Inside the Global Gold Frenzy

HERE, in a corner of Switzerland where Italian is spoken and roughly one-third of the world’s gold is refined into bars and ingots, business is booming. Every day, bangles, bracelets and necklaces arrive in plastic bags — from souks in the Middle East, from pawn shops in Asia and from corner jewelers in Europe and North America.

“It could be your grandmother’s gold or the gift of an ex-boyfriend,” said Erhard Oberli, the chief executive of Argor-Heraeus, a major refiner here that processes roughly 400 tons of gold a year. “Gold doesn’t disappear.”

Amid a global frenzy fed by multibillion-dollar hedge funds, wealthy speculators and governments all rushing to stock up on the precious yellow metal, the price of gold briefly surpassed $1,100 an ounce on Friday, a record high.

Long considered the ultimate refuge for nervous investors, gold has climbed as the dollar has steadily weakened, budget deficits have expanded in the United States and Europe, and central banks have continued to pump trillions of dollars into weak economies, creating fears of another asset bubble that will ultimately pop.

“It’s not that gold has changed, but gold buyers have changed,” said Suki Cooper, a precious-metals strategist for Barclays Capital. “It’s a structural shift we’re seeing on the investing side, from Asian central banks right down to individual investors buying ingots and coins.”

“Gold’s appeal has broadened,” added Ms. Cooper, who predicts that it will hit $1,140 an ounce by the second quarter of next year.

at the corner of Harrods Department Store in London?

Just because a retailer is selling gold doesn’t make this a bubble. Consider this wisdom from jiggyboy:

- Nothing can be in a bubble unless it is well past the previous inflation-adjusted all-time high

- Gold regularly drops up to ten percent in three days or less and once dropped more than twenty percent nearly without a break in 2008. Bubble price action goes one way.

- In every case, gold “corrections” have taken weeks and months to recover. Bubble price action is exponential — not a grinding, grudging “recovery”.

- It is almost a commodity, yet supply is not readily available. That’s a supply shortage, not a bubble.

- Boiler-room companies (i.e. cash4gold) are begging the masses to sell to them, not to buy from them

- CNBC is still bashing goldbugs instead of worshipping them

- We haven’t seen a TIME or Business Week magazine cover with a cartoony John Q. Public engaging in borderline-sexual acts with Lady Liberty from the Saint Gaudens Double Eagle

- Nobody you know, knows what Lady Liberty from the Saint Gaudens Double Eagle looks like

- Hollywood hasn’t yet made gold-related TV shows, movies, etc.

Also, this article specifically addresses the harrods issue:

“....If the top were in, we’d be in the midst of an all-out Mania. Are we? Do you get the impression there’s a rush into gold by the greater public right now? Are headlines blazing the covers of major magazines pronouncing gold as the new investment king? Has Wall Street gone gaga over gold and silver? I ask because these are the true signs that a trend has entered its final blow-off top and would signal it’s time to get out.

“I decided to put Bert’s prognostication to the test, and I invite you to play along.

“First, I struck up casual conversations with my friends, neighbors, relatives, acquaintances, my wife’s co-workers - heck, even my seatmates on airplanes - angling to learn how much gold they were hoarding, about the killing they were making in gold stocks, and how they were getting rich from all their precious metal investments. (In fairness, I had to exclude my dad, who is an award-winning gold panner, but he’s the only one.)

“I found no one - not one person - who is actively investing in anything gold or silver, let alone rushing to buy or hoard the stuff. I had two people who confided that they did own gold, but in both cases it was inherited. A few were curious how they would go about doing such a thing, and fewer asked if I thought they should. Most everyone looked at me blankly when I asked; they didn’t seem to know what I was talking about. When I got a reaction like that, it was pointless to ask about gold stocks. Of the handful I did ask, most had never heard of Barrick Gold, the world’s largest gold producer....”

http://www.321gold.com/editorials/casey/casey110509.html

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