Investors Go for the Gold
Who are all those gold bugs out there, pushing the price of the metal up with every nervous tick in the Mideast? They’re your neighbors.
Southland coin dealers say they’re suddenly doing a booming business in sales of one-ounce pure gold coins such as the American Eagle, Canadian Maple Leaf and Australian Kangaroo:
* Calls for information on gold coins are up 50% in the past few weeks at Miracle Mile Coin Center on West 3rd Street in Los Angeles, says partner Wayne Wojdak.
* At the Gold & Silver Emporium in Encino, Barry Stuppler says his sales volume in gold coins has tripled this month.
* Wes Bakke, who runs the Coin Shoppe in Fountain Valley, says he has sold 200 Eagle coins alone during the past two weeks.
The rush to buy the coins was sparked by Iraq’s invasion of Kuwait on Aug. 2, which gave a sharp boost to the market price of gold. But dealers note that the metal had been rising even before the Iraqi invasion, from a low of about $350 an ounce in late June. Friday, gold closed at $409.60 on the spot market in New York.
“It’s not just the Mideast situation behind this; it’s economic worries, too,” Wojdak said.
Indeed, professional money managers have long advised individuals to follow the European tradition of keeping at least 5% to 10% of one’s investment portfolio in gold, purely as a safeguard against world calamity. The idea is that, if inflation were to soar, or the economy were to plunge into a depression, gold might be one of the few investments to hold its value.
In practice, no one knows whether gold bullion would indeed be such a great investment if the world were to fall apart. Some coin dealers admit that many of the buyers they’re seeing are jumping into gold not to hold it forever, but to try and make a quick buck.
In any case, if you’re interested in buying gold coins from area coin shops, here are some tips:
* Expect to pay 4% to 6% over the spot price of gold for a one-ounce American Eagle or Canadian Maple Leaf, the two most popular coins. Friday afternoon, for example, the Gold & Silver Emporium was selling Eagles and Maple Leafs for $426 a piece, compared to the spot gold price of $409.60. Miracle Mile Coin Center was quoting $427 for an Eagle.
* Many of the coins are available in smaller sizes, but you’ll pay a much greater premium. A half-ounce Eagle, for example, was selling for $221 on Friday at Miracle Mile Coin Center. That’s an 8% premium over the spot price of a half-ounce of gold.
* You can avoid paying 6.75% California state sales tax on your purchase if you buy more than $1,000 in gold.
* A dealer may not be able to deliver your coins the same day; you may have to wait a day or so for a shipment from a wholesaler. In such cases, a dealer may ask for a 10% down payment and the balance when you pick up the coins.
* Plan to store your coins in a secure place--preferably in the safe deposit department of a major bank. “These coins are generic--like a $20 bill,” Stuppler says. If they’re stolen, they’re virtually untraceable and a thief could sell them anywhere.
* You can buy South African Krugerrands, the original gold coin, for $10 to $12 less than an Eagle or Maple Leaf. But many dealers advise against Krugerrands because they are less marketable, because of the emotional issue of apartheid.
Stock Fund Owners Stay Calm: Despite mounting concerns last week about the Mideast crisis and the economy, mutual fund companies say stock fund redemptions slowed dramatically from the previous week. Fidelity Investments in Boston says its outflow from stock funds last week was one-sixth that of the previous week. “The sentiment on the phones is much different,” said Neil Litvack, vice president for marketing. “We’re still getting calls from people who are concerned,” he said. But they’re calling to talk rather than sell. “Most of them are just saying things like, ‘I know I’ll make out fine after this is over,’ ” Litvack said.
T. Rowe Price Associates, the Baltimore-based fund giant, says that so far in August, its stock funds have seen only a 1% net asset loss from redemptions. Massachusetts Financial Services in Boston says its outflow has been 0.5%.
Have all the sellers finally been shaken from the market? Philip Roth, technical analyst at Dean Witter Reynolds in New York, doubts it. The Dow Jones industrial index rallied back from a 63-point loss at midday Friday to close off 36.64 at 2,644.80. But Roth believes that’s a bad sign, because he didn’t see real conviction in the buying. “What we need to see is a good rally” to restore some faith that the Mideast and economic traumas aren’t the end of the world, he said. Until then, half-hearted rallies that fade will just deepen the pessimism, he said. “I don’t see the conditions yet for a good bottom,” Roth said. If the Dow can’t hold around 2,640 to 2,650, the next stop could be 2,500, he said.
Briefly: Investment banking firm Sutro & Co., a major L.A. player in corporate finance, is touting its expertise in a special color insert in Southland editions of Tuesday’s Wall Street Journal . . . Advanced Logic Research, an Irvine-based personal computer maker, has applied to list its stock on NASDAQ’s National Market System. The stock ($8.50 on Friday) now trades in the secondary over-the-counter market.
GOLD’S RISE
Spot price, per troy ounce, Commodity Exchange July 12: $358.10 Aug 17: $409.60
