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