Buy, Sell, or Hold?

Every week when I write this blog, I research what is going on in gold trading around the world, along with what is being said about gold prices and trading in various media resources.  It’s an interesting process because who isn’t interested in gold, trading, and the markets, right?  I really enjoy reading up on the economy and what’s going on in the media anyway.

This week, when I began my research, I came up with two headlines: “Gold prices Too High for Jewelry Buyers.” That story is coming out of Reuters and Australia, where apparently a global commodities company felt compelled to state to reporters that “gold prices were too high to encourage buying from the key jewelry sector.”

To encourage jewelry buying, according to Reuters, the price of gold has to be around $800-850 per ounce in order to get buyers to pull wallets out of their pockets.  That’s a little glum, isn’t it?  But maybe they’re a little depressed down under?

Meantime in Arizona, the Arizona Republic headlines its story with the idea that “It’s Never a Bad Time to Buy Gold.” Whew!  I feel better already!  The article ponders whether gold prices would hold up well in a prolonged deflationary spell, such as would be possible in an expanded recessionary economy or if the current recession deepened into an economic depression.

This could be the chance to find out.  The economy’s inflation pressures have faded.  The U.S. Consumer Price Index has dropped in four of the past six months, and last year’s inflationary rate was the lowest reading since 1954.  If it’s going to happen, now is the time.

Gold is in an unusual position because it’s an asset that does well during inflationary times, according to experts.  And the precious metal has bounded back from a low of nearly $700 per ounce just last November.   It hit $1000 per ounce earlier this year, well ahead of predictions.

But for this metal, 68% of which is used in jewelry production, the demand isn’t a function of inflation and deflation.  Nor is it tied to American consumer prices, demand, or confidence.  Much of the demand comes from buyers in India and China (where they love and wear a lot of jewelry!), leaving any negativity produced by a bear market far behind.

Gold will always be a good buy.  You will always be able to read negative (or positive!) things about investing in gold whether it’s jewelry, coins, or bars.  But you are the only one who can decide for youself.

All That Glitters…

If you’ve been waiting to buy gold, this might be the moment.  Gold prices have fallen 8% in the last several weeks.  The downward glide seems to have halted, which is comforting to some.  Jewelers are considering whether it might be the moment to stalk up.  But so far, nobody knows.

And why?  Let’s look at the basics.  In the past week, the venerable Ben Bernanke, Federal Reserve Chairman and a key architect of any recovery that might be underway, said that he expects the economy to continue its painful twists and turns without hint of recovery until 2010.  That’s a departure from the past, when he said to expect the turn-around to begin in late 2009.

Not only that, but we’re also seeing signs of deflation.  Retailers are being hit so hard that they are dropping prices in desperation.  Some of those prices may force them finally out of the market.  Car dealerships, in particular, are struggling with the rules of car-buying now undertaking serious rewriting.  It’s a great time to be in the market for a new car.

But what about gold?  Gold almost always holds its value.  And although it has slipped a bit, the determination of whether to buy or sell has always been a personal one.  If you are finding yourself with additional cash, investment gold might be a good place to stash it.  If you are needing some cash, and have some extra gold, this is as good of a time as any to sell it for its value.  And if you don’t have a lot of cash, well, then let me steer you towards some of the rings and earrings on this website, which are particularly good values!

The decision to buy, sell, or stay out of the market must always be made in a careful way with consideration given to the personal situation at hand.  And this time, like every other difficult economy, we will all need to keep that at the forefront of our thinking.