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Markowitz: No rush for gold buyers, sellers (just yet)

Tribune-Review
| Thursday, November 13, 2014 12:01 a.m

Gold and silver dealer Eddie Lowy is glad he has low overhead these days.

Buyers “have disappeared off the face of the earth,” said Lowy, a Downtown dealer who owns Banner Coin Exchange. And sellers? Anyone inclined to bring in valuables for cash?

“They don’t want to sell at these price levels,” he said.

Lowy has endured a lot of fluctuations in the 34 years he has operated his coin store.

This year’s price story is down — sharply — even as a rival attraction for investment has boomed: the stock market.

Gold took a special hit in the last two months, dropping Lowy’s business “about 35 percent” from a year ago.

At Charles Litman Coin Exchange, Downtown, owner Kitty Litman said she views gold as being in a “temporary slump.” The metal topped $1.390 an ounce a few months ago, then fell off the table. It closed Wednesday at $1,159.10, down 20-odd percent from the summer high. Silver, which had hit $22 an ounce, sagged to $15.62.

What happened?

For one thing, a surprisingly non-inflationary economic recovery.

The stock market picked up again after a scary recent 8 percent drop. Inflation is officially tame at 1.7 percent. And the slow comeback from recession five years ago is adding jobs more consistently.

Japan recently piled on with a boost in yen supply to juice its economy. This just as our own Federal Reserve quit “quantitative easing.” So the dollar gained against other major currencies — and against gold (also oil).

Gold had been in slow decline anyway from $1.923 an ounce, its all-time top, in August 2011, just before the USA became less than AAA in bond rating.

So where to from here?

This may be a clue. A national dealer has quit forecasting $2,000 gold and $50 silver by yearend in radio commercials. A prominent Indianapolis bullion house is targeting $1,000 to $1,100 gold by New Year’s. Another predicts gold drifting to $900 by 2017, a “speculative bubble in the process of deflating.”

Gold holders and political conservatives both tend to hate government overspending, buildup of debt and cheapening of paper money by politicians and central banks.

It’s ironic, too, that just as novice investors are tempted to rush into stocks in the euphoria of bull markets, so do they in gold and silver. Near $1,400 and $22 respectively, Eddie Lowy said he could hardly keep any in stock. “But when prices are falling,” those who might enjoy a buying opportunity “run for the hills,” he said

Kitty Litman expects a seasonal lift from Christmas buying. A gold ounce coin would be pricey for most grandchildren, but several countries issue dime-size coins with a tenth of an ounce gold content. And a shiny silver dollar is in the $20 range.

Eddie Lowy said the consensus on yearend prices “is neutral to negative.” But “three to five years from now, he said, “those who own precious metals at current prices will be pleasantly surprised.”

Jack Markowitz is a Thursday columnist of Trib Total Media. Email him at jmarkowitz@tribweb.com.

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