GOLD ANALYSIS

Phenomenal demand for gold coins continues

The SA Gold Coin Exchange says demand for gold coins has picked up as investors wish to take charge of their own affairs.

Author: Tessa Kruger
Posted: Sunday , 21 Dec 2008

JOHANNESBURG - 

International demand for gold coins has picked up as people strive to take charge of their own financial destinies in an uncertain investment world.

 Sales manager at the South African Gold Coin Exchange Len Sham says the demand for Krugerrands and collector coins such as the Mandela Coin has been phenomenal over the past five years as the rand weakened and the gold price strengthened.

 International demand for coins has also increased over the last two to three years as people increasingly "want to be in control" of their investments. In addition, the recent credit crunch has led to a further uptick in demand for coins across the world, as seen in the fact that many countries are asking South Africa for Krugerrands due to their own short supply of coins.

 Sham said Krugerrands were especially popular in South Africa as it served as a rand-dollar hedge that could be sold back to the Exchange, any coin dealer or a person of choice at any time to realise cash.  

 The Krugerrand coins were worth their intrinsic value in gold and an example of how investment in coins can work in a volatile exchange rate environment was the fact that a Krugerrand weighing one ounce was worth R7,300 in October this year versus its current value of R8,550.

 "People like the fact that Krugerrands are tangible investments that would still hold value if the economic system collapses. Personally I would much rather be in possession of gold coins than paper under those circumstances," he said.

 Collector coins such as the Mandela Coin launched after democracy dawned in South Africa also saw an increase in demand over the past five years as only a limited number of these coins were cast. The Mandela coins have proved a particularly good investment for those who purchased them at R4,000 in 2004 through rarity and metal price appreciation.

 Sham said they advise investors who want to buy gold coins to invest 30% of their money in collector's coins that they typically have to keep for two to three years to make returns on this investment, and 70% in Krugerrands that could be sold at any time to prevent cash flow problems.

 The fact that Krugerrands and the value thereof were so well-known over the world meant that investors could easily sell their coins to dealers in any place in the world. The Krugerrand was in fact rated as one of the top 300 brands in the world.

 Tourists visiting South Africa were often fond of collector coins such as the local Natura Series sporting coins with some of Africa's powerful and much-admired animals such as lions, buffalos, elephants and hippopotamus and the various Mandela coins. Other countries abroad produced gold coins depicting their own events and characteristics.

 Sham added that investors in gold coins were unlikely to run into liquidity problems.

While Exhange Traded Funds (ETFs) also offered direct exposure to the gold metal, gold coin holders took their own decisions and didn't need to lose any sleep over finding willing buyers and sellers.