By
Tom Dyson, publisher, The Palm Beach Letter
Wednesday, February 25, 2009
Business was so good, Empire Diamond and Gold Buying Service had to hire a security guard to handle the crowd in their office.
"We've been serving about 100 cups of coffee a day, going through three or four pounds daily," said an assistant, hurrying away to fill the empty pot.
I found Empire Diamond and Gold Buying Service's story in the New York Times, archives from January 1980. When the gold price soared, Empire Diamond and Gold Buying Service was suddenly inundated with people looking to sell gold trinkets.
"We are handling a couple of hundred customers a day off the street and the average wait is three hours," said the owner, Mr. I. Jack Brod.
"Nobody has ever seen anything like this. I'm looking for a beautiful year in 1980," said Bob Deitel, owner of the Madison Coin Shop in Connecticut.
If you're trying to spot the peak of a gold bull market, "dishoarding" is one clue to look for. Dishoarding is what happens when people decide the gold price is so high, they'd like to swap their old gold heirlooms for cash. They pile down to the local gold and coin stores with their lockets, scarf pins, and old gold dental fillings.
The massive new supply floods the market and causes the gold price to collapse. The intense dishoarding in January 1980, for example, was one reason gold's bubble popped. Gold fell $250 in the final days of January and then keep falling for the next two decades.
Here's the thing, Gold just hit $1,000 and is within $50 of an all-time high. Gold fever has returned to America. Last week, the Daily Sentiment Index recorded 96% bulls in gold. Even my mother is thinking about buying gold. (I've been telling her to buy for the last six years.)
A few commercials on TV are offering cash for gold. One of these companies even paid for a spot in the Super Bowl. Pawnshops are doing well right now, too. But so far, it seems people are still more interested in accumulating gold.
Until you see lines around the block at coin shops and NYT articles about dentists earning thousands of dollars from used gold fillings, you should assume we're still in the bull market.
Good investing,
Tom
Editor's note: Tom Dyson is a regular contributor to DailyWealth, a free investment newsletter focused on the world's best contrarian opportunities. We write with a simple belief in mind: You don't have to take big risks to make big money with your investments.
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THE TREND IN CANADIAN ROYALTY TRUSTS IS STILL DOWN
A subscriber writes in to ask: Is it time to step in and buy oil royalty trusts?
"Only if you like stepping in front of trains" is our reply. For reference, we present the past two years in the Enerplus Resources Fund (ERF).
With a market cap in the billions, Enerplus Resources is one of the big "bell cows" of the Canadian energy trust sector. For most of the past decade, owning ERF was like owning a busted slot machine: The fund passed along huge monthly dividends and enjoyed a rising share price during the 2002-08 bull market in oil.
The past six months tell a different story. Shares are have lost about 70% of their value, and ERF's distribution has been slashed by falling oil prices. Shares hit a new low yesterday... and our chart below displays a classic "falling knife" asset. Royalty trusts like Enerplus will be a solid buy if oil rebounds back into the $50 area. But right now, shares are in a dangerous freefall... and now is not the time to catch this falling knife.
A Dramatic Turn for the Worse By Dr. Steve SjuggerudTuesday, February 24, 2009
In January, I was optimistic. I believed we could have pulled out of the recession in 2009. But now, that date's been pushed farther back... likely into 2010.
What You Must Own When the Banks Go Bust By Tom DysonMonday, February 23, 2009
It's not a fear of price inflation that's driving gold. It's the Europeans. They are turning to safe havens because their banking system is on the brink of failure.
How to Buy Gold Now... with a Proven Track Record By Dr. Steve SjuggerudFriday, February 20, 2009
Back then, gold was thought of as loony, not to mention gold coins. My readers probably thought I lost my mind. Thankfully, we got it exactly right. Both the price of gold and the rarity premium rose...
A Distortion in the Gold Market Could Make You 200% This Year By Dan FerrisThursday, February 19, 2009
Have you tried to buy gold coins or bars in the last few months? If so, you already have a good idea of the "distortion" I'm going to tell you about today.
