty premium for them.
"We are seeing the worst product availability situation that I've ever seen, as far as us being able to buy gold from the major distributors around the word,'' said Jackson, who has been in the coin business since 1987. "We're seeing an incredible shortage.''
What's driving the latest gold and silver rush? Experts say economic uncertainty has prompted a growing number of investors to move their money out of equity markets and bank accounts and into something tangible they can hold and feel.
"It is a hedge against a total collapse,'' said Mike Moreland, vice president of investments at Security National Bank. "It's portable wealth and it has been for centuries.''
Roller coaster ride
Edwin Geels, who turned his childhood love of collecting coins into a hobby and part-time business 35 years ago, said the last time he saw investors running toward gold and silver at such a frenzied pace was in 1980. Back then, with double-digit inflation dragging down the economy, gold prices climbed to about $800 an ounce.
The market went way down after that and was kind of idle until last year, when both gold and silver took off, along with other commodities,'' said Geels, a chemistry professor at Dordt College in Sioux Center, Iowa.
After hitting a high of $1,003 an ounce in March, gold prices have zig-zagged downward. Last week, gold futures slumped to the lowest level in 13 months, at around $730 per ounce. Prices for silver and copper also pushed downward, as lower crude prices eased inflation concerns and diminished the metals' appeal as a hedge against a weak dollar and rising consumer prices.
So far, the falling prices have done little to open up the supply of the metals.
"You can't get people to sell when the price is going down,'' Jackson said. "In my talks with other dealers, we're all trying to figure out if the price of metals is going to come up dramatically to get products to come out'' on the market.
Jackson, who also operates a coin shop in Storm Lake, Iowa, said his stores normally carry one-ounce coins such as American Eagles, Canadian Maple Leaf and South African Krugerrands.
But lately, it's been next to impossible to get newer bullion, which is purchased strictly for their gold value, not its numismatic value. Citing unprecedented demand, the U.S. Mint, for instance, has halted sales of American Eagles until 2009. As a result, Jackson's gold and silver inventories has dwindled to rare coins from the late 1800s and early 1900s.
Smaller gold and silver pieces also have been few and far between on Internet auction sites like Ebay, said Geels, who regularly buys and sells coins online. What has been available has been going for a steep premium. He cited an Ebay auction last Tuesday in which the winning bidder paid about $100 for a 1985 Mapleleaf coin, which has one tenth of ounce of gold. That amounted to a per-ounce price of about $1,000, a premium of about $260 per ounce over last week's spot price for the metal.
Too big to handle?
Larger bars of precious metal are more readily available, but cost an arm and a leg. A 400-ounce gold bar, for instance, now costs around $300,000. "Who has that kind of money to buy it?'' Geels ask. A 1,000-ounce silver bar, meanwhile, goes for around $10,000, plus it weighs 70 pounds.
"Trying to pick one of those up is really hard on your back,'' he said. "A lot of people don't even want to mess with those.''
Another way to buy gold or silver in a is through an online exchange traded fund. A pool account costs slightly less, but the drawback is you don't own the metals directly. Typically, a trust holds the metals in a warehouse, and sells shares against them, which are traded on the open market.
To guard against a collapse of those market funds, Geels said he advises potential investors to physically take possession of gold.
"That's more expensive because you have to pay the shipping,'' he said. "You also have to pay to store it (in a bank vault) because you shouldn't hide it under your mattress.''
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