Friday, November 21, 2008

Bullion dealers running out of stock

As most of us know, gold has a reputation for being the investment of last resort. There's a good reason for that, of course; although its value is as dependent on people's perception of value as is fiat currency, there has never been a time in recorded history when gold has not been seen as valuable. So in times like this, people tend to go for gold. Well, it seems a lot of dealers are caught unprepared:

FEARS of the unknown long-term effects from the global financial crisis have sparked a new gold rush.

With retail and wholesale clients around the world stocking up on the precious metal, the Perth Mint has been forced to suspend orders.

As the World Gold Council reported that the dollar demand for gold reached a quarterly record of $US32 billion ($50.73 billion) in the third quarter, industry insiders said the race to secure physical gold had reached an intensity that had never been witnessed before.

Perth Mint sales and marketing director Ron Currie said the unprecedented demand had forced the Mint to cease orders until January, with staff working seven days a week, 24-hour days, over three shifts to meet orders.

He said Europe was leading the demand, with Russia, Ukraine, Middle East and US all buying -- making up 80 per cent of its sales. One European client purchased 30,000 ounces for $33 million.

"We have never seen this before and are working right at capacity. And we are seeing it from clients in the shop buying one ounce, right up to 30,000 ounces from overseas clients," Mr Currie said.

Robert Jaggard, manager of bullion and rare coins dealer Jaggards, said business had picked up strongly and he expected it to increase further.

"All around the world there has been a heavy run on physical gold and there is a shortage of supply," he said.

Via audrey_girl in this iTulip thread. Some might wonder if gold really is such a good investment right now, since although gold does well when inflation is high, many of the pundits are now talking about deflation. And under deflation, the price of everything tends to drop - including gold. However, the party line at iTulip is what they call "Ka-Poom theory" (I shit you not). The basic thesis is that the present economic crisis will unfold with, first a deflation, and then a spectacular inflation. If their theory is true, buying precious metals is a great idea, because the "ka" gives you the opportunity to buy them cheaply, and when the "poom" comes you'll be sitting pretty. Whether their thesis is more plausible than the pundits who fear a deflationary spiral, I can't say.

Of course, the tinfoil hat crowd are saying that prices are being delibrately manipulated by the Illuminati, the Elders of Zion, or some such organization (and I'm not exaggerating; try googling "elders of zion" some time and see how many of the folks at that site take the Protocols seriously). Apparently the wicked conspirators first pushed the price of gold down by shorting gold-backed securities, then bought all the gold in bulk so there's none left for the rest of us. Or something like that. I tend to figure on something much more mundane - like, the bullion wholesalers were taken by surprise as much as anyone was by the direction the economy has taken, and as a result they didn't have enough supply built up to take advantage of the opportunities. The sociological corollary to Ockham's Razor - never invoke conspiracy to explain that which can be adequately explained by stupidity.

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