AGE Gold Commentary is our regular report analyzing trends in precious metals and rare coins. We monitor domestic and international markets and extrapolate from our 30 years in metals to place current events into a hard asset perspective. View archives.
9/14/2001: Gold market status after terrorist attack
Best Wishes from Dana Samuelson, Owner of American Gold Exchange.
We've been getting many phone calls since the horrific tragedy of yesterday asking about the current state of the gold market. Today's email update offers some explanation.
First let me say that our prayers go out to those who have suffered. Personally, I urge all of you who can to give blood and support our government in this time of crisis. Our great nation has suffered other tragedies in the past and we will prevail now as we have before.
Here are the developments in the gold market.
The COMEX Exchange, where gold is traded in New York, is several blocks from the World Trade Center complex and remains closed for an undetermined time. Other world gold trading centers remain unaffected and open.
Gold is currently trading right around $280 per ounce. Demand for gold surged following yesterdays terrorist attacks on the World Trade Center and the Pentagon. The gold bullion price has risen about $8 net, after surging over $30 yesterday and then settling down somewhat today. Premiums for all fabricated items (for example gold bullion coins and Classic U.S. $20 gold coins) are up in addition to the rise in the gold price.
The Bank of England auctioned 20 tonnes of gold this morning. This sale, the third out of six in this final series of sales designed to reduce Britain's gold reserves by a total of 415 tonnes, had an allotment price of $280.00 a troy ounce and was 4.3 times oversubscribed. The next scheduled sale is November 27th. To read the Bank of England auction press release please click on the convenient link just below:
Normally gold bullion is very competitively traded, with very narrow buy and sell price "spreads." In light of the surge in demand and the closing of the COMEX Exchange, many dealers are currently quoting wider than normal spreads between buy and sell prices. Today, for example, dealers are typically quoting a buy on gold of $277.50 and an ask on gold of $281.50. Gold bullion coins or bars are bought or sold basis this bid and ask. This increase in the spread is not unusual when the market conditions change radically and unpredictably, as they have in the past 24 hours. Once volatility settles down and market direction re-establishes itself spreads, and prices typically become more normal once again. Usually the "spread" on gold bullion is $1 - yesterday it was $10 or more depending upon the dealer - today it is $4.
As for gold market direction, I suspect that gold will not get any cheaper, but instead will move cautiously or perhaps even dramatically higher as investors around the world seek a safe haven from instability, financial or otherwise. The unprecedented attack on the United States by terrorists has created a war-like atmosphere here and abroad. World stock markets are reeling in the wake.
The Wall Street Journal reported today that "Yesterday's terrorist bombings threaten to push an already fragile global economy into widespread recession, smashing consumer confidence and disrupting basic commercial functions such as air travel and financial markets." Oil prices have surged. Financial markets worldwide appear to be vulnerable to further declines. For the complete story click on the link just below:
Once again, I urge all of you who can to give blood and to stand behind our leaders. We must not allow the cowards who have perpetrated these heinous crimes to succeed in their attack on our people, our democracy and our freedom.
I appreciate your time today.
My best wishes to all of you.
P.S. — Earlier this week we only accepted buy or sell trades from established customers. Some dealers halted trading altogether. My apologies to those potential new customers whose trades I refused. I've learned in my 21+ years that those who buy or sell based on emotion don't always follow through once the emotion of the moment has passed. Naturally, all open trades confirmed prior to yesterday are being honored in due course. Our word is our bond and we live by that.
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