A modern-day gold rush

MIAMI — In more than 53 years of business, Louis Morningstar has never seen anything like the hundreds of people who have lined up during recent weeks in his downtown Hollywood, Fla., jewelry-and-pawn shop to sell their gold or use it to get loans.

With gold hitting an all-time record of more than $1,900 an ounce recently, raiding the jewelry box has become a way for people to generate extra cash in these tough economic times.

"Most people are astonished with what they walk out with," Morningstar said. "They never dreamed that what's sitting at the bottom of their jewelry box could be worth a thousand dollars or more."

The gold-selling business is bustling at jewelry stores, kiosks, coin stores and pawn shops. Add in online sales and home parties, and you've got a boom.

With gold prices so high, almost anyone willing to part with a few trinkets can walk out with a few hundred dollars; with only a small handful of gold, it's easy to hit the $1,000 mark.

"With the economy not so good, people are taking advantage of it," said John Albright, owner of Gables Coin&Stamp Shop in Coral Gables, Fla. "Most of them need the money to pay bills. They've been shopping around for the best price."

Janet Shields is one of those customers. She arrived at Morningstar's recently with a bag of gold jewelry, hoping it would generate enough money to pay her utility and grocery bills.

The Hollywood single mom has seen her work as a massage therapist dry up in recent years because of the recession. She's already maxed out her credit cards, so now she's selling whatever she can to get by. She already got $400 by selling the gold coins her aunt left her.

"It's a very sad day," said Shields, as she waited to see how much she would get for the necklaces, bracelets and charms, including the boy and girl charms for each of her children. "I don't have any choice. I'm thankful I have something to sell."

Gold is in the 11th year of a bull market. Investors typically turn to gold in times of economic uncertainty, seeking to diversify away from equities and currencies.

Since the financial crisis in 2008, central banks around the world have bought gold as a hedge against their foreign currency holdings. In August, South Korea announced it had bought gold for the first time in more than 10 years.

On some days, Gables Coin&Stamp will sell a dozen gold coins, and supplies have to be reordered multiple times a week.

"There is the belief that gold is a wonderful store of value," said Richard Gotterer, managing director of Florida for Wescott Financial Advisory Group. "Gold makes people feel comfortable during economic uncertainty. The price is going up because investors are flocking to gold as a safe haven."

It's why gold's ascent often correlates with a recession. In October 2007, gold sold for about $740 an ounce. It briefly broke $1,000 in March 2008. But it wasn't until fall 2009 when gold prices rose solidly above $1,000 mark, then hitting $1,200 a year later.

In recent months, that climb has only accelerated amid concerns over the U.S. debt limit, financial crisis in Europe, a possible double dip recession and a faltering stock market. Gold prices are up nearly 40 percent in the past 12 months.

"Everybody wants to sell at the very highest point, but nobody has a crystal ball to be able to know when that is," said Jeff Malvin, owner of Beverly's Jewelers, which has three stores in South Florida.

As gold prices have risen, so has the competition for buying gold. Services like Cash4Gold and Money4Gold are part of the online craze that encourages consumers to mail in their gold. In almost every shopping center, you'll find someone offering to buy gold. They're also competing against independent consultants that offer private consultations or in-home parties.

There's no standard price on how much shoppers will get for the jewelry. Some places will pay as much as 90 percent of the market value of gold, reduced based on how much below 24-karat the piece is. But others pay as little as 65 percent of the market value.

Rising gold prices have sent price-conscious consumers to other metals. Some brides and grooms are buying wedding bands made from alternative metals like tungsten or titanium. Silver fashion jewelry has gained popularity, with designer collections featuring gold and diamond accents.

"You can get a heavy silver piece for $300 or $400, which makes a nice gift," said Raju Khiatani, owner of Barclay's Jewelers in downtown Miami. "That same piece in gold might cost $3,000 or $4,000."

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