Selloff tarnishes image, but some still bullish on gold
For a commodity that dazzled for most of the last decade, gold turned to lead this past week when the price dropped 13 percent over two trading days.
While it ultimately recovered a bit, gold's abrupt change of fortune made many wonder: Has the precious metal's long run as a perceived safe haven run its course?
Ross Almlie, of TCI Financial Advisors in West Fargo, thinks gold's time in the sun is over, for now.
"When people fall out of love with something, they don't come back to it quickly, and that's what we're seeing with gold," said Almlie, who suspects gold's price could "get down to $1,200 (an ounce) before we know it."
The price of gold stood at about $1,560 an ounce at the opening of the market April 12, but by the close of business Monday, the price had dropped to $1,329 after experiencing the sharpest drop in more than 30 years.
By midweek, the price had stabilized around $1,375 and by Friday it was above $1,400 an ounce.
Regarding gold's price drop, Almlie said that while the precious metal's fundamentals still seem to make sense, "the market has a mind of its own."
He said his company began steering clients away from gold about a year ago, when the price stalled at about $1,600 an ounce.
Almlie likened gold's drop in popularity to the aversion many investors are showing toward Apple Inc., whose market value remains depressed even though many analysts believe the company represents one of the best growth bets around.
"Nobody's willing to pick up a bunch of shares of Apple right now," Almlie said.
Some still bullish
Jack Seaman, who operates MinDak Gold Buyers in the Moorhead Center Mall in Moorhead, Minn., said last week's market selloff had no downside effect on traffic at his store, which mostly buys from people bringing in gold jewelry and the like.
If anything, business increased, Seaman said.
"Customers might fear that gold will drop even further, so they want to sell their items before the price drops," said Seaman, who doesn't think gold prices will slip into freefall.
"I believe gold is going to stabilize and go on a slight increase in price as we go through the remainder of the year," Seaman said.
He maintained that while the price of gold may take large swings up or down, the impact on what people get for secondhand jewelry may stay relatively small.
He said if gold prices drop $150 or $200 an ounce, it might translate to a $5 or $10 difference on what someone gets for their jewelry.
At Treasure Island in Fargo, people are still bringing in gold items to sell, but many more are taking advantage of the price drop and are buying gold, mostly in the form of coins and gold bars, said owner Chris Olson. This past week was the busiest week his business has ever seen.
"We had the single largest drop in the precious metals price since 1981," Olson said. "This has resulted in an unprecedented number of orders." He figures buyers are banking on the nation's debt situation to rekindle interest in gold as a hedge against a devalued dollar.
For those looking for a place to stash their hoard, Olson also operates Dakota Depository, a separate business co-located with Treasure Island.
Even with the volume of business that occurred this past week, Olson said they are not in danger of running out of space in the depository.
"There's still plenty of room, there," he said. "Plenty of room."