Aware that gold is the ultimate store of value, concerned South Africans are piling into Krugerrands and Nelson Mandela gold medallions, the SA Gold Coin Exchange said on Friday.
”On the back of global financial turmoil, the ever-popular Krugerrand has soared through the R10 000 mark, handsomely rewarding investors who several months back anticipated the global financial turmoil that has driven the rand price of the yellow metal into orbit,” Alan Demby, executive chairperson of the SA Gold Coin Exchange, said in a statement.
Technically, the surge could be directly ascribed to a combination of an advancing dollar gold price and a weakening rand.
”Based on current demand levels, the SA Gold Coin Exchange’s sales have been running at levels in excess of R100-million a month. We have accordingly increased our 2009 sales target to an admittedly conservative R1-billion,” said Demby.
Reord stock market lows were translating into record highs for gold and Krugerrands, and Demby suggested that in the last six months, a large number of investors had switched from equities into gold coins.
”The smart money has carefully digested the fact that in the past six months the JSE all-share index has slumped by 30%, while the price of a Krugerrand has soared by 64% over the same period,” he said.
Demby said it had to be remembered that the index was somewhat buffered by ”a firm gold share index”.
He said that British media had been carrying reports on the flight from cash to gold in the wake of concern over the safety of the banking system.
”Here the concern is more over the value of the currency than the banking system. Even so, widespread uncertainty is prompting investors the world over to accumulate gold as the only tried and tested safe haven.”
Looking ahead, he predicted ongoing Krugerrand strength.
”Prospective investors in Krugerrands have not missed the boat. As the global financial crisis deepens, as it is surely bound to do, gold bullion will continue to advance,” he said.
At the same time, South Africa’s inflation differential and the risk perceptions attaching to emerging market economies would probably witness ongoing rand weakness, Demby said. – Sapa