I’d love to have one! Unfortunately, humanity’s long desire to predict the future is not within my grasp; and despite the huxters urging you to buy gold or sell gold based on some ‘predictable’ future, their knowledge of the future is as severely limited as mine. So let’s see what seem to me to be reasonable guesses.

Precious metals, as a class, really owe their historic value to their common characteristics and their relative rarity. They do not readily oxidize, so they can be melted and easily used over and over again (most experts think that a large percentage of the gold currently in circulation was mined before the birth of Christ). Secondly, they are generally malleable; and when you combine their resistance to oxidation with their malleability they’re great for jewelry and coinage. So for thousands of years these unique metals have been attractive to the world’s wealthy – this despite its relative lack of any practical utility. Naturally, this conflict between price and value has led some to be skeptical; and last night an old friend and a client said of gold’s current price, “It’s a bubble, isn’t it?” I readily agreed.

Gold’s use in industry; that is, its practical use, is limited to about 20% of annual production, obviously, that leaves 80% to be used in jewelry or to be hoarded. For centuries India’s farmers have been the biggest consumer of gold for both purposes. They have bought gold when times have been good and sold it to meet their needs for survival when times have been poor. Their gold was usually turned into jewelry (most often of crude design and manufacture), but the purpose of this was two-fold. While serving as a visible sign of wealth, first and foremost, as jewelry, the family’s savings could be under constant surveillance. Naturally, the law of supply and demand applied; so when they wanted to buy gold, its price was usually high and when they wanted to sell it, it was usually low – just like any other commodity. And throughout it all, the price of gold was ‘invisibly’ connected to its demand by the wealthy.

Currently, you can largely count India out of the equation. When the price of gold exceeded $800/ounce Indian gold consumption contracted; and as gold has passed through ever higher milestones to today’s $1200/ounce, plus, that contraction has continued, as it did elsewhere. In the U.S. in 2009 and 2008 the price paid for all gold jewelry was roughly the same; but the actual amount of gold sold as jewelry was considerably less. This was repeated throughout most of the industrialized world; so much so that one might say that jewelry demand for gold has been so sharply curtailed as to be tantamount to a collapse. Inevitably, this points to speculation in the price of gold as the major force driving its rise in price. Equally as inevitable is my first guess. It is that the price of gold will collapse to somewhere between $750/ounce and $900/ounce as soon as the general level of investor confidence has improved. The same may not be said of platinum and diamonds.

Unlike the price of gold, that of platinum nosedived with the economic meltdown. Why you ask? The answer is simple; its price is driven by the automobile business – in normal times it uses more than half of the world’s annual production of platinum in catalytic converters. As the automobile business soured, industrial demand for platinum declined greatly. This year, as the U.S. automobile business has been on the rebound and, significantly, as China has passed the U.S. as the world’s number one market for cars, the price of platinum has climbed by about 25% over its recent market low. Currently, I think that at a little over $1500/ounce, its utility is so great that it’s still undervalued. Incidentally, it’s a superb jewelry metal; but price constraints limit jewelry consumption to about 25% of annual production. Diamonds? Chinese demand for diamonds and the absence of any recent diamond finds to offset that demand has caused DeBeers to ‘ration’ its diamond production into the foreseeable future – and the company has said it will increase prices for its rough material by 5% in each of the next three years. My crystal ball says buy platinum and diamonds now; it’s not likely that they’ll be cheaper in the near term.

I can’t tell you whether today’s buyers of gold are ‘the peasants’ or ‘the wealthy’; but last week I spoke with a designer who participated in a jewelry auction limited to shareholders in a very prestigious mutual fund. His conclusion, the wealthy are buying fine jewelry; so with prices for diamonds and platinum as good as they’ll get into the foreseeable future, perhaps you should consider a platinum and diamond purchase – particularly as a celebration of life. Celebrate your anniversary or a birthday with a diamond gift; and don’t wait for one of those ‘big’ numbers. Life isn’t certain; so when your feelings are, spell them out with a beautiful statement of your love. Naturally, feeling as we do about the beauty that is part of our humanity, we won’t sell you a diamond that is a disappointment. We’ll only sell you something that says ‘I love you’ as perfectly as the spoken word. Check out our website, particularly the collections; it’s hurstsberwynjewelers.com. Now call us at 708.788.0880 for an appointment. We’re Hursts’ Berwyn Jewelers; and we’ll help you realize your dreams.