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Triple Lutz Report--Today Was My Lucky Day But No Gold--Episode 135

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I got some unexpected great news today. A watch that my friends at Tarrytown Jewelers spent the past several years marketing for me finally sold. I had almost forgotten about it and was completely shocked to hear the news. I immediately decided to take the proceeds and buy some gold or silver there, but there was bad news on that score. While they had some gold in stock, they had purchased it several weeks before the recent decline. Therefore, they were unwilling to sell it at a loss and I was out of luck. You really can't blame them. why should they sell for a loss. They figure that if they hold it for a few more weeks or months, eventually it will go up. And, in my opinion they're probably right.

But, you have to realize there are a number of opportunistic buyers/sellers of bullion for whom it is not their primary business. Rather in the course of their main business, the opportunity often arises for them to buy and sell bullion. While the profit margin is low, so is the risk. They are willing to take the risk for a small but steady profit. However, when precious metals prices hit the fan, they can sustain temporary loses. So rather than simply dump the metal, they take it off the market and wait for prices to rebound. And like a self-fulfilling prophecy, this is what usually happens. When enough sellers act in this matter, supply decreases and demand catches up, leading to price rises. So this story is instructive in how these fragmented decentralized physical metal markets actually function.

Please send your questions to kl@kerrylutz.com or call us at 347-460-LUTZ. 

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