October 12, 2008

The New Gold Rush

There’s a new gold rush.

The financial crisis is prompting people to look for safer forms of investment than stocks and shares.

The interest in gold coins is so great that many of the world’s major mints are struggling to keep up with demand, including the Austrian Mint, which produces the Vienna Philharmonic – one of the best-selling bullion coins worldwide.

Sales of Vienna Philharmonic gold coins have gone up by more than 230% since last year.

Kerry Tattersall, the director of marketing at the mint, says production has gone into overdrive.

“We are running at present something like three shifts on all of the machines, on the presses, producing both gold and the silver bullion coins.

“We’ve actually got delays in delivering orders in silver. With gold, we are just about keeping pace, but it is a bit of a struggle.”

In September alone, the mint sold 100,000 ounces in gold coins – in normal times it would take three to four months to sell that much.

Mr Tattersall says people are looking for security.

“We are seeing a lot of panic buying at the moment. People are losing confidence in the economy – whether that is justified or unjustified is a matter of opinion. But we are seeing a lot of people looking for a safe haven.”

King’s ransom

In the mint, chunks of gold are melted down in a fiery furnace. Then a stream of molten metal is formed into a thin strip of gold, out of which the blank coins are cut. Later the blanks are struck with the design of violins and musical instruments.

The Austrian mint, in the heart of Vienna, was founded more than 800 years ago to make coins out of the silver ransom paid for King Richard the Lionheart, who was taken prisoner in Austria on his way home from the Crusades.

It is a sign of the importance people have attached to precious metals over the centuries.

But there is no such thing as a completely safe investment.

Gold, like all commodities, is vulnerable to fluctuations in price.

Prices tumbled in 1999 when Gordon Brown announced a decision to sell off some of the Bank of England’s gold reserves.

Robert Stoeffele, an analyst at Austria’s Erste Bank, says until recently there was less interest in gold as an investment.

“We forgot the appeal of gold in the last 28 years because we had a bear market in gold. But within the last few years we have seen a huge fundamental bull market for gold.

“Gold is like a thermometer for the financial markets. I’d say we’ve got fever,” he said.