BURLINGAME, Calif.--In the 50 years since Burt Blumert founded Camino Coin Company, a precious metals dealer in this quiet San Francisco suburb, he's never witnessed such a frenzy of interest in gold and silver coins.
"There are no gold coins available," said Blumert, who is now mostly retired after giving the business to a longtime employee last year. "This is just as true of silver, even more so."
Call it the Great Gold Rush of 2008. Or, more accurately, the Great Gold Shortage of 2008. Like many dealers with physical storefronts, the Internet accounts for a good percentage of Camino Coin's business, and it and other online retailers have found that economic uncertainty, the stock market crash, and inflation fears have led to a resurgence of interest in all kinds of precious metals--and a sharply reduced supply.
Spikes in demand are not exactly new: in 1991, fears of war in the Middle East caused sales of U.S. Mint-produced American Eagle bullion gold coins to spike. In the stagflation of the 1970s, gold prices increased eightfold in just three years before falling back to earth in the 1980s.
But today's remarkable flood of demand for gold coins--something tangible, symbolic, and entirely divorced from an increasingly-fragile banking system--has surpassed those other eras.
"In normal times you're buying as much off the street as you're selling," Blumert, 80, said in a weekend interview. "In average times, you don't go to the mint. All of that has dried up. All of those sources. The mint becomes the only source of merchandise." The worse news: the U.S. Mint, citing unprecedented demand, has actually halted sales of many gold coins until 2009.
Hal Varian, Google's chief economist, echoed that observation in an earnings-related conference call last week. Varian said there's been an "obsession" with related search terms among Google users, with "huge increases" in searches for gold, home safes, Libor, and money market funds.
At Blanchard and Company, the self-described "largest and most respected" precious metals retailer in the United States, visits to the firm's Web site have increased by about 1,000 percent since early September, according to David Beahm, vice president of economic research.
Beahm said that search engine advertising is responsible for attracting about three-quarters of new customers to the New Orleans-based firm. "Quite frankly, we've never seen this kind of demand before," he said. "People are actually just interested in gold. Right now, most people want gold American Eagles, but they'll take anything they can get." (The U.S. Mint manufactures American Eagle bullion coins that contain one ounce of gold.)
Precious metals demand "skyrocketed"
Other online retailers report similar experiences. "The demand for precious metals has skyrocketed," said Mike Maroney, a vice president at Monex of Newport Beach, Calif., which calls itself "America's premier precious metal dealer" with more than $25 billion in transactions to date. Maroney said Monex's business has increased by "four to five times" since September, and now customers want to take physical possession of their purchases.
"We're seeing large net worth customers looking to own some gold as a hedge," Maroney said. "A lot are worth hundreds of millions. They're not worried about price. They're worried about having something in their hands if everything else goes to hell in a hand basket...(In addition), we're seeing people who have never owned precious metals in the past call up and ask how to start."
The lack of American Eagle gold coins, coupled with new shortages of Canada's Maple Leaf coins, has been problematic. "Thankfully, we have a marketing agreement with the Austrians--they're running their presses around the clock...I typically have somewhere between 60 to 70 delivery products. Now I have seven. Everything else is sold out." (The Austrian government mints a gold bullion coin called the Vienna Philharmonic.)
Goldmoney.com offers a different, and innovative way to buy gold: Open an account through their Web site, transfer funds from a bank account, and the U.K.-based company will buy bullion for you and hold it in a vault insured by Lloyd's of London. The benefit is that you don't have to worry about finding a safe place to store coins; the downside is that in an emergency, you don't possess them.
In the last month, said James Mitchell, a customer support manager for Goldmoney.com, "business has quadrupled, it's gone up four to five times. It's really gone crazy here. We've been growing steadily over the last few years but we've had a boom in the last month."
In addition to offering a popular specialty-news aggregation site, Kitco.com lets customers order bullion coins or hold gold in storage accounts.
John Nadler, a senior Kitco analyst, suggests that customers set up a storage account and wait for the current shortage to wane: "If people are going out and paying unreasonable premiums on products, there's just no reason for that. They could buy a pool account, wait until there is normal production and convert to coins at small fees."
An alternative to stocks, bonds
Another way to benefit from potential price rises, and own an asset that's generally not correlated with the performance of the stock market, is to buy an exchange-traded fund through a brokerage like Sharebuilder.com. The amount of gold held in trust by SPDR Gold Shares leapt by about 16 percent in September alone.
The downside--and this applies to buying coins as well--is that the price of gold may fall and investors could lose money. Gold does not pay interest or dividends, and can badly underperform the stock market during an economic boom.
This happened in dramatic fashion in the early 1980s, when gold hit a high of around $850, not adjusted for inflation. Then it plummeted to a fraction of that value and remained there until its gains this decade. A 1999 article in The New York Times expressed the conventional wisdom of the time: "In the nearly two decades since the price of gold peaked, there have not been many good seasons for the precious metal."
If inflation is increasing, especially with the amazing amount of dollars that the U.S. government has created out of thin air in the last few weeks, gold could continue to shine.
"People are concerned about inflation right now," said Dana Samuelson, president of American Gold Exchange in Austin, Texas. "I think gold prices will be substantially higher still in the coming years, based on the inflationary forces of all this money they're printing to continue to lubricate the financial system...People are scared. We're in uncharted territory."
CNET News' Stephanie Condon and Stephen Shankland contributed to this report.