by Richard Giedroyc
November 13, 2012 – In the inflationary economic crisis that climaxed in 1980 gold prices spiked to somewhere around $800 US per ounce. The price of gold then tumbled to less than half that figure once the financial world recovered. Gold prices remained in a narrow trading range for nearly three decades. A dramatic appreciation once more commenced during the early 21st century, this time fueled primarily by the Great Recession.
During the Great Recession many investors viewed gold as a traditional safe haven in which to place their money. Stock markets around the world were plunging in tandem. It was generally anticipated that as the stock markets recovered gold would once more decline in a similar pattern to what had been experienced during the previous crisis. At the time this article is being written gold has declined, however it has declined noticeably less than it did in that earlier scenario. Today gold appears to be trading in a narrow price range much closer to where it was during the depths of the Great Recession.
There are many reasons why gold has not followed the pattern it did three decades earlier. There is, however, one particular observation that should be noted as a possible entrée for ancillary mint products by those mints with refining or precious metal coin production capabilities.
Consider the following logic. We are now in a true global economy for the first time. What happens in any individual country has ramifications worldwide. If one country catches an economic cold the entire world braces to catch the economic flu.
Countries including China, India, Turkey, and others have traditions in which the family wealth is oftentimes stored in gold. This may be gold in the form of jewelry or coins, but it is physical gold, not a paper transaction. These people have taken delivery of this commodity. In some of these places the woman of the family wears this wealth. The demand for gold is continual in these places, this demand fluctuating with the economics of the moment, but nevertheless a strong and reasonably consistent demand for the yellow metal. Since this is a cultural rather than an economic reason to own gold this practice should be recognized as being important.
This culture fueled demand for gold is relevant to gold producers, refiners, and manufacturers including mints. In some respects this demand is assisted by the modern financial model used universally around the world. This is our non-gold based fiat money system. The former system based on specie money, bank notes and other financial instruments that was backed by something physical such as gold, is considered antiquated. I am not criticizing our fiat money global economy. There is good reason for fiat rather than specie money, since the supply of money in circulation needs to be expanded and contracted under certain conditions. A gold-based economy doesn’t allow this flexibility. The dynamics of each system is different. One pitfall of the fiat money system is inflation. The fear of inflation may also become a concern that encourages gold ownership.
Gold is still considered to be a traditional store of value. While fiat money is the norm universally, globally gold is evolving into a main stream commodity investment. Since gold has not declined significantly in value following the Great Recession gold can be viewed as taking on a new roll. It is no longer treated exclusively as a safe haven only sought in times of economic troubles.
How fashionable has it become to either invest in or simply to own gold? It depends on your personal finances. There are vending machines being placed in high end retail stores where wafers of gold in various weights and purities can be purchased. There are gold bullion coins produced to be traded for their intrinsic value. Some low weight bullion coins are produced to be used in the jewelry industry. There are banks in India that are selling privately produced gold medals and tokens they call “coins” over the counter to consumers. And all this is taking place at a time when jewelry stores are indicating the only gold jewelry they are able to sell in any quantity is wedding bands. The average consumer views gold jewelry as being too expensive with the spot price of gold being at its current levels.
The average jewelry store sells unbranded merchandise. This unbranded merchandise is sold to average consumers, not to people interested in gold as a commodity investment or due to a cultural tradition of holding gold as the family’s wealth. The gold these jewelers sell is marked 14 k, .583, 10/24 and with other similar marks of purity. Only jewelry stores catering to an upscale public offering branded gold jewelry identified as Cartier, Tiffany, or the like are still selling gold in significant amounts.
Do I see an opportunity here? Where are the branded gold ingots, medallions, mint manufactured jewelry, and designer coins? Why is Tiffany a household name, but Monnaie de Paris is not? Walk into the gallery of Monnaie de Paris and you will see high quality merchandise produced by the mint, however its appeal is limited because the gold oriented consumer views this as a coin store. Mint produced gold products need to be produced with a wider and wealthier audience in mind. Both branding and a breadth of gold merchandise is lacking.
What about products including gold cufflinks, buttons, broaches, watch fobs, and the like? Why not promote your coin designers as the artisans they are, then promote the products they design and the design itself? Have them sign these products. Promote these items as limited edition products, selling them with a numbered certificate of authenticity and in a special presentation case. These products could include special coins, medallions, or fashion embellishments, all made of gold. Even a gold ingot could be a signed or specially designed piece meant to attract non-coin collecting buyers.
Make it fashionable for anyone to display their personal or the family’s wealth. Make wearing such items mainstream.
Why allow private vendors from overseas to sell gold ingots in high end vending machines when you could be selling your mint’s gold oriented buyer’s products the same way? If banks are to sell gold medals over the counter they should be your medals, not those originating in another country.
Promote not only gold as a mainstream object, but promote gold non-numismatic products manufactured by your mint using professional engravers and designs working for you!