Finally - Coming Down From The Stratosphere

Gold sees biggest slide in decades...
and why is this not a complete surprise...it had the biggest gain in decades too.

From the JCK
The drop comes less than three weeks after the metal hit a new record of $1,920. At one point in overnight trading on Sept. 26, the metal’s spot price sank to $1,535.

Analysts called the decline a reaction to the belief that it had been “over-bought” and the market is seeing a “gold bubble.”
Even so, the price of gold has logged impressive gains this year. It remains up more than 10 percent since Jan. 1. The gold price increased 29 percent in 2010.
The price of gold first hit $1,600 in July.

There has been so much recent speculation in gold that prices skyrocketed up,
especially in the last 2 months. 
Such speculation pushed everyone in the jewelry business to raise prices on their inventory.
In addition, prices were so high that manufacturers were being driven out of business...and that's not good for anybody.
A much needed correction has finally started, profits are being taken and gold is finally going back to a more reasonable level. 
And this is a good thing. 
It would have been one thing to have had a steady increase over a period of time, but it was another thing altogether to have had a level of speculation that move prices so quickly in matter of only a couple of months.

My clients have been asking me when we were going to have a Summer or a September sale.
Obviously, any sale was impossible as gold was going up.
Now hopefully, gold will stay at a reasonable level and we will be able to buy a lower prices...and sell at lower prices.  And that's a win-win for both for us and for our clients. 

Golden Years

Got Gold?
I hope that you do as it reached $1500 today.

and here's the 5 year chart

Meanwhile here's the 5 year chart for the Dow Jones Index

You know...I just thought that I would mention it.
And just for your viewing pleasure...

The Super Rich Are Different

 

They buy gold....and lots of it.

According to this report from Reuters Super Rich Investors Buy Gold By The Ton

Fears of a double-dip downturn have boosted the appetite for physical bullion as well as for mining company shares and exchange-traded funds, UBS executive Josef Stadler told the Reuters Global Private Banking Summit.

"They don't only buy ETFs or futures; they buy physical gold," said Stadler, who runs the Swiss bank's services for clients with assets of at least $50 million to invest.

Of course this is hardly a surprise given a 30% + increase in price in 2010 as you can see in this chart 

 

And the fact that gold has been going up for ten straight years

UBS is recommending top-tier clients hold 7-10 percent of their assets in precious metals like gold, which is on course for its tenth consecutive yearly gain and traded at around $1,314.50 an ounce on Monday, near the record level reached last week.

It's hardly a surprise that those Swiss banking gnomes are recommending gold as they are sitting on piles of it buried deep in vaults under Zurich's Bahnhoffstrasse.   

"We had a clear example of a couple buying over a ton of gold ... and carrying it to another place," Stadler said. At today's prices, that shipment would be worth about $42 million.

But seriously, where does an investor store $42 million in gold? Well I guess that if you can afford that much gold you can afford to build your own private Fort Knox as well.

On the other hand

Billionaire financier George Soros, echoing comments from investment guru Warren Buffett, last month described gold as the "ultimate bubble" because it is costly to dig up and has no real value except its market price.

But a rising price for the precious metal has in itself generated more and more demand from investors looking for a way to hedge against a fresh recession. Gold bears no yield and is uncompetitive in an environment of rising interest rates.

Gold bubble?  Maybe, but probably not yet.

My recommendation...instead of buying ETFs buy gold jewelry, the asset that you can wear.

Just don't pay retail prices.  Buy at a price close to the intrinsic value.