Last weekend, on a sunny afternoon in the Victorian suburb of Bayswater, two men on a dirt bike smashed the glass window of a jewellery store. In 90 seconds they stole about $90,000 of gold jewellery. And then rode off.
The shop was open for business and a staff member and the owner were out the back. They weren’t sure what the ‘banging’ sound was.
But these dirt bike bandits aren’t the only ones pinching gold.
On five separate occasions a Perth man walked into a store to try on a gold necklace. Once wearing the necklace, he’d bolt out the door. Police reckon his stealing binge netted him $70,000 of gold jewellery. The cops only caught him this week.
Before you get a little cynical and cry ‘insurance job’, hear this. The Victorian jeweller didn’t insure his gold. The owner claimed that at the current price, insuring his gold was an expense he couldn’t afford in this economy.
This is an odd risk to take. In New South Wales alone, jewellery store thefts are the fastest rising store robberies. Up 35% since 2008. Even pinching booze has only increased 25%.
How times have changed. Rather than rob a store and demand cash from the till, thieves prefer a real asset. Something with real value.
And why wouldn’t they? With all those ‘gold buyer’ stores in shopping centres, it’s pretty easy to turn the stolen loot into cash. Sure they won’t get the spot price of gold…but hey, they stole it, remember?
Right now, the Perth bandit is yet to face the judge and see how much trouble he’s in. But if the dirt bike bandits are reading this, we recommend they hold onto their ill-gotten gold a little longer.
Because the price of gold is going up…
The shiny metal is yet to return to its mid-2011 highs, but there’s a suggestion that it has found a floor price.
As reported on a self-confessed goldbugs website, 24hourgold.com, ‘…there are rumors circulating the market of Asian central bank purchases on any drop into the $1500 to $1550 range — a gold call of sorts that puts a floor under the price.’
This tells you central banks are trying to buy up when gold reaches a ‘cheap’ level. And they view $1500–$ 1550 as a cheap level!
Dr Alex Cowie, editor of Diggers & Drillers, has been encouraging his readers to watch central bank gold buying for over twelve months.
On Monday, he told readers about another round of purchases. He said ‘…as a group they [central banks] are huge buyers. Last month central banks from 12 countries, including Russia, Mexico and Turkey, bought 57 tonnes of gold. In reality, China’s central bank should be on that list too — they just don’t declare how much they buy.’
How huge is huge? Less than ten years ago, central banks sold 545 tonnes of gold. And last year, they bought about 440 tonnes. That’s nearly a 1000 tonne swing in a decade.
Even though investment and jewellery make up the largest demand group, central banks now account for 7% of all gold demand.
It might not sound like much, but it actually reflects a very important shift in attitude towards the metal.
You see, the biggest central bank buyers of gold aren’t from Western economies like America, or the UK. It’s the smaller, emerging and developing economies like Mexico, China and Russia.
As the crisis continues to play out, central banks are stocking up on gold for the same reasons we do.
In spite of the volatile prices, gold is one of the few assets that goes up in value when things go wrong. Another is US Treasuries, but we know which we’d rather own.
But there’s a bigger reason why central banks are moving into gold. They’re preparing for the bigger role gold will play in reserve assets. Rather than hold cash, US Treasury bonds or foreign currencies, central banks could choose to load up their balance sheets with something of real value.
So, consider this the time to stock up, or take the big leap of buying in for the first time.
As Alex said recently ‘The one thing I’d say about gold is that it’s not a get-rich-quick scheme. It’s a long-term alternative to holding cash in a portfolio. The trick to making it work hardest for you is buying at the right time.’
And when is that right time?
Now. The gold price is still around $1600 which is a great entry point. Take advantage of buying when the gold price dips down.
If you’re keen to get started in buying some bullion, check out Alex’s tips on how to buy gold.
Shae Smith
Editor, Money Weekend
The Most Important Story This Week…
In 1989 it was perceived wisdom that Japan would overtake the United States as the largest economy in the world. Tokyo was famous at the time as the most expensive city in the world. The Japanese share market was at a huge high. However, that was the peak for Japan. It has suffered a long bear market ever since. The share market has been falling for twenty years.
Investors have often thought the Japanese market couldn’t fall any further along the way. It did. Everyone kept waiting for a recovery that has never come. Most investors think a stock market falls but will rally higher at some point in the not too distant future. The Japanese experience says this is wrong. Australians have been waiting five years already for the share market to head higher than it was in 2007. The question is, will the ASX go up? Or will Australia suffer the same fate as Japan? Kris Sayce give his opinion in How This Bear Market Could Last Another 18 Years… Just Like Japan’s
Other Recent Highlights…
Nick Hubble on Best Investment Strategies For the Times Ahead: “If you think that investing in times like these is difficult, you’re right. Recognising that these events happen regularly is a helpful step to sorting out your investment strategy. Do you simply wait for a lost decade to pass by before jumping into the stock market again?”
John Stepek on Why the Chinese Economy is On the Slide: “Growth in China’s manufacturing sector is slowing rapidly, according to official data. In May, the purchasing managers’ index hit a five-month low, worse than analysts had expected. A separate survey sponsored by HSBC…suggests it is already shrinking.”
Dr. Alex Cowie on The Banking Plan That Could Be A Game-Changer for Gold: “The Basel Committee of Bank supervision, who dream up the rules that govern banks, are looking at turning gold into a ‘Tier One’ asset. This means the banks can carry gold as capital at 100% of its market value – instead of the current 50%. This gives gold a huge increase in status, and effectively turns it back into money at the top level…That’s a pretty incredible thought.”
Martin Hutchinson on Inside JPMorgan’s Magical Fun Palace: “The financial system wasn’t fixed after 2008, and it won’t be fixed anytime soon. The unexpected $2 billion – or is it $5 billion? – loss incurred by JPMorgan Chase “whale” trader Bruno Iksil shows only too clearly the flaws in Dodd-Frank and other regulatory activity. Big banks are still taking risks they simply don’t understand. Worse, there’s no reason to believe the regulators understand them, either.”