Wednesday, November 11, 2009

All That Glitters at Harrods London

As gold hits all-time (nominal) high of $1,119.60, Harrods of London is seeing a brisk sale of all things gold - gold bars, nuggets, bullions.

The department store started selling pure swiss gold bars on October 15. You can now buy gold ingot (5 to 1,000 gram), you can buy bullions (Sovereign, Maple Leaf, Krugerrand, Panda, Philharmonic, Eagle), and Harrods stores them for you for a fee if you like. If you buy from Harrods, you can sell back to Harrods.

How can a department store sell gold? you may wonder. Harrods Gold Bullion page says the department store has had a private banking arm, Harrods Bank, for more than a century catering to well-heeled clientele.

In Germany they have gold dispensing machines at train stations. In Japan, you can set up an account to buy gold every month with as little as $15 per month (you buy whatever amount of gold you can buy with that money). Reserve Bank of India just bought 200 tonnes of gold from IMF.

Analysts have been saying that the gold move is an inflation hedge and a move against the U.S. dollars and all other fiat currencies (just about every single currency in the world). I personally think it is more like a crisis hedge in times of financial, social, and/or political dislocation as evidenced by the gold spike in the wake of Iran hostage crisis and the Soviet invasion of Afghanistan.

But with Harrods selling gold bars and bullions along their very high-end merchandise, it makes me wonder if gold is entering a bubbly phase of being a status symbol. Not just a few gold coins here and there, but 1-kilogram (35 oz) pure gold bar (that would cost close to $40,000) or two.

Kitco.com's Gold Index (which is also linked in the left column of this blog under "Market Data and Tools") shows gold is bought despite the slight recovery in the U.S. dollar.


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