INTERNATIONAL. The demand for gold coins has hit an all time high, the South Africa Gold Coin Exchange said on Friday.

"The rapidly growing demand for gold coins strongly suggests that the gold bull market is well set to extend itself strongly into the future," said chairman Alan Demby in a statement.

An increasing number of analysts and commentators were predicting strong gold price advances, Demby added.

He said during the course of 2008, the value of the exchange's sales of gold coins, primarily Krugerrands, was a substantial 80% higher than in 2007.

"I accept that exchange has grown its market share, but this has played no more than a minor role in our headlong revenue growth, which I am convinced emanates from a belief that gold is the ultimate hedge against the uncertainty generated by the global financial meltdown," Demby said.

Furthermore, Demby said, UBS Investment Research forecasts gold to hit US$2500 an ounce in the next five years as prospects of either deflation or inflation become more extreme.

He added that Citigroup analysts Alan Heap and Alex Tonks had raised their gold forecast to an average US$925 an ounce in 2010, from a previous estimate of US$900.

"Surging investor demand is powering the gold market," said Citi global commodity strategist Alan Heap. "The market is expected to remain robust as long as economic and financial risks remain paramount. But it's a crowded trade and fundamentals are not supportive."

Demby also noted that in the fourth quarter of 2008 compared with the equivalent 2007 quarter, total bullion demand in India, the world's largest gold market, was up 84%.

He added that gold demand in China was up 215 while demand in Thailand soared over 100 percent and Middle Eastern gold bar and coin demand rocketed 139 percent.

"Record demand has also spilled into the first quarter of this year, sending total global demand for gold in the form of exchange-traded funds (ETFs), coins, bars and futures past the $100-billion mark – for the first time ever," Demby said.

Moreover, gold demand via ETFs shot up by 469 tons – a full 223 percent over the previous record set in the third quarter of 2008.

According to Demby, coin and bullion demand was expected to be just as strong as the 396% surge in the fourth quarter of 2008.

"It should be no surprise, then, that the price of gold continues to trade above its 1980 high of US$850 – and rising.

"All the data clearly reveal that we are looking at a bull market more powerful than almost anyone is ready to admit – so powerful that it would not come as a surprise if the price hit US$2000 before the end of next year," Demby said.

According to a World Gold Council's report released Wednesday, gold demand rose 38%, to 1,016 metric tons in the first-quarter from last year, representing a 36% rise in value to US$29.7 billion. The bulk of growth, however, come from gold-backed exchange-traded funds, gold coins and bars--products that are popular among precious metal hoarders.

"There has been a seismic shift away from capital appreciation towards wealth preservation and we believe this trend will define investment behavior in the next decade," said Aram Shishmanian, chief executive of the World Gold Council.
 

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