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Canadians trading, investing gold and silver after prices surge with COVID-19


TORONTO — Soaring gold and silver prices have lured Canadians to sell their unwanted jewelry or invest even more in the precious metals with the hope of even larger profits.

"We've been extremely busy in the last few days, especially with the prices going up the way they have been, probably the busiest we have ever been," said Aditya Nagaraj, Greater Toronto and Hamilton regional manager for Canada Gold, which buys and sells the precious metals.

Interest began to accelerate about a month ago as gold prices topped US$1,800 an ounce for the first time since 2011. The precious metal's price then grew to a record high of US$2,069.29 on Aug. 6 for an increase of about 36 per cent this year.

Silver, meanwhile, surged 67 per cent from Dec. 31, 2019 to a seven-year high of US$29.77 per ounce on Aug. 6.

Some sellers have unloaded their rings and necklaces for a little cash to help them through unemployment and tough economic times. But Nagaraj said most customers have been wealthy Toronto-area residents, especially older people, who no longer wore the many gold pieces they had accumulated.

"A lot of times people are holding onto these things for a better time, a better price — and now seems to be the right time to do it," he said.

For those considering buying jewelry as a way to ride the rising price of gold, experts warn retail margins and sales taxes eat up some of the benefits.

However, one of Canada's oldest jewelry brands says gold is considered to be a good investment at times of crisis when confidence is low and anxiety is high.

"If you want to make a highly symbolic and emotional investment, people will purchase gold jewelry rather than mining stock," wrote Jean-Christophe Bedos, CEO of Birks Group Inc., in an email.

Consumers have looked at gold jewelry and watches during the COVID-19 pandemic as spending has shifted from "experiential" luxury like travel, restaurants and spas, he said.

He said he's not worried that consumers will reduce gold purchases as the commodity price rises.

"Clients understand the value of gold and that the higher value makes the purchase a better investment. The fact that gold is recyclable and keeps its value assures clients they are making a wise investment in hard luxury."

Investing in gold or silver can be done by holding coins or bullion, as well as buying exchange traded funds (ETFs) or mining company stocks such as Franco-Nevada Corp., Barrick Gold Corp. or Pan American Silver Corp.

In fact, Warren Buffett's Berkshire Hathaway Inc. disclosed earlier this month it has a US$565 million stake in Barrick, in spite of the famed investor's previous reluctance to invest in the metal or mining companies.

On the commodities market, interest in gold has risen as a safe haven asset as central banks around the world have ramped up stimulus to support the COVID-19-battered economy — moves that have traditionally been inflationary.

Some observers believe the price increases aren't over, with some even predicting gold could reach US$5,000 to US$10,000 an ounce in the next decade.

Gordon Pape has long been skeptical about owning the metal as he's heard predictions over the years that prices would rise to "ridiculous levels."

But the editor and publisher of the Internet Wealth Builder and Income Investor newsletters said he changed his tune and advocated owning gold for the first time around the time that the coronavirus pandemic started.

He points to Bank of America researchers forecasting that gold could reach US$3,000 an ounce within 18 months and Goldman Sachs pegging a price of US$2,300 within a year.

"My guess would be a rise of at least 10 per cent from where we are today by year end," he said.

Pape is skeptical, however, of forecasts for US$10,000 an ounce for gold and said a COVID-19 vaccine that allows the global economy to recover could be a setback by removing the safe haven factor from the metal.

Colin Hamilton, a London-based gold analyst at BMO, recommends that investors take advantage of dips in the price of gold below US$2,000.

The sector has had a history of not returning profits to investors, but that attitude is changing, he said.

Gold has reached the top end of his price forecast, Hamilton said, and sits around double the long-term price of around US$900 an ounce.

"This is a very good price. My view is not to be overly greedy on it from having seen the run we've had already," he said from London.

This report by The Canadian Press was first published Aug. 20, 2020.

Ross Marowits, The Canadian Press