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Stuff You Don't Know About Gold Because You're A Man

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On Wall Street, the sky's the limit. But on Main Street, gold is way out of reach.

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Wrap it up in investment jargon all you want, but everybody understands the value of gold, as our ancestors have understood it since they first crept out of their caves. It is a thing of genuine and unalterable beauty, an object of real and universal value in a world in which almost any other possession can turn to vapor at any moment.

But by any rule of logic, the gold craze has gone too far. That is, the price of gold has climbed beyond its value for any decorative or functional use. It's in serious Dutch tulip territory.

Let me assume that I'm writing this for a male reader. I hope women reading this will comment if they agree or disagree.

You can't be blamed for missing this key milestone. Even the best of men, in my experience, suffer from a peculiar streak of illogic that causes them to react in an irrational and even dangerous manner when exposed to sporting events, machines that make loud noises, and investment opportunities. Also, most of you dislike shopping, so you don't have a clue where socks come from, never mind where gold goes when it leaves the mine or the vault.

So, pay attention for a moment to what's happening out here.

Gold has many industrial uses, but its primary use, now that governments no longer coin gold, is for jewelry. It is, or was, available across the price spectrum. Up until three or four years ago, when gold prices began to rise precipitously, almost anybody could have at least a little of it.

Every woman had about 50 pairs of earrings but usually wore one of two pairs, the gold or the silver. These needed to be replaced fairly often because they got lost, or broken, or whatever. So, every department store carried a wide selection of simple everyday gold and sterling silver earrings. "Everyday" meant 14K, or 14 karat, which is 58% gold content. The pure stuff is 24K, and most of us have never even seen it outside a museum, never mind worn it.

Middle-class shoppers waited for Macy's (M) One-Day Sale and bought a 14K gold pair for about 60% off, or about $80. But they were available everywhere at various price ranges. The styles at Wal-Mart (WMT) might be a little lighter, or smaller, and cost maybe $50. At Bloomingdale's (now owned by Macy's Inc.) you could spend a lot of dough on designer styles, but they still carried the classic 14K styles, and most were a little bigger and a little costlier than the ones at Macy's.

Then gold prices started going up, and up. Consider the price of a few of the gold exchange-traded funds over the past five years: SPDR Gold Shares (GLD) has climbed from about $53 to as high as $186; iShares Gold Trust (IAU) rose from about $6 to more than $18. ETFS Physical Swiss Gold (SGOL) launched at $100 in late 2009, and now trades for as much as $189.

London's fabled bank storage vaults, where physical gold traditionally is stored underground in rooms that run the length of skyscrapers turned sideways, are so stuffed with hoarded gold that the price of storage is rising.

And many women you know are quietly cashing in their little hoards of gold jewelry for cash.

But they're not replacing it. The department stores know that their customers can't or won't replace something with a new version of that something for triple the price. So, each has come up with creative substitutes appropriate to their customers' price range.

Down at the low-priced end, Wal-Mart offers a few selections in 10K gold, the lowest karat content that legally may be described as "gold." Other items are rhodium-plated, which is sterling silver with a gold overlay, but too little gold to be labeled as such. Sterling silver is still quite affordable, so there's lots of that.

Macy's always had the widest selection, and it still does, but it's offering luxury that its buyers will pay for. There are designs in woven strands of gold and silver; sterling silver studded with diamonds and other stones, and lots of gold-plated silver. It still has 14K gold earrings, and they start at about $400 on sale.

At Bloomingdale's, 14K gold hoops, unadorned, now run about $1,700. The store is stocking a new kind of jewelry made of rosé, an alloy of sterling silver and 18K gold with gold plating. It is also starting a fashion for very large but wire-thin gold hoops, for about $400 to $500.

Most women will decide this stuff is just as pretty as 14K gold, and it does the job. Problem solved.

We've all heard the argument on gold demand: It's only going up because of the new rich of India, where family pride demands that a bride be weighed down with the shiny stuff on her wedding day. But surely Indian parents have discovered that gold vermeil (sterling coated in gold) is quite convincing from a distance.

And here's another thing: I just replaced my coffee pot with an identical model, one of the kind that comes with a reusable "gold filter." Except when I opened it I found it came only with one of those little paper cones.

Now, nobody thought that the fine mesh filter had a lot of gold content in it, but it had some. It was 23K gold-plated, at least in the high end machines. You can buy one separately now, for about $19.95. Even the expensive models are packed with a "gold-tone" filter, meaning it's yellow. It costs about $8.95 if bought separately.

As for industrial uses, there's a miniscule amount of gold content in virtually all electronics, because gold is a highly-efficient conductor. Most of that is not harvested when the products are junked, presumably because it hasn't been worth it. Not so far, anyway.

Gold prices have fluctuated throughout history, according to supply and demand. I had a chat with a jeweler last week when I cashed in a handful of my old gold jewelry (yeah, me too, and I got $843 for it, thanks very much). The jeweler showed me one of his treasures, a trade-in he couldn't bear to part with. It was a purse, about six inches square, made of heavy gold mesh with a solid gold sculpted handle. It was an exquisite thing, made in Pittsburgh, not Paris. Some woman toted that thing around 100 years ago or so. And her great-granddaughter just cashed it in.
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