Apr 2nd 2009
From The Economist print edition

Some investors want savings that they can caress

AROUND the corner from The Economist’s offices in Mayfair, a shop dealing in old coins has a faded notice in the window. It advertises what were once daily prices for Krugerrands—gold coins from South Africa—and dates back to times when trade in such coins was brisk.

EPAGolden era

The heyday for buying physical gold was in the early 1980s, when bullion reached its peak in real terms. Once again, business is picking up. According to the World Gold Council, retail demand for bullion in the fourth quarter of 2008 was almost five times what it was in the same period of 2007. Dealers report a surge in interest from those worried about the safety of banks or simply the lack of attractive alternatives to negligible deposit rates and volatile stockmarkets. Fanning such fears are those who argue that today’s financial crisis does not so much resemble the Depression of the 1930s as the hyperinflationary Weimar era of 1923.

Sandra Conway of ATS Bullion, which operates out of discreet offices in central London, says there was a big rush after the demise of Lehman Brothers in September. “People want something tangible in their hands as a safeguard,” she says. One ATS client saves up all his £2 coins ($2.90) until he has enough to buy a sovereign, a gold coin minted by the British government. But coins tend to attract a markup, based on both scarcity value and the cost of manufacture; according to Ms Conway, Krugerrands trade at about 13% above the spot price.

http://www.economist.com/finance/dis...