Gold's waxing and waning allure

Gold’s Quirk: It’s Volatile, but Holders Feel Secure

Excerpt:

James K. Galbraith, an economist and public policy professor at the University of Texas, however, cautioned that investors who are considering a gold purchase now, either to hold or trade, should “be prepared to take a bath.” They should know, he said, what happened to those who waited in long lines outside shops on Jan. 21, 1980, eager to pay more than $900 apiece for coins containing an ounce of gold.


While gold is a hot commodity now, the demand by average investors is still far from what it was then. That was the top of the previous gold bull market, which had begun in January 1975, after President Gerald R. Ford signed a bill legalizing private ownership of gold coins, bars and certificates.


Gold ownership had been illegal since 1933, when, to forestall Americans from demanding that banks give them gold for their dollars, President Franklin D. Roosevelt issued an executive order prohibiting it. (In the early 1970s, President Richard M. Nixon severed the last remaining links of the so-called gold standard that had made currency redeemable for actual gold.)


The early gold buyers in 1975 included Kenneth J. Gerbino, 62, who now manages private accounts and a hedge fund of gold mining stocks and who profits when buyers push up gold’s price.


“I could see that when the federal government prints money to pay its bills, inflation always results, and buying gold was the best way to keep up with it,” recalled Mr. Gerbino, whose business is based in Beverly Hills, Calif. “I’d go to a coin shop, give a guy $1,000 and get some coins.”


Gold started climbing strongly in 1978. In January 1980, with inflation nearly 14 percent, average investors afflicted by gold fever jumped into the market. So did experienced sellers like Anthony Calcagno, who was dealing rare coins in San Francisco. Less than six months earlier, he had purchased many South African Krugerrands for around $300 apiece.



Comment: Gold (or silver) may be purchased at Apmex.com or Ebay. I personally had a bad experience buying silver coins via Ebay where the seller cleverly accepted my order for 20 Silver American Eagles and then sent me ONE and used the shipping documentation as proof that that he had completed the sale. Ebay ultimately (after 90 + days and much documentation and communication) reimbursed me for the failed purchase. My own recommendation is not to make gold or silver a major portion of one's investments.