Market turmoil sends investors scrambling
for gold Richard Wray - guardian.co.uk
Wednesday October 01 2008 18:57 BST
In London one
of the UK's leading gold bar and coin merchants ATS Bullion
has experienced unprecedented demand over the past few days.
investors are shunning banks in the current financial crisis,
and putting their savings into one of history's most tangible
representations of wealth: gold bars and coins. Demand is
so high among the world's wealthy that suppliers are seeing
their stocks dramatically depleted.
"It's notable that there has been an increase in interest
in gold generally," according to Justin Oliver, senior
investment manager at Collins Stewart, who advises worried
investors about where to put their money. "Gold is still
viewed as a safe haven in times of crisis".
Just last week the US Mint, which has been responsible for
ensuring an adequate supply of American coinage since 1792,
was forced to halt sales of the "American Buffalo"
solid 24 carat gold coins because it was running out of supplies.
It had already needed to ration supplies of the 22 carat "American
Eagle" alternative by starting an allocation programme
which limits the number that can be sold at any given time.
The price of both one ounce coins was also lower than the
price of an ounce of gold on the open market at the time,
making them incredibly tempting to investors looking to make
a quick return. Having broken through the $1,000 (£562)
barrier earlier in the year, the gold price has retreated
and is now trading at around $880 an ounce. The 2007 American
Eagle one ounce coin, however, was going for at $789.95 while
the 2006 Buffalo coin cost $800. The prices of the current
- 2008 - editions are $1,119.95 and $1,199.95.
A spokeswoman for the US Mint said sales of 24 ounce coins
are up 34% this year, with 164,000 snapped up already.
"We are now working diligently to build up our inventories
and hope to be able to re-sell the coins shortly," she
In London, meanwhile, one of the UK's leading gold bar and
coin merchants ATS Bullion has experienced unprecedented demand
over the past few days at its shop next door to the Savoy
"There has been enormous demand," according to
managing director Sandra Conway. "There are very few
sellers of physical gold and we have had queues of people
"We have got gold in stock but there have been some
shortages, especially of Krugerrands."
Named after Paul Kruger, who headed up the Boer resistance
to the British in the 19th century, Krugerrands were first
minted in South Africa in 1967. Although it was illegal to
import them into the UK during the 1970s and 1980s, because
of apartheid, they are now one of the most widely circulated
gold coins. As such the price of the one ounce coins tends
to track the gold price to within a few percentage points,
making them a perfect vehicle for investors.
The World Gold Council, formed and funded by the world's
leading gold mining companies, has seen a clamour for gold
from across the world. Some refineries are believed to be
having trouble keeping up with demand.
"We are seeing a large amount of buying in the retail
sector, in the form of bars and coins," said a spokesman.
"But there is also heavy buying in gold-backed securities".
Gold is traded in the form of securities on stock exchanges
in Australia, France, Hong Kong, Japan, Mexico, Singapore,
South Africa, Switzerland, Turkey, the UK and US. Called exchange
traded commodities or exchange traded funds (ETFs), they track
the gold price almost perfectly and are actually backed with
They appeal to investors because they do not require the
actual storage of gold by the buyer and ETFs are traded in
a number of currencies while the gold price is set in dollars
which can be an advantage, especially to European investors.
The World Gold Council reckons such securities represent
about 38% of all the world's investment in gold. There are
now 1088 tonnes of gold invested in these markets with strong
buying reported over the past few days.