Gold Rush: Soaring Prices, Unscrupulous Precious-Metals Dealers, Right-Wing Paranoia -- We've Been Down This Yellow-Brick Road Before

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Putting aside the world-gone-to-hell theory for buying gold, there's the more practical reason: making money.

The lead-up to the exorbitant gold prices of today began in 1971, when President Richard Nixon ended a 25-year-old system of trading in gold at the fixed price of $35 an ounce. Gold prices started going up big-time after that and peaked in the record-setting years of 1980 and 1981.

Demand for gold climbed steadily through the 1970s, following Nixon's move and an economic downturn called stagflation, a term used to describe a time of high inflation and unemployment. As gold entered a period of extreme fluctuation in the early 1980s, some people made a boodle — while those who got into the game too late got hosed.

Buyers in the first days of January 1980 could snatch up gold for about $550 to $650. Then, on January 21, the price spiked at $850 an ounce. Yet, by January 31, it had lost a quarter of that value and ended the year below $600.

For the next 25 years, gold prices ranged from about $300 to $450.

No doubt, those kinds of wild fluctuations make many Americans think twice about buying gold at today's price of roughly $1,200 per ounce.

Gold boosters note that the trends are different this time. Gold's big rise in 2006 hasn't descended to the $450 or so seen throughout much of the 1980s and 1990s.

A burning question for gold aficionados is whether the inflated price of gold constitutes a "bubble" similar to the real-estate market's bubble. And, if so, when will that bubble burst?

Despite the fact that the dollar price of gold never has been higher, some gold sellers and so-called experts predict it will keep rising — to double or even triple its current value. Peter Schiff, an economist who warned the public in 2006 of the then-looming recession, predicted this month that gold would be selling for $5,000 or $10,000 an ounce within five to 10 years. He suggests buying gold bullion, like American Eagle coins, and stock in gold-mining operations.

In fact, the price of gold is not as high as it's ever been, when adjusted for inflation. Experts estimate the real price of gold during the high of 1980 was $1,500 to $2,000, maybe more, measured in today's dollars.

Judging by sales of the American Eagle, as tallied by the U.S. Mint, the public's demand for gold is nearly as high as it was in 1986, when the price was much lower. Gold advocates claim that mainstream America hasn't yet caught on to the buying trend, and that it's possible even more people will jump on the gilded bandwagon.

The people often making these claims, gold dealers, plan to make money coming and going: When the market is hot and the price is high, they will make money by selling at a premium over the "spot price," the dollar amount assigned to gold at any given time.

When the market falls and people are desperate to sell before it dives even lower, dealers will rake in cash by buying metals back at less than the spot price.

If you want to buy gold as an investment, you can't do it through the U.S. Mint, which produces the most popular form of bullion, the one-ounce American Eagle. (If you have the cash, you can also buy Fort Knox-style bricks — but, again, not directly from the Mint).

When the Mint began its Eagle-selling program in 1986, officials decided not to set up shop as a government-run retail business, says the Mint's spokesman, Michael White. Instead, bullion is sold to just eight companies in the world, which then re-sell it to retail outlets.

The Mint does sell specially made, blemish-free "proof" coins, such as the American Buffalo, but with a high mark-up. A one-ounce Buffalo proof, for example, in late June was selling for $1,510, about $150 more than gold's spot price.

"We don't sell [proof coins] as an investment," White says. "We say it's a collector's version."

One of the eight companies in the world authorized to buy gold bullion from the U.S. Mint is an outfit in Bridgewater, Massachusetts, called Coins N Things. Though the company still does business with the mom-and-pop-shop name it started with in 1974, it convinced the Mint in January that it was one of the big boys. To join the Mint's exclusive club — which allows the eight companies to buy bullion at a lower wholesale rate than anyone else — Coins N Things had to prove it was capable of handling a huge amount of trade, Paul Thompson, the company's vice president, tells New Times.

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Ray Stern has worked as a newspaper reporter in Arizona for more than two decades. He's won numerous awards for his reporting, including the Arizona Press Club's Don Bolles Award for Investigative Journalism.