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Cash-For-Gold Not a Market Top Signal

By: Peter Cooper, Arabian Money


-- Posted Tuesday, 23 February 2010 | Digg This ArticleDigg It! | | Source: GoldSeek.com

It is quite worrying to switch on German TV and see an advert for ‘gelt fur geld’ or cash-for-gold. Four years ago TV adverts for courses in how to flip US real estate were a signal that the market was near the top.

 

Yet the real estate adverts were about how to buy property. The cash-for-gold adverts are all about selling gold jewellery for instant cash – presumably at a rate that is considerably to the advantage of the TV advertiser.

 

70s silver coins

 

There is a past precedent from the late 1970s. In the UK then selling pre-1947 silver coinage for more than double its face value was all the rage. After a while all these coins had been taken from circulation and melted down by dealers. But that was long before the 10-fold increase in the silver price.

 

So perhaps it is no different this time. The cash-for-gold adverts are a symbol of a developing bull market in precious metals, not the actual top itself.

 

Indeed, in the late 1970s this author used to search through mounds of coins to locate scrap silver to cash in. It was a nice little earner for a teenager. But if only that silver had been kept, and not sold!

 

For not only are those selling their family gold and silver now getting poor market prices – they have to be low in order to pay for prime time TV ads – this is also going to be a missed opportunity as there will be an opportunity to cash out at much higher prices later on.

 

Still time to go

 

If the 1970s are a precedent then the silver coins were pretty much gone by 1978, two years before gold and silver hit their highs – a price still to be matched by silver today, and gold is not that much higher either.

 

Just adjusting for inflation would give us very much higher prices. Retail investor interest in buying and selling gold and silver is just a part of an evolving bull market. It does not signal a market top.

 

In the case of real estate flipping in 2006 that did signal a market top because the professionals were no longer buyers but purveyors of courses to tell others how to get rich. Buying gold now clearly makes sense as the mug-punters are still sellers.


-- Posted Tuesday, 23 February 2010 | Digg This Article | Source: GoldSeek.com


About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in 1999 to complete his first book, a history of the Bovis construction group.

Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in www.ameinfo.com, which later became the Middle East's leading English language business news website.

Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.

He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.

Order my book online from this link




 



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