Demand for Krugerrands has soared to all-time highs over the past few weeks, says Alan Demby, executive chairman of The South African Gold Coin Exchange (SAGCE).
He ascribes the phenomenon to a combination of factors, the most telling of which is the high dollar gold price. "Sales of the one-ounce gold coin advanced markedly on the day a while back when bullion pierced the $1900 an ounce mark. And interest has since quickened."
Demby suggests that the sell-off by weak holders and those buying on margin has been positive for gold's long-term outlook, as genuine long-term holders are the ultimate beneficiaries.
He characterises investors in Krugerrands as a "unique breed"; people who account for much of the smart money rushing into the metal.
"They are visualising a systemic change in the factors influencing the price of gold and anticipate a basic shift in the global financial framework. They expect the determined stimulation strategies being pursued by the world's power economies to spill over into severe inflationary pressures. That's why they are buying gold."
Demby maintains that the "unique breed" is expressing its expectations of the future through the Krugerrand because it is the most convenient and cost effective way of doing so.
"Ultimately, they are doing what many centuries of investors have done before them — trusting in gold as a great store of value."
Demby points to associated buying of Krugerrands and gold collectable coins and medallions; demand prompted by the 185th anniversary of Paul Kruger's birth on October 10.
"In fact, ZAR coins, which feature Paul Kruger, are currently fetching record prices on the international as well as the local market, proving that when it comes to coins the idea of holding history in your hands is as compelling today as ever before, especially when it comes to gold coins. This might be a small market but there are a fair number of collectors out there who are avid believers in the value of commemorative coins; who contend that their long-term value, enhanced by a rarity factor, is assured. And if they enjoy a substantial gold content, as many do, then so much the better."
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