We’ve had some old unwanted gold jewelry lying around for a long time. With gold at $1,237 per ounce, we figured it was time to sell it. We are a living movement up the supply curve of gold.
The local jeweler who bought the gold says we are hardly unique-but the pattern of supply has been interesting. He says there was little increase in quantity supplied until the price hit $1,000-then there was a flood. As the price has risen still further, some additional amount has been supplied, but not too much. Apparently, potential suppliers were waiting for the price to hit $,1000; thereafter, only those who hadn’t paid attention, like me, were left to enter the market. Exercise for students: Graph what this says about the shape of the supply curve!
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For one, you are using the word ‘supply’ incorrectly.
Since the supply is always roughly equal to demand, you seem to be implying that the trading in Gold is very thin right now because of scarce supply.
Just look at a GLD liquidity graph and see if you are right.
Gold is viewed as a haven in a risky economy. IT is seen as a hedge to currency inflation.
But I think it is a broad indicator of FEAR. Declining value in homes. widespread unemployment, shinking industry, terrorism threats, nuclear prolieration crisis in Iran, poor prospects for the young, and Trillion Dollar Wars of uncertain outcome have made Americans uncertain and less confident.
I know the price of gold peaks with crisis like 9/11, YK2 and any hint of the start of Armageddon. Survivalist buy, beans, ammunition and gold.
How does the price of gold correlate with surveys of FEAR?
The gold price curve reflects demand as well. India’s traditional demand has been off lately, but US inflation worries have inspired increased buying. It’s a complex world.
It says relatively little about supply/demand curves, as individuals selling old jewelry are a tiny portion of the trade in gold and have minimal, if any, influence on the prices.
As early as mid-2006, the popular financial press was touting predictions that gold would go to $1000, so it’s not surprising that $1000 got set as a “magic” number for the general public. If that seems like a stretch — Googling “gold” with “$1000″ gets over 6 million hits while “gold” with “$900″ gets about 1.2 million hits. The $1000 price level is considered bigger “news” and would therefore have been much more widely known to people who don’t follow commodities trading, so there would be people who had no clue about gold prices until they heard “$1000,” noticed they were feeling a bit over-extended, and thought of grandma’s jewelry.
The real question is how much did you sell the gold for to the jeweler? I’m guessing substantially less than $1200 an ounce.
1) Upward sloping, till
2) vertical line at $1,000 for a period of time
3) market absorbed influx of supply
4) supply curve returned to normalicy and johnny come lately Dr. Dan Hamermesh got more $ for the stuff in his (and his faimly’s) drawer.
How much of the gold price/volume action is due to Glen Beck and Fox News shilling for the gold traders?
What still gets me is how people think gold would have any value in the state of any real crisis. People are assuming that someone would actually buy a virtually useless precious metal during a time when everyone is (or at least feels) poorer. The only real practical use of gold is wife insurance.
A more realistic inflation/safety hedge is something like wheat, corn, or sugar. Or better yet, buy an emergency survival kit and lots of canned foods.