Over the past year, the price of gold fell by about 13 percent and because of this many financial experts believe 2014 will be the complete end of the yellow metal’s 13-year bull run. Some gold investors, who were once ecstatic about precious metals and invested in it simply as a short-term profit generator, have become terrified about gold’s prospects.
Earlier this month, a Goldman Sachs head proclaimed that gold will drop to around $1,050, an additional 16 percent decline from its current prices of around $1,250 – no mention of how silver will perform. London Bullion Market Association, meanwhile, projects gold will fall to as low as $950.
Others aren’t so skeptical about gold’s future. Jim Rogers, chairman of Rogers Holdings and prolific contrarian investor, does see gold hitting a bottom this year, but that bottom would most likely be the end and it would start rising again. Former Texas Republican Congressman and three-time presidential candidate Ron Paul, who is an avid gold investor, looks at gold at a long-term investment perspective.
“I don’t see gold so much in short-term because I see it in over a 100-year period,” said Paul in an interview with CNBC. “Long-term, it will always go up so long as we have a [Federal Reserve] printing money. But, on the short-term, the traders have a lot to say about this. A correction like we just had last year – one year out of 13 – that’s not a big correction. That doesn’t destroy a so-called bull market.”
Despite the drop in gold prices, the demand is still growing and investors are still buying large quantities of gold – even central banks are acquiring large quantities of the precious metal. It was reported by the International Business Times this month that the Royal Mint in Great Britain announced its Sovereign 2014 gold coins were out of stock, while the World Gold Council stated in a report that gold demand grew 63 percent in the first three quarters of 2013.
“Since the dip in the price of gold, we have seen increased demand for our gold bullion coins from the major coin markets, and this presently shows no sign of abating,” the mint said in an email to the news outlet. “The Royal Mint continues to supply to its customers and is increasing production to accommodate the higher demand.”
Peter Schiff, president of Euro Pacific Capital, repeated most of last year that this might be the last great buying opportunity for both gold and silver – silver has dropped to less than $20 an ounce over the past week. Much like Dr. Paul, Schiff argues that as long as the Federal Reserve continues to print money, gold is the best investment available.
“Buckle up your seatbelts. I’m sure it’s going to be a rough ride next week. But don’t lose your conviction, hang onto your gold and if anything use these as buying opportunities and accumulate. If you don’t have gold, take advantage of the decline in price,” said Schiff. “I think in the future, I think we’re going to look back at this particular period as the last great buying opportunity of this ongoing bull market.”
This goes back to the initial question: are goldbugs selling their gold to online pawn shops?
It’s no secret that online pawn shops such as iPawn or PawnUp are gaining tremendous clientele from those who are strapped for cash or who are not interested in their precious metals, diamonds, watches and other tangible assets. With an immense number of households in the United States living paycheck to paycheck, it can be quite understandable why some might get rid of their gold.
Years ago, consumers would sell their treasured goods to physical pawn shops. However, with technological advancements and acceptance of online retailers, customers have turned to the Internet to make some money. Individuals tell the pawn shop what it has, they send the item through FedEx and the owner pays in cash through PayPal – perhaps even in bitcoin this year!
The online pawn shop industry has gotten so large since the economic collapse in 2007 and 2008. The Wall Street Journal published an in-depth piece in late 2011 on how pawn shops on the Internet lend cash quickly or buy assets in a convenient amount of time, something that consumers hold dearly when rent is due, the utility bill is late or an unforeseen event has transpired.
Cash for gold seems to be doing quite well. Everywhere, whether it’s on street corners, bus stops or television, companies are advertising that they will give you cash for all of your gold and silver bullion and jewelry.
In 2011, the Financial Post reported that people weren’t too keen on giving up their gold to pawn shops or bullion buyers because they expected prices to surge beyond $2,000. That may have changed due to the decline in prices over the past 12 months.
For goldbugs, contrarians say to hold onto your gold because it’s simply a bump in the road.