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Buy, Sell, or Hold?

indian-gold-jewelryEvery 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.

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