Global demand for gold coins climbs after big bullion slump

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Debarati Roy

Austria’s mint is running 24 hours a day as global mints from the US to Australia report climbing demand for gold coins, while Goldman Sachs says this year’s price rebound will end.

Muenze Oesterreich mint has hired extra employees and added a third eight-hour shift to the day in a bid to keep up with demand. Purchases of bullion coins at Australia’s Perth Mint have risen 20 percent this year from a year earlier. Sales by the US Mint are set for the best month since April last year, when the metal plunged into a bear market.

Global mints are manufacturing as fast as they can after a 28 percent drop in gold prices last year, the biggest slump since 1981, attracted buyers of physical metal. The demand gains have helped bullion rally for five consecutive weeks, the longest since September 2012.

That will not be enough to stem its slump, according to Morgan Stanley, while Goldman Sachs predicts bullion will “grind lower” over this year.

“The long-term physical buyers see these price drops as opportunities to accumulate more assets,” said Michael Haynes of online bullion dealer American Precious Metals Exchange. “We’ve witnessed top selling in the past few weeks.”

Gold futures in New York have climbed 5.2 percent this month to $1 264.50 (R14 074) an ounce, heading for the first gain since August last year. The Standard & Poor’s GSCI spot index of 24 raw materials has slid 1.2 percent, while the MSCI All-Country World index of equities has fallen 2.9 percent. The Bloomberg Dollar spot index, a gauge against 10 major trading partners, has added 0.7 percent.

The Shanghai Gold Exchange, China’s largest bullion bourse, delivered 2 197 tons to customers last year, compared with 1 139 tons in 2012, it said. China beat India as the top buyer last year as demand probably reached a record, the World Gold Council estimates.

The UK’s Royal Mint ran out of 2014 Sovereign gold coins due to “exceptional demand,” it said. Coins were not available until six days later when inventories were replenished.

Bullion tumbled last year after some investors lost faith in the metal as a store of value, snapping 12 years of gains. Holdings through exchange-traded products fell 33 percent in the past 12 months, erasing $69.1 billion from the value of the funds, data show. Prices also fell as US equities rallied and inflation remained low.

“Prices are likely to drop further as global economic conditions are stabilising and tapering worries continue,” said Rob Haworth at US Bank Wealth Management. “There is no doubt that physical demand has improved, but it will not be enough to support prices.”

The US Mint, the largest, has sold 89 500 ounces so far this month. The Austrian mint, which makes Philharmonic coins, saw sales jump 36 percent last year and expected “good business” for the next couple of months, marketing and sales director Andrea Lang said.

“It’s

been a bad year for gold,” said Frank McGhee at Integrated Brokerage Services. “People who bought coins have lost value, but are not looking at short-term gains, and hope springs eternal.” – Bloomberg


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