At the time of writing gold is $45 per ounce down on the session. Why? Well, firstly, this is one of Bush's "tools" - private gold ownership is seen as a threat to the economy - and secondly the market for gold has, for the time being, settled into two markets. There is the market for physical gold and the market for what is called 'paper gold'. The price of physical gold is what you would have to pay to buy an ounce of gold to put into your pocket - i.e. take it away with you. 'Paper gold' is a piece of paper saying that you own (or are entitled to) an amount of physical gold.
What's the difference? Place a one ounce coin in your toilet bowl and flush it. It will still be there. Place your piece of paper in the toilet and flush....
Take your one ounce coin to a coin dealer and he will give you (surprise, surprise) around $1000 in today's money for it. Take your piece of paper into a dealer and he will (at best) give you the phone number of someone else you might speak to.
There is now a very distinct difference between the 'spot' gold price and what you will need to pay to buy bullion. So, if you are about to buy bullion, don't assume that your dealer is ripping you off if he is asking 20% or far more as a premium over the 'spot' price quoted.
Will the prices stabilise and converge later? Maybe, but there are no guarantees. I suspect that we will see a worldwide private market for small bars and coins at a large premium over spot for some time to come - six months to several years. Best advice is to buy on dips but this market is moving so fast that possibly the best advice is to buy bullion coins for whatever you have to pay - but use a reputable dealer. DO NOT USE EBAY unless you are an experienced gold trader and ebayer.
Don't panic - unless you are on margin and long. This is about taking out traders - and maybe posturing for the G7. Everyone with access to their own capital is filling their boots with bullion. Gold WILL go up but it will be savagely volatile. This is the time to say farewell to paper gold in all its forms. If you couldn't write your name on every piece of gold you own, with a felt-tip, then you don't have physical gold. If you trust your bank or bullion dealer's vaults and you are sure that your property is properly stored there in your own box, then that counts. But don't trust any ownership that does not in principle allow you the felt-tip-pen-test.
"The Felt-Tip-Pen-Test-Is-Best" You heard it here first.
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