Investors pile into gold coins

Investors pile into gold coins

Johannesburg - Aware that gold is the ultimate store of value, concerned South Africans are piling into Krugerrands and Nelson Mandela gold medallions, the SA Gold Coin Exchange said on Friday.

"On the back of global financial turmoil, the ever-popular Krugerrand has soared through the R10 000 mark, handsomely rewarding investors who several months back anticipated the global financial turmoil that has driven the rand price of the yellow metal into orbit," Alan Demby, executive chairperson of the SA Gold Coin Exchange said in a statement.

Technically, the surge could be directly ascribed to a combination of an advancing dollar gold price and a weakening rand.

"Based on current demand levels, the SA Gold Coin Exchange's sales have been running at levels in excess of R100m a month.

"We have accordingly increased our 2009 sales target to an admittedly conservative R1bn," said Demby.

Reord stock market lows were translating into record highs for gold and Krugerrands, and Demby suggested that in the last six months, a large number of investors had switched from equities into gold coins.

"The smart money has carefully digested the fact that in the past six months the JSE all-share index has slumped by 30%, while the price of a Krugerrand has soared by 64% over the same period," he said.

Demby said it had to be remembered that the all-share was somewhat buffered by "a firm gold share index".

He said that British media had been carrying reports on the flight from cash to gold in the wake of concern over the safety of the banking system.

"Here the concern is more over the value of the currency than the banking system.

"Even so, widespread uncertainty is prompting investors the world over to accumulate gold as the only tried and tested safe haven."

Looking ahead, he predicted ongoing Krugerrand strength.

"Prospective investors in Krugerrands have not missed the boat.

"As the global financial crisis deepens, as it is surely bound to do, gold bullion will continue to advance," he said.

At the same time, South Africa's inflation differential and the risk perceptions attaching to emerging market economies would likely witness ongoing rand weakness, Demby said.

- Sapa

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."