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Gold Echos the Past
September 18, 2008

Watching gold yesterday was almost as explosive as the annual 4th of July fireworks display I watched in Bonduel this year. No one, of course, got hurt in the fireworks display.

I am not so sure about the volatile gold market.

Gold went up like a skyrocket and it lit up the bullion investment sky. By the close of regular trading in New York yesterday, the metal had set a record as the largest one-day price gain in terms of dollars, up $70.10. In percentage terms a day like this has not been seen since 1999, which you may remember was the lead-up to the Y2K problem that was going to happen to our computers when their internal clocks were to be thrown off when the year 2000 arrived.

Silver had a good day, too, rising by $1.178 to close at $11.64. This was the biggest one-day gain since 1979.

It is these references to the 1979-1980 boom that make me nervous. I remember what happened when the euphoria faded.

Gold went up from $742 on Jan. 16, 1980, to $803 on Jan. 17, 1980, up $61. This was on its way to its closing high of $825 on Jan. 21. On Jan. 22, it dropped by $155 to close at $670.

Manic upward movement was followed by manic downward movement in less than a week.

I cannot claim to know the future, but volatility works both ways. Even if the long-term uptrend in gold has further to run as many experts expect, short-term corrections can be wild.

That is the time when there is a big difference between being a long-term gold owner and a newcomer chasing headlines. Be careful.

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About the Author
David C. Harper has been a coin collector since 1963. He joined the Krause Publications editorial staff in 1978 and is currently editor of Numismatic News and World Coin News. He also edits two books annually, North American Coins & Prices and Coin Digest. He is the author of the Class of '63 column that runs each week in Numismatic News. His first bylined numismatic article appeared in the June 1971 issue of Coins Magazine and his various Krause Publications assignments included a stint as editor of the magazine 1980-1983. Harper received a bachelor of science degree from the University of Wisconsin-Oshkosh in 1977. He had a double major of journalism and economics.

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