Lesson From a Gold Souq
By P.J. O'Rourke
Is it better to make a fancy investment or a plain one?
By "fancy," I mean an investment that grabs your eye because it's brilliant, shiny, bright, new, beautiful, and elaborate.
By "plain," I mean an investment that just is what it is.
"Fancy" and "plain" aren't investment terms you're likely to find in Barron's or on CNBC. And those guys probably have 100 different ways to talk around that question...
But I'm just a former foreign correspondent... not an investment maven. And I got a simple lesson in fancy and plain investments the first time I visited a Middle Eastern gold souq.
In the cities of the Middle East, merchants selling a particular commodity will all gather in a single marketplace, in Arabic, a souq. A city has a gold souq, a fruit and vegetable souq, a carpet souq, a clothing souq, and so on.
In August 1990, I was in Dubai in the United Arab Emirates, covering the aftermath of Saddam Hussein's invasion of Kuwait. After I had interviewed as many Kuwaiti refugees as I could find, there wasn't much else to do. So I visited the gold souq.
Dubai was not yet the vast, towering metropolis it would become. But it already glittered with oil wealth... especially in the little shops along the narrow, awning-covered streets where the old gold souq was located. (There's a skyscraper there today.)
Even the smallest shops appeared to have a million dollars' worth of gold jewelry on display. I had never seen so much gold. And I had never realized how powerfully attractive gold is.
All the gold for sale was 24 karat – 99.99% pure. The merchants of Dubai deal in nothing else. Pure gold has a fiery look. It seems to glow from within. The array of bracelets, pendants, rings, chains, medallions, and brooches was like a sunset on a shelf.
I felt as if I suddenly understood gold. But what I didn't understand was the gold-souq prices.
One wonderful filigree necklace was made with delicate threads of gold worked into a sort of heavenly angel's lace collar. This was for sale at a bargain price. Next to it was an unadorned amulet selling for much, much more.
I saw the same thing repeatedly. A pair of earrings displaying exquisite craftsmanship – cheap. Smooth gold hoops – pricey. A locket too pretty for Tiffany's – a pittance. Another you might find in Wal-Mart – a bundle.
I looked around until I found a shop owner who spoke good English. But for a while, it was as if I couldn't make him understand my question about why one fabulous piece of jewelry was inexpensive, while another ugly one cost so much.
"Oh!" he said at last, "the price. It is the London gold market. We check on the financial wire service. Then we use this scale."
"But this is plain," I said, pointing to a large, clunky bangle. "While this," I said, pointing to a delicate armlet the creation of which must have required the best efforts of a skilled goldsmith, "is fancy."
"Fancy?" said the gold merchant. "Price is weight. Fancy is free of charge."
Regards,
P.J. O'Rourke