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Off to the Races
January 03, 2008

Wow, look at that parade of round numbers yesterday. Oil hit $100 a barrel. Gold went through the $850 record price of 1980 and closed at $857. Silver shot through $15. If it was a hard asset, it went up in price.

Those of us with long memories might want to cast our minds back to January 1980, the last time gold was trading at such a lofty level. It might be a cautionary tale, because 1980's rise did not have a happy ending.

The first trading day of 1980 saw gold rise $26.80 to close at $575.50 a troy ounce. By Jan. 21, the price hit a trading high of $875 and closed at $825, while the London price, which was the benchmark, was at $850.

The reasons for gold's rise at that time are the same reasons as today. Inflation was perceived as rising out of control. The dollar was weak. The future was uncertain.

Markets ran as far and as fast as buyer enthusiasm could carry them. But then buyers either lost their enthusiasm or ran out of money, with a little help from market trading authorities who discovered that Nelson Bunker Hunt had led an effort to try to corner the silver market. Controls were put on trading and the attempted corner was unwound, much to the detriment of silver's price. It went from $50 a troy ounce to $10.80 by March 27, 1980.

Gold followed the downward path set by silver. It hit $463 by March 27. It was an event that was followed by 20 years of a generally down market.

January market enthusiasm is an interesting phenomenon to watch. Let's hope it doesn't get carried away as it did in 1980 and set the stage for a painful decline.

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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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