Gold Coin Demand Helps Lift Price

March 6, 2010Demand continues to drive gold coin prices, as private investors, exchange-traded funds and central banks continue to add to their holdings. Investment demand, which rose more than 7 percent last year, continues to push prices, as evidenced by yesterday’s closing price of $1,135.40 per ounce.

Private investors are buying gold because of uncertainty in national currencies, thus making gold more important in the monetary system. Says Frank Lesh of FuturPath Trading, “The international currency is gold.”

After enormous growth in 2009, exchange-traded funds are still adding to their holdings. SPDR Gold Shares ETF has grown by 2.2 percent this year after increasing an amazing 45 percent last year. The fund now holds over 1,100 tonnes of gold, meaning only the central banks of the United States, Germany, Italy, and France hold more gold.

Central banks have been creating demand for gold coins as well. India purchased 200 tonnes of gold from the IMF near the end of last year, a move which some suggest led to the record-setting high in December. China has been said to be adding gold as an attempt to diversify its federal reserves against weakening currencies. The China Review News reported on December 30, 2009 that the country had purchased 454.1 tonnes of gold from its domestic market, over 50 percent of the 890 ton total for all central banks last year.

Exchanges have also seen an increase of gold coin contracts. The New York Commodities Exchange had 5,000 futures contracts that expired on February 24th, an amount that would have consumed nearly one-third of the COMEX holdings of gold. Saxo Bank senior manager Ole Hansen says, "The view among many is still that they worry about missing the boat and there has been buying into the break through at $1,131." 

Kevin Johnson

Senior Staff Writer –

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