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2002 To Be a Golden Year.
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(January 2, 2002) Gold finishes the year 2001 at $279 spot price, and Onlygold.com begins its fifth year as the most user-friendly gold distribution channel in the United States. We appreciate and thank all of you that have bought and sold gold with us – we're looking forward to big things in 2002.
As 2001 found gold spot prices around the $279 mark, gold ends its 5th year in a row at under $300 per troy ounce. A remarkable record of consistency, arguably possible only through government and ‘big money’ manipulation, but partially due to a lack of interest among most investors in the western world.

Goldbugs (whom we will arbitrarily define as anyone who bought gold at more than $300 per ounce) decry low gold prices. On the Internet, a quick perusal of the web-sites and chat-rooms devoted to gold and precious metals will reveal a plethora of conspiracy, collusion, and manipulation theories on why gold is cheap today. Even upon your return to planet Earth, you won’t find anyone that doesn’t agree that gold today is cheap.

For instance, the old saying about gold and inflation was that throughout history an ounce of gold generally was worth the purchase price of a man’s suit of clothes. Whether this includes shirt, tie, and shoes is subject to debate, but this chestnut was repeated endlessly during the 1970’s and 1980’s. Today, however, a man is not likely to leave his local emporium very well turned out for the sum of $275. Just your standard department store man’s suit today will run you $400 –$1,000. If your tastes run to Ralph Lauren, Hugo Black, or dozens of other quality brand names, a nice suit can easily cost thousands of dollars. And we’re still not talking custom tailoring.

The point is that two hundred and seventy five US dollars just don’t go very far today. The inflation-adjusted price of gold is probably as low as it’s been in modern history.

Some see this as a marketing problem.

David Vaughn of 321gold, Inc. of Miami addresses this problem. Bobby Godsell, who is the CEO of AngloGold, one of the largest gold producers in the world, wrote to Mr. Vaughn:

“We clearly agree that gold producers should be promoting all uses of its products. I also agree that in times of economic retrenchment the investment use becomes relatively more important. On gold as an investment it is far less a promotional campaign that we need, as a building of ‘distribution channels.’ People in the West very much want to buy investment gold. All our research confirms that. It is just difficult to find the outlet to do so."

(Of course, our staff at Onlygold.com single-handedly comprises the most user-friendly gold distribution channel in the United States, but Mr. Vaughn and Mr. George Paulos believe that the element gold would benefit by having a presence at the largest shopping mall in the country.)

Here we present a somewhat shortened version of what Mr. Vaughn writes:

TODAY IT IS PUT UP OR SHUT UP TIME FOR THE WORLD GOLD MINING INDUSTRY.

A reader of this "letter," a businessman & entrepreneur, has stepped forward and offered his hand & his wallet in an effort to create those "distribution channels in the West."

Mr. George Paulos, presents to us a working & sound proposal that will enhance the desirability of gold, its image, & create a marketing strategy to get gold into the hands of every man, woman, boy, & girl in this country & ultimately into everyone's hands around our entire globe…

Mr. George Paulos: "I would be willing to put action behind my words and participate in the building of a gold boutique chain store operation if it was properly funded and supported by the gold industry. A small portion of the (World Gold Council) $200 million marketing money could make it happen and be a true long-term investment for the industry that guarantees an alternative "distribution channel" that breaks the stranglehold of the bullion banks…..”

“THIS IS MY PROPOSAL: Many studies by the gold industry show a strong latent demand for gold ownership in the general public. Actual gold ownership by the public remains inconsequential because of inaccessibility and lack of visibility. This represents a tremendous untapped market and an unusual marketing opportunity for the creation of a network of boutique style retail shops dedicated to the sale of gold and other precious metals products for the purpose of investment. With a distribution infrastructure and a liquid market established by these shops, a carefully crafted marketing campaign could ignite a critical mass of demand that could substantially raise the market price of gold and other precious metals. American marketing genius has created value out of worthless items such as baseball cards and pet rocks. Those same techniques could be applied to creating a healthy market for precious metals investments and collectibles.”

“The numbers are compelling. Suppose there are 20 million individuals in the US who have investable funds averaging $100,000. If each places a conservative and prudent 2% of those funds into gold as part of a tangible asset portfolio, this adds up to an aggregate demand of $40 billion or 133 million ounces of gold at $300/oz. This represents a modest 10% penetration of the adult population of the US. Global markets are an order of magnitude greater.”

“The creation of a precious metals boutique chain is a non-trivial project requiring substantial funds and a long-term commitment. However, a pilot project could be established with minimum cost that could test the feasibility of the concept and develop the best business practices. The Mall of America in Minneapolis is the obvious location for a pilot store. It is an international destination for consumers who are looking for the "chic" and unusual. Bullion wares make perfect consumption items for the traveling shoppers because of small size and high value. A well-appointed shop with beautiful displays of radiant metals will mesmerize shoppers and create a marketing buzz.”

“With the recent stabilization of the gold price, turmoil in financial markets, and a general rethinking of investment strategies by the public, this is a perfect window of opportunity to exploit vast untapped demand and re-establish gold ownership as a "chic" and commonplace activity."

Editorial Comment: We always think of gold as very ‘chic,’ and, at least in theory, we applaud the idea of making the purchase of gold a ‘commonplace activity.’ But those are inherently contradictory concepts. Something can be ‘chic,’ or it can be ‘commonplace,’ but it can’t be both.

Gold buyers today are certainly not as commonplace as they were during the boom years for gold. In the early 1980s, prices averaged over $500 an ounce, and, people bought gold, talked about it, and predicted its unending rise in value over time. Today, gold is a contrarian purchase, out of favor, inexpensive, and forgotten by the masses.

Of course, gold’s time will come again, and sooner rather than later, in our opinion. And when it does, higher prices will once again draw attention to gold, leading to even higher prices, more investment dollars will pour in, and we’ll be off to the races. In the meantime, we doubt that displaying gold in sight of the credit-card-toting crowd at the Mall of America will do much to hasten that inevitable day.

 

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