Gold at $1,000 Spurs Sales of Old Jewelry as Scrap Rises 22%
Source: Bloomberg, Millie Munshi (9/17/09)
"Investor demand for a refuge from tumbling prices of financial assets sent gold up 31% in the past year."
"With the gold prices so high, and the recession going, why not sell something I never wear?" Murado, 30, of New York, said three days after the metal surged to $1,013.70/oz. He sold the jewelry to EZSellGold Inc. in Manhattan for $3,500, up from the $500 purchase price in 1994.
While Standard Bank Ltd. predicts prices will rise 7.8% by the end of the year to $1,100 and Barrick Gold Corp., the world's biggest producer, is spending $5.6 billion to bet the rally will continue, consumers are speculating that price gains are limited after a nine-year rally. Scrap sales, including used jewelry, will rise 22% in 2009, said Philip Klapwijk, the chairman of industry researcher GFMS Ltd.
Individuals are selling as the deepest recession in more than 60 years sends the U.S. unemployment rate to the highest level since 1983. Investor demand for a refuge from tumbling prices of financial assets sent gold up 31% in the past year.
Murado would have received a gain of $634 by putting $500 into the Standard & Poor's 500 Index in 1994, excluding dividends, compared with the $3,000 windfall from his bracelet and necklace.
The jewelry wasn't worth nearly as much five years ago, when gold lingered around $400/oz. on the Comex division of the New York Mercantile Exchange. The precious metal also fell as low as $253.20 in 1999, a year when the S&P rallied 20% and the U.S. economy grew 4.8%.
"There's not that much difference in value between $950 and $1,000 gold," said Michael Musheyev, an EZSellGold co-owner. "But when everyone sees that $1,000 level or they hear about it in the news, it makes them go gaga."
For Murado, the prospect of higher prices means he will probably unload more of his jewelry.
"Everybody is interested in buying gold now, so I'm going to be selling every day when the price is above $1,000."