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Premiums on gold bullion coins surge

International Business Times [1]
June 3, 2010

Despite the rising prices of gold, physical demand for the yellow metal continues to surge. Physical demand for gold is robust and premiums on gold bullion coins continue to rise in key bullion markets like London, Dubai, Mumbai, New York and Beijing.

According to an analysis from GoldCore, premiums on British gold sovereigns have increased from 3% to over 7% in just one month on British sovereigns as British investors buy the coins as they do not attract CGT. Recent buying has seen supply issues develop in the gold sovereign market which could see a further rise in premiums in the coming weeks.

Gold rose again yesterday on safe haven demand due to falling stock markets after growing concerns about the impact of the oil spill in the Gulf of Mexico and continuing concerns about contagion in the eurozone. Gold initially rose in Asia before giving up those gains and falling as low as $1218/oz in early European trading.

Gold is weaker in all currencies today, except the Japanese yen which has seen its safe haven currency credentials questioned after the Japanese Prime Minister, Hatoyama, resigned. He is the fourth Japanese prime minister to resign in four years.

[2]

Gold is currently trading at $1,222/oz and in euro, GBP, CHF, and JPY terms, at €997/oz, £832/oz, CHF 1,410/oz, JPY 112,060/oz respectively.

The Nikkei fell and Asian equities were mixed but European indices have fallen sharply as Europe’s sovereign debt woes continue to undermine confidence. The month of May and start of June has seen gold’s safe haven properties realised and its inverse correlation with equities has again been clearly shown.

While gold is up by nearly 5% in the period, the benchmark global indices, the MSCI, is down by more than 10% (see chart above). Investors with an allocation to gold would have seen reduced volatility and again seen their returns enhanced in May – as they would have done in the last 10 years and throughout history.