Arnie Shapiro, owner of a Marietta shop that buys gold from cash-needy consumers, didn’t have much business last Wednesday. Just a cheap gold chain and a scuffed ring, maybe 200 bucks’ worth.
Shiv Aggarwal, who sells gold jewelry and other items in Norcross, sold six Canadian Maple Leaf gold coins the same day at $1,475 each. He also unloaded a 22-carat gold necklace.
The tale of the two gold merchants speaks volumes about gold’s recent plunge in value and the effect on businesses, consumers and Atlanta’s overall economy.
Gold lost 9 percent of its value last Monday — the steepest decline in three decades — dropping to $1,361 an ounce.
While gold regained a bit of its shine by week’s end, closing at just under $1,400, its decade-long run as a hedge against uncertain economic times looks suddenly shaky. It’s down about 26 percent from its August 2011 peak of $1,888.
Gold buyers like Shapiro, ubiquitous during the recession with their We Buy Gold sign twirlers dancing alongside busy roads, struggle as fewer Atlantans want, or need, to sell gold jewelry.
Merchants like Aggarwal, whose gold sales slumped during and after the Great Recession, enjoy a surge of business as lower prices draw new shoppers.
“Sales were up 15 percent last year compared to 2011 and we expect another 15-20 percent increase this year because gold prices are going down,” said Aggarwal, whose Legacy Jewels caters largely to an Indian clientele. “More and more people are opening up their pocketbooks.”
Gold in flux affects more than just consumers, investors and small businessmen. GoldMax USA, once one of the metro area’s fastest growing businesses, has curtailed national expansion plans. A private equity firm that planned to acquire GoldMax backed out of the deal last year.
Scott Garber, an Atlantan and GoldMax co-founder, wouldn’t comment on the investment deal. He also downplayed gold’s price drop.
“It doesn’t mean anything. It goes up and down. There are times when it went up 8, 9, 10 percent over the course of a week and went down 8, 9, 10 percent,” he said in a short, hurried interview last week. “It doesn’t seem like the public tracks it that closely.”
Maybe, but the financial crisis and recession produced a wave of anxious consumers who gobbled up gold. They were egged on by ads touting its reliability in tough times.
“Gold has always been, and will continue to be, a very volatile investment,” said Adrian Cronje, chief investment officer for Balentine, an Atlanta financial advisory firm. “Because of its popularity in recent years, people have almost been lulled into how tranquil the price has been. But they need to look at its longer-run history.”
Just a dozen Aprils ago, gold sold for $256 an ounce. During the recession of 2008 and 2009, it traded around $900.
Then things got wacky.
The price went from $1,143 an ounce in April 2010 to $1,505 a year later to $1,638 the following year.
“That was quite a run,” said Howard Davidowitz, who runs a retail consulting and investment banking firm in New York. “It’s an astounding bull market there in gold for 12 years. And because of that, a lot of gold stores opened up all over the place to trade gold.”
Garber, a Georgia State University graduate, started Southeast Gold Buyers in Atlanta in 2008. A year later, revenue hit $28 million. In 2011, fueled by soaring gold prices and consumers’ need for quick cash, revenue reached $248 million.
Renamed GoldMax in 2011, after a merger, the “We-Buy-Gold” chain tallied 185 stores in eight states, including 65 in Georgia. Cardboard cut-outs of spokesman Robin Leach, former host of Lifestyles of the Rich and Famous, implore customers to “sell your gold and silver to GoldMax to get a taste of the good life.”
Garber dreamed of 700 to 900 stores nationally by 2017, according to various interviews. GoldMax press releases have said 100 stores would open in 2012 and another 50 in 2013.
GoldMax, though, opened only 30 stores in 2012, according to a company statement. Garber said Wednesday that GoldMax has “close to 300 stores nationwide” and cited the opening of two shops in California earlier this month. He said difficulty finding good commercial sites, not gold’s lost luster, contributed to the slower growth.
Arnie Shapiro blames a saturated market. He counted five gold-buying operations — pawn shops, jewelers and an ex-partner’s gold-buying store — within two miles of his A&M Gold Company on Canton Road in Marietta.
“Everybody and their mother got into it, including the true amateurs,” Shapiro said. “That’s ridiculous. That’s not smart.”
Back in the halcyon gold-buying days of 2009 and 2010, Shapiro grossed maybe $1 million a year in wholesale gold sales to refiners and his other jewelry business. This year he expects about half that amount. The low price of gold is one factor. The improving economy — with lower unemployment and fewer sellers desperate for cash to keep the lights on — is another.
Myriad reasons account for gold’s biggest decline in three decades. Less demand from Chinese and Indian consumers. Cyprus’ proposed huge gold sell-off. Little threat of inflation. The stock market rebound. An improving U.S. economy.
Nobody knows where gold is going. Cronje, the investment adviser, says gold should remain in portfolios as long as interest rates remain in check.
Benny "the Sheriff" Chester takes a long view, too. Chester is vice president of the Weekend Gold Miners Prospecting Club, a Dahlonega nonprofit that leases land alongside gold-flecked streams where panhandlers can try their luck. Membership has remained steady at around 900 the last few years.
