All That Glitters | Area gold merchants aren't swayed by the tumultuous precious metals market
Photo/Matt Pilon
Mark Alzapiedi, owner of Watermark Antiques & Gold in West Boylston.
When Mark Alzapiedi buys a cache of gold jewelry or gold bullion from an area resident, he has a decision to make. Call his smelter immediately to lock in a selling price, or wait until the end of the week.
Even with recent turbulence in the gold market, Alzapiedi, who owns Watermark Antiques & Gold in West Boylston, said his decision is usually the same.
“Most times, I let it ride,” he said. Sometimes the market tanks towards the end of the week, cutting into his profit. But when the market performs well later in the week, Alzapiedi, who has been buying gold for about seven years, makes a higher profit margin. For area gold buyers and gold investors, dips in gold prices don’t mean all that much. It’s a long-term game. And the game has been good to anyone who has invested in the precious metal over the past decade. The metal has doubled in value nearly two-and-a-half times in that span, from around $250 per ounce 10 years ago to highs of above $1,400 in the past quarter.
But during the third week of January this year, gold prices hit a four-month low, giving concern to some area gold hoarders that the decline would continue.
Ups And Downs
Early this month, on a snowy day in West Boylston when gold had been trading at $1,338 per ounce, Alzapiedi had a small pile of 14-karat jewelry in his shop that someone had recently brought in to sell. The customer had her eye on the spot price, and had seen gold fall in value.
“They felt they had reached the top of the market,” Alzapiedi said. It’s not uncommon for some people to cash out their gold when prices drop, he said.
John Jorjorian of Northeast Precious Metals in Worcester said that there are many things that affect gold prices — from political instability in Egypt to financial instability in Europe. But Jorjorian, who has been buying gold for more than 30 years, said that he is unconcerned about the recent turbulence.
“There’s always going to be gold price spikes and gold price dips,” Jorjorian said. “I personally believe gold’s going to hold its own right now and maintain a fairly strong value.”
Jorjorian said he immediately locks in prices with his refiner right after every sale. Unlike Alzapiedi, Jorjorian doesn’t believe in playing the market as a gold buyer. He counts on his built-in margins earned through commissions on each gold purchase.
For those who don’t buy and sell physical gold, but rather trade it on the markets or through exchange traded funds (ETFs), the drop in prices was also nothing to worry about.
Investors tend to use gold as a hedge against the dollar and the stock market. But despite gold’s impressive returns in the past decade, Michael Grenon, vice president and principal at Westborough-based Grimes & Co. Inc., said his firm tends to play it conservatively with gold and several other commodities.
“My impression is that advisors in general have still not fully grasped or felt comfortable with having gold as a primary holding,” Grenon said. “We’ll occasionally hold gold strictly as more of an inflation hedge.” He said that Grimes & Co.’s portfolio contains less than 5 percent in gold positions, and that the price drop in January was no reason to change any holdings for clients. “It was a decent-sized pullback, but not enough where we were significantly changing our allocations,” he said. Gold tends to have an inverse relationship with the U.S. dollar and the stock markets. Investors buy gold when they are concerned about increasing inflation and poor performance in the stock market.
Citing his firm’s recent published outlook for 2011, Grenon noted that in 2009, for the first time in 30 years, demand for gold from investors outpaced demand for gold from jewelers.
“What’s driving gold is not demand, but investors pacing what is a hot sector again,” he said.
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