Wealthy investors drain supplies of gold
by hoarding bullion bars By Javier Blas in Kyoto
Published: October 1 2008 03:00 | Last updated: October 1
gold are demanding "unprecedented" physical levels
of bullion bars and coins and moving them into their own vaults
as fears about the health of the global financial system deepen.
Industry executives and bankers at the London Bullion Market
Association annual meeting said the extent of the move into
physical gold was unseen and driven by the very rich.
"There is an enormous pick-up in investment demand.
I have never seen a market like this in my 33-year career,"
said Jeremy Charles, chairman of the LBMA. "The gold
refineries cannot produce enough bars."
The move comes as fears grow among investors over the losses
at investment vehicles previously considered almost risk-free,
such as money funds.
Philip Clewes-Garner, associate director of precious metals
at HSBC, added that investors were not flying into gold simply
because they saw it as a haven amid Wall Street's woes. "It
is a flight into gold because it is a physical asset,"
"Vault staff are also doing overtime," another
banker at the LBMA meeting said, adding that investors in
some countries were paying premiums of up to $25 an ounce
above the London spot price to secure scarce gold bars.
Spot gold prices in London yesterday traded at about $900
an ounce, more than 25 per cent above the level before Lehman
Brothers' collapse. Although some traders said the rush into
physical gold could boost prices, others cautioned that prices
were depressing jewellery demand, capping any price gain.
Industry executives said gold refineries and government mints
were working at full throttle to keep up with investor demand,
but acknowledged they were suffering from shortages, particularly
Johan Botha, a spokesman for the Rand Refinery in South Africa,
which manufactures the Krugerrand, the world's most popular
gold coin, said the plant was now running at full capacity
seven days a week. "Even so, now and then we have shortages,"
The Austrian mint, which manufactures the Vienna Philharmonic,
a popular gold coin in Europe, said it had extended work to
the weekends to accommodate soaring demand.
Last week, the US mint suspended the sale of its American
Buffalo coin after it ran out of stocks.