Gold: Royal Mint doubles gold coin production to meet surge in demand

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The Royal Mint, established in the 13th century, doubled production of gold coins in the second quarter as demand surged for bullion to diversify investments.

Output climbed to 16,910 ounces from 8,030 ounces a year earlier, according to data obtained by Bloomberg News under a Freedom of Information Act request. First-half production jumped 86pc to 45,406 ounces, the figures show.

Demand for physical gold as a store of value and hedge against inflation has increased as governments spend trillions of dollars to combat the worst recession since World War II. Bullion holdings in gold-backed exchange-traded products rose to records in the second quarter. Gold is trading about 7pc lower than the record $1,032.70 an ounce reached in March 2008.

“There’s still interest in gold as a safe-haven asset,” said Stephen Briggs, an analyst at RBS Global Banking and Markets in London. “This whole sector will capture people who don’t have access to the futures market.”

Individual investors typically buy gold coins, bars or shares in exchange-traded products. Holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, were 1,120.55 metric tons on June 30, up 74pc from a year earlier. Investment in the fund, which reached a record 1,134.03 tons on June 1, was little changed from the first quarter.

The mint’s gold production in the second quarter, when the benchmark FTSE 100 Index of shares gained 8.2pc, fell 41pc from the prior three months. The index slid 11pc in the first quarter, its seventh straight retreat, helping to stoke demand for bullion as an alternative investment.

“Earlier this year, with the crisis, it led to huge uncertainty,” Briggs said. “Things have come off the boil a little bit. There’s not quite that urgency, but there’s still a sense that there’s inflation and uncertainty around the corner.”

The UK mint moved to Llantrisant in Wales from London’s Tower Hill in 1968, three years before Britain switched to a decimal currency system. It makes coins including the 22-carat 2009 Gold Proof Sovereign, weighing 7.99 grams (0.26 ounce) and costing £299 ($503), according to the government agency’s web site.

The mint’s use of silver declined 60pc from a year earlier to 32,629 ounces in the second quarter, the figures show. First-half production fell 35pc to 107,423 ounces.

By Bloomberg
Published: 10:33AM BST 05 Aug 2009

Source: The Telegraph

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