Gold and silver market finds motivated buyers and sellers

The market for precious metals is seeing both sides of the coin these days with both buyers and sellers showing interest.

The high price of gold and silver, in particular gold, which was at $723.70 per ounce as of Friday, combined with a tough economy, is pushing people to sell their excess jewelry to gain some ready cash.

And the uncertainty of the markets has been leading more people cashing in their investments to buy more secure gold and silver products.

Allan Rowe, owner of Northern Nevada Coin on North Carson Street, which buys jewelry for either resale or meltdown, said they are busy with both types of customers.

"Some people look for extra cash, and other people that have cash look for somewhere safe to put it," he said. "It's better to be informed about what you have."

Rowe advised anyone interested in selling their jewelry to contact a local dealer about its worth, rather than going online to a Web site interested in buying. He said one customer of a well-advertised site seeking to purchase gold jewelry was offered $68 for items Rowe said were really valued at $400.

Northern Nevada Coin General Manager Aaron Ware said the problem with online dealers is a seller doesn't know how the value of the gold is determined.

"That's probably the worst deal out there for people," he said. "Now there are gold buying parties similar to Tupperware parties. The thing to remember is when you are dealing with those people, you are not dealing with professionals."

He said the online dealers require sellers to mail the jewelry to them, then Web site officials contact the seller and tell them what the price will be.

"If you refuse, it takes weeks to get your stuff back," he said. "People need to shop around."

Ware advised sellers to call local dealers to find out what percentage of melt they were paying for gold or silver.

"Melt" is the value of the jewelry on the spot market after it is melted down, he said, adding that Northern Nevada Coin paid 80 percent of melt. The remaining 20 percent is their profit margin.

He said 14 carat gold is 48 percent pure, while 24 carat gold is pure, and customers at the shop can have their jewelry tested if they are unsure.

Ware indicated a year and a half ago, there were a large number of sellers of gold, but that has leveled off now and a whole different group of people are looking to buy.

He said the stock market decline and the well-publicized failures of several large investment banks have pushed some investors, mostly middle-class people, to sell their stocks and investments and purchase gold, looking for a safe haven for their money.

He indicated that gold generally maintains its buying power, no matter the price.

In 1975, Ware said, the federal government put the price of gold at $300 an ounce, so that 100 ounces was worth $30,000, about the price of a three-bedroom, two-bath home at the time.

But in 1979, with hyperinflation raging, the federal government removed the cap on gold values, and it soared to $800 an ounce, or $80,000 for 100 ounces. That was about the cost of the same house in 1979.

"Historically speaking, over the long haul, gold has maintained its buying power," he said.

The irony is more people buying gold can lead to a lowering of the price.

The cycle, as Ware explained it, is that nervous investors take funds, for example, $25,000, out of investment accounts. The investment bank can no longer borrow that much from other banks, so it has to sell commodities - gold or silver on paper - to give their client his cash. That sends the price of those commodities down.

So then the investor tries to buy 100 ounces of physical gold, but dealers have trouble getting their hands on that much, so the price goes up, thanks to the new demand.

"What you can hold versus what you have on paper is the attraction," he said. "Most people believe that inflation will rear its ugly head again soon, and they are fleeing to safety."

He said people can buy gold in many forms, such as bullion or bars, coins or ingots.

- Contact reporter Karen Woodmansee at kwoodmansee@nevadaappeal.com or call 881-7351.