Gold fever hits crazy new highs

The world is being gripped by gold fever—if you doubt it, you need only look at John Clifford’s latest enterprise. He pays top dollar to dentists for the shiny metal after they pull it from patients’ mouths. When people get dentures, they sometimes leave gold fillings and bridges behind at the clinic, says Clifford, owner of Guaranteed Green. It’s not always pretty. The fillings often come attached with “bits of porcelain and tooth matter.” Yet a large filling can fetch $50. “Dentists could easily accumulate $10,000 worth of gold over the course of a career,” he says.

Clifford is part of a booming industry capitalizing on the soaring price of gold, which recently hit US$914 an ounce, up 30 per cent since October, and up nearly 240 per cent since 2001. Investors keep bidding the price higher because they’re betting the massive stimulus plans in the U.S. and other countries will spark an era of hyper-inflation. As the price rises, companies like Clifford’s are making big profits by buying gold at big discounts to the market price. Hence the disturbing image of Ed McMahon flogging his gold toilet in a Super Bowl commercial.

But Jon Nadler, a senior analyst with bullion dealer Kitco in Montreal, is wary of all the hype around gold right now. He points to forecasts that gold will go as high as US$4,000 as a sure sign the market is reaching zany levels. After all, gold would not reach such ridiculously high levels unless there was a complete collapse of the global economy (think a return to the barter system or Zimbabwe-style inflation).

Besides, he already sees signs that the market is cresting. Demand in India, the world’s largest gold consumer, fell by half last year. Now he worries prices are increasingly being driven by “Johnny-come-lately” investors piling in, just as they did with real estate and oil. “The airwaves are saturated with commercials for gold dealers warning that the sky is falling and all these firms that want to buy your gold,” he says. “Every time there’s a mania you can usually count on the smart money having moved on to greener pastures.”