Gold spike gives consumers pause, not fever

Gold has gained almost 20 percent since the start of the year, driven chiefly by dollar weakness and the spectre of inflation, with investor fervour heightened by the excitement created by high prices.

But in contrast to a second day of busy trade on global gold markets, the scene at shops and jewellery merchants from Sydney to Dubai to Mumbai was marked by a distinct lack of occasion, suggesting that the wave of retail scrap selling that greeted gold's record run in March 2008 may not be quick to recur.

"Today's been like any other day," said David Carr, of KJC Coins Australia in Sydney, which deals in precious metal coins and bars. "No one's coming in to sell gold because the price jumped overnight, it's more wait and see, business as usual."

The Australian outback gold mining town of Kalgoorlie, home to a nearly Times Square-sized electronic ticker tape broadcasting up-to-the-minute bullion prices, also was quiet.

"There's nothing going on that's out of the ordinary," said John Horner, editor of the Kalgoorlie Miner newspaper.

Profit taking -- read selling -- replaced gold purchases that in New York and across Europe on Tuesday had swept spot bullion more than $10 above its previous March 2008 peak, and carried through on Wednesday to a record $1,048.20 an ounce.

The issue of scrap supply in the gold market -- generated largely from the resale of jewellery to merchants -- has taken on greater importance in recent years, as the advent of physically backed Exchange Traded Funds (ETFs) attracts new investors.

The biggest such fund now holds more than 1,000 tonnes of gold, equivalent to the world's fifth-largest central bank, and analysts had said that only the flow of scrap material into the market had prevented gold from soaring much sooner, much higher.

While there was some evidence of retail sales, it was not overwhelming.

NO GOLD STASHES

To date, there have been no reports of gold hoarders burying stashes in secret spots as was the case in 1980, when gold zoomed above $800 an ounce for the first time, or about double today's level when adjusted for inflation.