Canny investors choose coins

In a mint in the town of Jablonec nad Nisou, about 112 kilometres north of Prague, a worker checks the quality of a commemorative gold coin with the face of US President Barack Obama. The world's most talked about president, arrives in the Czech capital today to attend the EU-US summit, which begins tomorrow.

A few years ago, creating a coin to commemorate a political figure's visit might have seemed eccentric – even a little overboard, if you will. But that's a thing of the past. From special occasion UAE coins to the American Eagle, gold coin production is being cranked up in mints around the world – including here in the emirates – to satisfy customers who believe the assets may be immune to the crisis.

Take Guenther Fuchssteiner, for example. The 59-year-old military doctor has been visiting the Austrian Mint for more than 20 years, and exchanges spare money he has for gold, following a habit set by his parents. "I have always tried to put a little bit of gold aside, as an investment, and I have been doing so more since the crisis," he says.

It seems that he's not the only Austrian doing so, as sales are expected to exceed last year's record levels.

Austria's Philharmonic, named after the Vienna Philharmonic Orchestra, was the world's best-selling gold coin in the last quarter and sales soared 544 per cent in the first two months of 2009.

"There is no sign of demand abating," says Austrian Mint Marketing Director Kerry Tattersall. "At present production is struggling to keep up with demand."

Investors are perhaps doing the right thing. Mangesh Gavankar, Head of Sales and Marketing, Emirates Gold DMCC, says buying gold coins is one of the safest investments. "Anytime is the best time to buy gold," he tells Emirates Business.

"The truth is, gold may go down slightly after you buy, but it will eventually become high again, so technically, you can't go wrong."

Gavankar, who represents the largest gold refiner and bar manufacturer in the Middle East, adds that demand for coins in the region is on the rise from people from all walks of life.

"A key to the regional market is that a lot of Asians reside here, and they rely on gold for investment. Before the crisis, many used to focus on other types of investments, such as property, for example, but now they are turning to gold.

"We're seeing that more individuals are interested in buying coins. It's a safe investment, coins can be bought in various weights, so can be suitable for individuals with whatever salary."

The rest of the world agrees. Hans Dieter Rauch, who sells both collectors' and investors' coins in his boutique in Vienna, says revenues soared 300 per cent last year.

"It's the man in the street, not particularly rich people but normal citizens like you and me," says Rauch.

Russia's state-controlled Sberbank says it has never seen such strong demand for investment coins, while the US Mint says sales of its one-ounce American Eagle bullion gold coins rocketed over 400 per cent to 710,000 ounces last year.

"The demand for gold has been unprecedented," says Carla Coolman, a spokeswoman at the US Mint.

Gold hit a record high of $1,030.80 an ounce in March 2008 and last month rose back above $1,000. Jewellery sales by cash-strapped Americans and Europeans have helped brake the metal's rise in recent weeks.

"Jewellery has higher making charges, so pieces become more expensive," Gavanker continues. "That's why buying coins or bars is better than buying jewellery for investment purposes. You tend to lose a high percentage when selling jewellery."

The Czech Republic's Komercni Banka this month added gold coins and bars to their traditional portfolio of products. In New Zealand, Michael O'Kane, head bullion trader at the Mint, says the mint was averaging a month's transactions in a day.

Wealthy investors are more likely to invest in bars than coins as the premium for production is lower, says Wolfgang Wrzesniok-Rossbach, head of sales at precious metals group Heraeus.

"If you buy a kilo bar you have to pay one time the surcharge for producing the bar, which is pretty low," he says. "If you buy 30 one-ounce coins, which would be about equal to a one-kilo bar, you have to pay 30 times that amount." Gavankar adds: "It's subjective and depends on the investor."

But coins have the edge for small investors who want flexibility, and appreciate their aesthetic allure.

Demand is for more than physical product: In the past few years, the precious metal has been sought after for speculative gains, with interest in gold-backed funds in particular soaring.

Gold-backed exchange-traded funds (ETFs) are listed on stock exchanges and offer investors exposure to price without physical delivery. Sponsors of the funds buy a matching amount of physical gold and keep it in bank vaults.

But since the financial crisis accelerated last autumn, interest has increased in coins and bars as investors seek security rather than profit.

"There are people who are so concerned about the state of the world that, for them, even ETFs aren't good enough because you only have a piece of paper," says Stephen Briggs, a metals strategist at RBS Global Banking & Markets.

"Although that entitles you to gold, it is not actually gold under the bed."

And increased demand is doing wonders for the sector. While other manufacturers are reducing output and jobs, the Royal Canadian Mint quadrupled capacity to produce bullion gold and silver Maple Leaf coins in late 2008, and the Austrian Mint is producing in one week what it usually churns out in four.

"It is weird, given the economic situation, because all these other companies are doing badly and we are one of the few companies that are actually doing really well," says Martin Marsik, 32, who works with thundering machines in the smelter of the Austrian Mint. The same goes for the UAE, with Gavankar stating: "There are definitely more orders in comparison to last year. As a result, we are experiencing work pressure."

And the key to picking up a good gold coin in the country? "Dubai is pretty safe when it comes to buying," he insists. "All I suggest is avoid rip-offs, and buy genuine Emirati coins which feature the picture of His Highness Sheikh Mohammed bin Rashid Al Maktoum."

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