Buyers Seeing Gold in Their Future as Hedge Against Y2K

Business is booming, say San Fernando Valley dealers in gold and silver coins, with some buyers apparently fearing they’ll need them if the worst predictions of a Y2K crisis materialize.

“Our sales are up substantially over last year, maybe 60% just in gold coins,” said Tom Lenk, owner of Valley View Coins in Encino. “There used to be an equal amount of buyers and sellers, now there are just buyers.”

Buyers don’t specifically say they want the coins as a hedge against the Y2K computer glitch some fear could temporarily stymie commerce and banking, but they are asking about the barter aspect of the coins, Lenk said.

“I get the feeling they are buying them in preparation,” he said.

Gordon O’Rourke, vice president of Continental Coin and Jewelry Co. in Van Nuys, said the most dramatic increase in his business has come from sales of small denomination quarter-ounce and 1/10-ounce coins because consumers feel these will be best “for bartering in the event of a collapse of the financial system.”

“We’ve seen five- and tenfold increases [in sales] of the smaller units,” he said.

*

The company even has a “Y2K barter round,” a quarter ounce of silver that goes for $2. “We’re selling those by the thousand,” O’Rourke said.

“People are talking about [gold] and they are buying it,” said Larry Brasler, co-owner of Conejo Valley Stamp & Coin in Thousand Oaks, who said coin sales have been rising steadily since September. “Our store has bought and delivered more than 3,000 ounces of gold to customers in the last week and half.”

But Brasler, who dismisses fears that Y2K will cause any big banking problems, noted that the buying boom might just be coincidental, saying people have more disposable income after the first of the year.

*

When the calendar switches to the year 2000, computers programmed to read only two-digit years could malfunction, reading the “00” as 1900 rather than 2000. Fears have been expressed that this could shut down bank computers, making it difficult to withdraw funds, although banking executives generally say the programs are being updated and there will be no major problems.

“The perceived problem is that there is going to be a shortage of cash,” O’Rourke said. “The idea is to have something that people recognize as real money.”

Mark Teller, of M. Louis Teller in Encino, who has been in the precious metals market for 30 years, calls such fears unwarranted.

“I think it’s absolutely ridiculous to store gold coins” as a substitute for bank accounts and paper money, he said. Gold “is a speculative metal that you either buy and sell or that you collect.”

Reports of Y2K gold stockpiling have popped up among coin dealers elsewhere in the country, but gold--a traditional refuge in times of unrest or inflation--has been a big loser in this decade of prosperity.

Gold hit a peak of about $860 an ounce in January 1980 but has drifted mostly downward since then, hitting a low of about $277 last year before recovering to about $286 now, said Joseph Burns of American Pacific Precious Metals in Encino.

Rather than stock up on gold coins, Teller suggests those fearful of Y2K should prepare the same way they would for any other natural disaster that might disrupt services: “Keep a tankful of gas, a few thousand dollars in cash or traveler’s checks, some candles, batteries and food that doesn’t need to be cooked.”

Stocking up on gold and silver as a tool for bartering will just not be useful, he said.

“People understand money; they won’t understand gold coins or diamonds or platinum rounds,” Teller said. “Ninety percent of the people in the U.S. have never seen a gold coin. They won’t know if it’s real.”

And if someone gave a gas station attendant a gold coin, “What kind of change is he going to give you?” he asked.

Buyers should acquire gold, he said, not from fear, but for sounder reasons--because they have extra money to invest, because the price of gold is low now or because they are collectors.

“If you look at the price of gold, it’s gone nowhere,” Teller said. “At $288 an ounce, it’s a pretty good buy.”

Still, many tout gold and silver coins as a good bet for the upscale survivalist.

Woodland Hills coin dealer Barry Stuppler, of Barry Stuppler & Co., Inc., also thinks the Y2K scare is overrated.

“I don’t believe there will be a tremendous disaster,” he said, “but the perception [that there will be] is fueling the demand [for gold and silver coins].

“There is a lot of concern about the infrastructure of commerce breaking down. People want gold and silver as a barter vehicle.”

The demand will increase as the end of the year approaches and with increased media coverage, he said.

*

Meanwhile, he noted, the perception “has been very good for business, very good for the value of coins. Demand is up for gold coins.”

Stuppler has also seen a 65% jump since last year in sales of the Morgan silver dollar, which has climbed in price from about $15 to about $25. “We’ve sold tens of thousands of these over the last year.”

The coin is popular because it is “easily recognizable and cherished because it is remembered fondly,” he noted. “And in mint condition, it is a beautiful coin.”

Also, he said, silver is perceived as easier to barter with than gold and is more affordable for the average buyer.

Several coin experts said they thought the gold-buying frenzy was limited pretty much to the United States.

“Other markets don’t have the money to spend on gold that we have now,’ Brasler said.

Although the price of gold is still at a five- to 10-year low, experts say prices could rise.

“One reason gold is down is because there is a glut,” said John Klein of the Klein Exchange, which buys, refines and sells scrap gold and other precious metals. “Gold is a commodity. Years ago, people would buy gold and put it away as a hedge against inflation. They are not prone to do that today because the economy is strong.”