INTERNATIONAL. Demand for gold coins has risen sharply as interest in the precious metal soars on financial instability and investors' appetite for assets seen as a safe store of value,

Investors have used gold as a shelter from the impact of the deteriorating economy on other assets, pushing the price up and making jewellery expensive for consumers with shrinking disposable income. Demand for physical gold products such as coins and bars has been particularly strong, traders say.

The Royal Canadian Mint, which produces Maple Leaf bullion coins, said it quadrupled its production capacity late last year as demand for gold and silver bullion products leapt.

Gold is being driven by concern about the financial system and lack of confidence in paper currencies,” said Adrian Day, the president of Adrian Day’s Asset Management in Annapolis, Maryland. “All the pressure is on the upside.”

The United States Mint said sales of its one-ounce American Eagle gold bullion coins rocketed to 710,000 ounces in 2008, from 140,000 ounces a year before.

"The demand for gold and silver has been unprecedented," a spokesman for the Mint told Reuters.

The chairman of the French Mint, Christophe Beaux, said sales roughly doubled last year in value terms and are expected to rise by another 50% this year.

The 2009 catalog the mint had produced was almost entirely pre-sold, he said. The French Mint produces 100 euro gold coins, and plans to mint 10-ounce and 1-kilo coins this year.

In South Africa, the world's third-largest gold producer, Natanya van Niekerk, deputy general manager for numismatics at the South African Mint Company, said she had seen a big increase in demand for gold.

"I think we will see this same trend in this and the next quarter," she said. "Gold surely has been resilient in these times."

Michael O'Kane, head bullion trader at the New Zealand Mint, said many overseas buyers had come into the New Zealand market. "We're seen as a safe-haven market," he said.

He said buying had been strong since the collapse of US investment bank Lehman Brothers in September, as investors moved money from banks into hard assets like gold.

The mint was averaging "a month's transactions in a day," he said, adding he saw demand continuing to rise.

Gold sales in Dubai's traditional jewellery market have collapsed mainly because of the decline in tourist arrivals. Local jewelers who have been waiting for a big chunk of tourists said that less and less tourists inflow to the city has badly affected the sale of the yellow metal.

Retail sales in Abu Dhabi’s gold market have fallen by more than 70%, according to the Gold and Jewellery Group, due to high prices. There will be fewer and fewer people who can afford the intricate jewellery pieces in their windows.

But despite, high prices, demand has been soaring for physical gold which is seen as a long-term investemnet and a safe store of value.

As a result, there was an acute shortage of gold coins in Dubai, during the recent shopping festival.

“People are coming and asking for gold coins. But there is a terrible shortage of gold coins. Many gold and jewllery shops in Dubai do not have the stocks of gold coins,” said a manager with Joy Alukkas, a leading Dubai jeweller.

Numismaster