October 2008 | Gold coins command record prices

Heavy losses in equity markets are enticing investors to pay record prices for popular bullion coins such as South Africa’s Krugerrand.

On Friday, gold dealers said that the premium for bullion coins surged by up to 10 per cent above the gold spot price, up from 2-4 per cent before the deepening of the financial crisis. The jump comes as official mints struggle to match demand.

Mark O’Byrne, director at Gold Investments in Dublin, said: “Premiums continue to surge on a daily basis on bullion coins and bars making the spot price less relevant all the time.”

Spot gold in London rose to a two-month high of $931 a troy ounce, up 20 per cent since the financial crisis gathered pace in mid-September.

It reached an all-time high of $1,030.8 an ounce in March.

Priced in euros and sterling, gold hit record highs – at £550.8 an ounce, up almost 30 per cent in the past month, and €668.77 an ounce.

The jump in premiums means that while spot prices traded just above $930 an ounce, the same weight of bullion in the form of an actual coin cost up to $1,100 an ounce.

On Ebay, the internet auction site, investors were bidding for one-ounce Kruggerand’s at up to $1,299.99 each on Friday.

FideliTrade, one of the main US gold dealers in coins and investment bullion bars, quoted the popular American Buffalo one-ounce gold coin $76 – or about 8 per cent - above the gold spot price.

Goldline International, a popular online retailer based in California, quoted the American Eagle, the American Buffalo and the South African Krugerrands gold coins $80 above spot prices.

Investors are rushing into gold – actual coins and small bars and bullion-backed exchange traded funds – as they abandon other markets, traders said.

The world’s largest gold exchange-traded fund, the New York-listed SPDR Gold Trust, said its bullion holdings rose to a fresh record high of 765.74 tonnes by late Thursday, up 1.84 tonnes from Wednesday.
back