Treasured Metals High Price of Gold and Silver Sends Owners on a Selling Spree

By DAN SHAW, Courier & Press staff writer 464-7519 or shawd@courierpress.com

Once thought to be little more than trinkets, old jewelry stuffed away in attics and keepsake boxes has suddenly become a small treasure because of the extraordinarily high price of gold and silver.

Gold is now being sold for around $900 an ounce. That’s more than double what it was just four years ago, according to Kitco, a Web site that tracks different metals. Silver hit $20 an ounce last month, up from nearly $7 an ounce four years ago.

Bryan Manzi, owner of Classical Coins in Evansville, said the high prices have prompted customers to sell everything from gold coins to silver teapots to metal coupling out of air-conditioners.

“Some are cleaning out their jewelry boxes and walking out with thousands of dollars,” Manzi said.

He, in turn, is happy to buy as much gold and silver as he can. Even though the price for the metals is quite high, the demand for them is still strong. Manzi said much of the gold and silver he sells goes to investors in foreign countries.

“Things aren’t doing too good around here,” he said. “I’m selling about less than 10 percent domestic and 90 percent abroad.”

Walayet Khan, a professor of finance at the University of Evansville, said a large reason investors turn to gold and silver is that they are thought of as having a stable value. Gold is particularly attractive during hard times, when stocks, real estate and other assets are quickly losing value.

Because of its rarity and beauty, gold has been prized for around 5,000 years, Khan said. And most investors are willing to bet that won’t change in the near future.

Another reason for the popularity of gold and silver: Prices in the United States are steadily being inflated. A lot of that is a result of the increasing cost of gasoline.

Since nearly everything bought or sold must be transported, the cost of fuel directly causes the price of almost every good to rise, Khan said.

That, in turn, diminishes the value of the dollar. As the currency of the United States grows weaker, investors are looking to put their money into stabler investments – and many have turned to gold.

“We are even to the point that common, average people have started thinking to invest in gold,” Khan said.

In the past year, the demand for gold has gone up by 37 percent, Khan said.

And so long as the forecast for the economy remains gloomy, as it likely will for months ahead, he can only expect the price of gold to stay high, he said.

For Manzi and other gold sellers that’s good news. Others aren’t quite as eager to hear it.

Tim Droste, an owner of Droste’s Jewelry Shoppes, said his business continues to do well despite the high prices, rather than because of them.

Fortunately, those who are looking to buy engagement rings aren’t apt to postpone their weddings just because of the high price of a gold or silver mounting.

Droste’s is also in a good position because it is in the business of repairing and appraising jewelry, not just selling it.

“And we’ve got a name,” Droste said. “We’ve been in business for over 40 years.”

Despite the high prices, the demand for silver jewelry seems to have only grown, he said. He speculated the popularity is likely a result of successful advertising campaigns coupled with the fact that silver is still a fairly cheap metal.

“People will spend from $25 to $100, if they can get something stylish and unique,” Droste said.

Also good for Droste’s: The high metal prices have prompted many customers to have their jewelry reappraised so it can be insured at its current, high value, he said.

Khan said that because the price of gold often rises when that of other assets falls, many investors buy the metal as a hedge, or insurance against bad bets. Despite the bad economy, he thinks the best advice is still to own a variety of assets, including stocks and bonds.

“I think a diversified portfolio should have some gold in it as well,” he said.

Manzi said he agrees, although he would never tell his customers to put all of their money into gold.

“I wouldn’t put all my eggs in one basket,” he said. “You are flirting with disaster there.”

ILLUSTRATION – LARRY FINK

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