published Thursday, August 11th, 2011

Gold rush spurred by record high price

Rick Davis, owner of Rick Davis Gold & Diamonds, speaks about the high price of gold at his Brainerd Road store early Wednesday morning.
Rick Davis, owner of Rick Davis Gold & Diamonds, speaks about the high price of gold at his Brainerd Road store early Wednesday morning.
Photo by Dan Henry.
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Antsy crowds formed long lines at Chattanooga-area gold buyers Wednesday, as consumers struck by gold fever rushed to sell old jewelry, coins and even teeth.

The bling blitz, which has been ongoing for several months, gained steam as world gold prices vaulted above $1,800 per ounce for the first time.

That news, announced as stock, bond and currency markets struggled for footing, signaled that the shiny yellow metal still is a reliable safe haven for nervous investors.

In Chattanooga, Robert Westenhaver and his wife, Miriam, turned in $525 worth of gold on Wednesday at Rick Davis Gold & Diamonds.

“We turned in some pieces of Mariam’s old teeth that she had, and I turned in my class ring of 1957,” Robert Westenhaver said. “Hey, the market’s high, this is a good time.”

With their daughter’s marriage coming up on Sept. 10 and relatives arriving from all over the country, the time was ripe to pick up some cash, he said.

“Maybe if we had waited, it might have been worth more, but I’m 72 and I don’t need to do that,” Westenhaver said.

But how high will gold go?

Sellers who hold on too long could miss cashing out at the top of the bubble, and those who sell early may suffer seller’s remorse if prices climb higher.

“A lot of people think it’s going to go to $5,000 an ounce, and they don’t want to miss it,” said Don Smith, manager at Southern Bullion Coin & Jewelry.

Gold once hit $850 an ounce in the early 1980s, he said, or about $2,320 in today’s dollars, before the country climbed out of that economic malaise and reached record levels of prosperity later in the decade.

That drove the price of gold back down, a financial disaster for investors who bought at the peak, though it was good news for the country as a whole.

How high

Rick Davis, owner of his namesake, Rick Davis Gold & Diamonds, said the number of customers coming through his door has quadrupled since the price of gold hit $1,600 about a month ago.

“The last few days, it’s probably jumped another 60 percent,” Davis said.

Davis, who has been in the gold-buying business for 36 years, said part of the reason for the rush is that consumers realize that an eventual market correction is inevitable, and they’re hoping to sell their jewelry before the price drops.

“The correction is going to come as the economy gets better,” Davis said.

Smith said he plans to melt down most of the gold items turned in by customers.

“We refine it into bars and sell it to the government,” he said.

Of course, he doesn’t pay the market rate to customers, because that would leave him no profit margin when selling the gold back to the federal government, which then doles it back out to jewelers and coin makers.

Gold buyers generally run 5 percent profit margins, he said, making most of their money on volume rather than individual sales.

“You can’t pay the market rate because you’ve got to refine it, and pay to operate the business,” he said.

Lewis Revels, owner of Chattanooga Coin, said he doesn’t expect the price of gold to fall until the U.S. economy gets back on track.

“Until that happens, I don’t really see a top to gold,” Revels said.

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about Ellis Smith...

Ellis Smith joined the Chattanooga Times Free Press in January 2010 as a business reporter. His beat includes the flooring industry, Chattem, Unum, Krystal, the automobile market, real estate and technology. Ellis is from Marietta, Ga., and has a bachelor’s degree in mass communication at the University of West Georgia. He previously worked at UTV-13 News, Carrollton, Ga., as a producer; at the The West Georgian, Carrollton, Ga., as editor; and at the Times-Georgian, Carrollton, ...

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nucanuck said...

As long as governments continue to dilute their currencies by printing excessively, gold and silver will continue to gain in nominal terms.

Gold and silver are real money, all the rest are substitutes. In times of trouble, like now, people want the safety of gold and silver.

Countries store gold as reserves, rich people horde gold, even Chinese peasants save gold and silver. Only in America do we think gold is a barbarous relic.

Those selling gold now will probably regret it soon.

August 11, 2011 at 1:54 a.m.
Salsa said...

Guns are more valuable than gold. If you have a gun you can always get gold!

August 11, 2011 at 3:55 p.m.
nucanuck said...

Guns are a hallmark of a deteriorating society, gold...quite the reverse.

August 11, 2011 at 7:31 p.m.
rolando said...

Tell that "hallmark of a deteriorating society" BS to the Founders, nucanuck.

Still a bit sore at them, are you?

England is doing oh, so well without guns for their police and their honest citizens, aren't they? Seems the me the reverse of your comment holds true over there in today's world.

August 15, 2011 at 10:11 a.m.
onotoman said...

Gold was definitely sky high with its price a few months back, and it got so bad I was looking at trading silver instead of gold in my portfolio. Eventually, the prices came down and stabilized, but that might not continue for a long time.

Gemma Tubbrit -

February 7, 2012 at 2:48 a.m.
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