Gold down $10 on US rate cut

Dec 17 2008 09:09

Sydney - Gold recoiled on Wednesday, giving back more than $10 after a strong showing overnight on the back of the latest US interest rate cut.

The US Federal Reserve cut its target for overnight rates to a record low zero to 0.25%, and said it would employ "all available tools" to dispel a year-long recession.

Spot gold was fetching $847.20 an ounce against New York's last notional close of $857.35. In the last week, gold has gained as much as 11%.

Dealers cited selling by investors in Asia as the price hovered around $857 an ounce for bullion losing some of its polish.

Still, the plight of the dollar, which was near 13-year lows against the yen and two-and-half-month troughs versus the euro, was side lining some arbitrage investors who otherwise might look to cash in bullion for greenbacks, they said.

"The passing of the US Fed rate announcement should take some ammo away from the gold longs and a potential drop in the oil price will dampen inflation hedge support," Australia & New Zealand Bank commodity research head Mark Pervan said in a report.

US February gold was up 0.72% at $848.90 an ounce on the Comex division of the New York Mercantile Exchange, after settling up $6.20 at $842.70 prior to the Fed announcement.

The benchmark October gold contract on the Tokyo Commodity Exchangerose ¥13 to ¥2 431 per gram to yen.

The Bank of Japan holds a two-day meeting Thursday and Friday with speculation that the Japanese central bank will be forced to follow the Fed's lead, driving domestic interest rates back toward a zero policy and potentially triggering gold buying.

Spot platinum dropped $3.50 to $854.00 an ounce after gaining 5% from its previous finish of $817 in New York on Monday.

Spot palladium was down $2 to $176.00 as traders awaited news on a US plan to bail out carmakers, the main buyers of platinum group metals.

Spot silver was higher at $11.15 an ounce versus $11.11 in New York.

- Reuters

In an interview on SAfm @ 18:25 on 08 December 2008

Krugerrands hit record prices and there is a shortage of the coins - Alan Demby

In an interview on SAfm @ 18:25 on 08 December 2008

[miningmx.com] -- THERE is a shortage of Krugerrands as trade in the gold coin picks up, said Alan Demby, the executive chairman of the South African Gold Coin Exchange.

"Our turnover has increased dramatically in the last couple of months. I suppose the best hedge, if you will, against the turmoil has really been gold coins and Krugerrands," Demby said on SAfm Market Update. "Of course, gold has come off its highs, but our saving grace in the South African context has really been the rand/dollar exchange rate which, as you all know, has fallen out of bed. So in the last month or two the Krugerrand has reached an all-time high of just over R9,000," he said. In 1986, six million Krugerrands were minted, but that has come down to between 50 000-100 000 coins a year. "But, you know, when the proverbial hits the fan, everyone goes for what really counts, and that's Krugerrands. In fact, today there is a shortage of Krugerrands and the guys can't keep up with minting Krugerrands. So after all is said and done, Krugerrands are still the most popular coin." The exchange-traded fund market is not really a competitor for gold coins, Demby said. "I think we deal with the retail investor, or collector if you will, much like clients buy between, say, one and 2,000 coins. And I think the big institutional buyers really trade in the ETFs," he said. "I like to see that we work alongside each other, and I think that the institutional investors probably trade that market much more aggressively and more frequently than our clients do," he said. "Our clients tend to be on average long-term hoarders, if you will, for want of a better word, and at some stage they might wish to sell or hand it over to their children, grandchildren," he said. "There are over 55 million Krugerrands. It's really easy to buy and sell anywhere from one Krugerrand to a couple of thousand Krugerrands. It's really a very liquid market."

Gold coin supply 'drying up'

Dec 12 2008 07:15

Johannesburg - The supply of gold coins globally is drying up, the SA Gold Coin Exchange said on Thursday.

"Unsurprisingly, coin dealers the world over are starting to run out of stock of all manner of gold coins," said Alan Demby, executive chairperson of the SA Gold Coin Exchange.

"Those who have the coins are selling them at often significant premiums."

Demby said investors, "rushing to safety" in the current financial crisis, were clamouring to buy gold in its physical form.

Traders confirmed it had become extremely difficult to purchase the yellow metal in the form of bars or coins.

"People are panicking - they're looking for a tangible asset," Demby said.

The "rush to safety" showed a number of fears about the fragility of global finance.

It underlined concerns that the move towards zero interest rates could trigger an inflationary surge in the future - and this would bring into question of the value of some paper currencies.

The latest figures available from the World Gold Council illustrate that demand for coins, bars, and exchange traded funds (ETFs) has doubled in the third quarter of 2008 to 382 tons compared to a year earlier.

Demby said the growing global shortage of gold coins "pointed unerringly to a pending strong rise in the gold price".

Evy Hambro, manager of BlackRock's $4.7bn World Mining Fund, had pointed out that since the beginning of the year gold had handsomely outperformed virtually every stock market in the world - "a compelling reason why the supply of gold coins had begun to dry up."

"Also, gold production has been declining year-on-year since 2001 when production peaked at a gold price of only US250 an ounce," said Demby.

"It looks as though production's going to fall significantly again for 2008, with a bigger fall in prospect for 2009."

With production declining and demand strong, central banks selling less gold and jewellery demand recovering rapidly, the outlook for gold was "as bright as it had ever been.", Demby said.

- Sapa -news24.com