With Local Gold Inventories Depleted, Panicking German Dealers Stage Run On Krugerrands

Tyler Durden's picture

Last week we noted that several prominent Austrian and German gold dealers had run out of inventory and were no longer transacting with a European population that has suddenly discovered gold religion. As a result, dealers are now focusing procurement efforst outside of Europe, with South Africa  receiving the brunt of Europe's panic for physical precious metals. As the FT reports, "At the Rand refinery in South Africa, the phone has not stopped ringing this week." Just imagine what will happen when the gold bug goes airborne and jumps across the Atlantic...

More from the Financial Times:

Panicking German dealers and banks have been desperate to get their hands on krugerrands, the world's most popular gold coin.

"We have some extraordinary sales to German customers," says Deborah Thomson, the Rand treasurer. The refinery, which usually sells 2,000 coins to each customer at a time, says that last week it received an order from one German bank for 30,000 coins. Another bank requested 15,000 coins.

Frank Ziegler, head of precious metals at BayernLB, one of Germany's largest wholesale suppliers of gold, says: "People are buying krugerrands like crazy." The frenzy pushed gold prices to a nominal high of $1,248.95 a troy ounce yesterday while the euro price surged through €1,000 an ounce for the first time. Adjusted for inflation, however, gold prices are still a long way from their all-time high above $2,300 an ounce in 1980.

Although coins account for a small part of the market, they are one of the best indicators of investor sentiment towards the precious metal. And right now gold is in massive demand from investors who see it as the ultimate safe haven at a time of market turmoil and as one of the best hedges against a possible resurgence of inflation.

Other important factors are supporting prices: institutional investors are pouring billions into bullion-backed exchange traded funds; central banks have reversed 20 years of selling gold (and some, including the Chinese central bank, are buying it); and mine gold supply growth has stagnated.

In focus are also the big physical and otherwise gold ETFs which have recently received much notoriety over the likeilhood they are hollow ponzi scams which will shut down operations the second there is even a whiff of a gold run on their holdings.

There is no indication that Germans are ready to stop buying. Panicked by the possible inflationary implications of this week's €750bn eurozone bail-out, they have been snapping up gold coins and small bars at a faster rate than in the aftermath of the Lehman Brothers bankruptcy.

The European Central Bank says its government bond purchases will be "sterilised" by operations to remove inflation risks. But Martin Siegel, manager of Westgold, a dealer of gold in Frankfurt, says people "are not as dumb as economists. They believe there is going to be inflation and are buying gold to protect themselves"."

German investors are notoriously wary about inflation. While few are old enough to remember the hyperinflation that wrecked Germany during the Weimar Republic in the 1920s, the episode remains etched into the national psyche: newsreel from the period has been running on the news in recent days.

The appetite for coins has been so intense that shortages are developing. "In the European market there is a shortage of krugerrands," says Mr Ziegler. As a result, the premium paid for krugerrands in the secondary market has risen from about 2 per cent to 6-8 per cent.

The interest has not been confined to coins and bars. ETFs, which hold physical gold and issue shares to investors, have also seen large inflows.

 

The world's largest, the SPDR Gold Trust, has increased its holdings by
50.5 tonnes in the past two weeks, more than in the first four months
of the year. Other funds have also been building their positions. Gijsbert Groenewegen, at Silver Arrow Capital, a New York-based precious metals hedge fund, says investors have been flooding into his fund "in swarms" in the past week.

Analysts and traders believe gold could rise even higher in the short term.

Philip Klapwijk, executive chairman of GFMS, the precious metals consultancy, believes that the current upward trend "could run a bit". Edel Tully, precious metals analyst at UBS, forecasts the gold price will hit $1,300 an ounce in the next month.

One bullish factor is the lack of physical gold, or scrap, being sold, despite the high prices. In Asia, where the gold market is especially sensitive to price, a surge in prices usually leads people to sell their old gold for scrap, boosting supply.

But that is not really happening yet. Afshin Nabavi, head of trading and physical sales at MKS Finance, a gold refining and trading company in Geneva, says: "Sales of scrap have picked up but not that much."

 

Even if gold is indeed entering a bubble mania phase, the mania in PMs is far less exuberant than in stocks, with the stock market multiples larger than that of gold and silver, and with far greater retail and speculative participation. Should there be an unwind, we expect stock prices to drop more and faster than those of PM products.

h/t Slim Beleggen

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Mongo's picture

I can tell you that something is up because messages (as been noted by ZH before) have been poping at dealers. The latest one is on Auruminvest-nw.de - http://auruminvest-nw.de/

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ACHTUNG:
Auf Grund der hohen Nachfrage beträgt die aktuelle Lieferzeit ca. 10 Tage

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Also check out Geiger-edelmetalle.de where the silver is almost depleted, I am only waiting for them to close down for an extended period to manage the orders. The governments should fear what is now unravelling, what goes around comes around eh?

cossack55's picture

Was that Ruanda 1 oz silver coin going for 44.90 EUs.  Can we send Silver Eagles to Europe.  Ebay overseas here I come.

Frank Owen's picture

Ebay sucks now - costs about 9% of final amount in fees, and maybe more for paypal fees (which ebay also owns). I sold 3 ozs of gold the other day through kijiji (don't know if they have that in the States) at spot price which was better than the price i could have got from ebay after their outrageous fees.

Also found out that Canada Post will not insure coins for more than $500, no matter what (a change within the last few years). I did not look into couriers as they usually charge insane brokerage fees for crossing the border.

Not happy to sell the coins but I have been out of work for a while.

MsCreant's picture

That is what the insurance is there for. Congrats on having the wisdom to own them in the first place. This is a success story in my book.

glenlloyd's picture

Ebay has sucked for a long time. I used to sell quite well there until the fees started to gouge sellers, especially those who received payment by the (ebay owned) paypal unit. And as a buyer I know it's easy to purchase and pay with paypal but it sucked to sell and get hosed for the huge fees imposed.

Ebay is now basically just a dumping ground, huge lots of the same item by "power sellers" who in the end don't sell anything at all. It's good for price discovery if you discount the fee portion but what I buy now can be purchased other places for less.

Sorry to hear you had to part with some coins, but that's what it's there for and hopefully you improved your position from when you purchased them.

jaybaybaker's picture

This post and its content is a very probable indicator that we are near a significant top in gold. Will these people still want delivery in ten days when the price is significantly lower than when they ordered?

And for everyone who is still short the euro, consider this comparison of recent comments:

Euro leaders: Europe must tackle budgets (Trichet and Merkel), say they have only gained time to fix spending

Dollar leaders: White House aide Romer-more [stimulus] needed to aid recovery

Everybody betting on a decline of the euro ... what can possibly go wrong?

Iam_Silverman's picture

Define "significantly lower" please.

Do all of the buy and hold funds sell stocks after a 1% change?  Should I unload funds in my 401K if the NAV drops 1%?

A 1% drop is US$12.4859 as I write (well, type actually).

I buy PM's as a segment of my preps for any occasion - be it inflation, deflation, hurricane, unemployment, etc.  When the cost of my home, auto, health insurance goes up or down by 1% I don't shop around or drop it.

10% drop in price?  That may affect how a gold day trader responds to spot price and he may rue adding when the market was high.  I think that the point you are missing (gleaned from your anti-PM posts) is that the great numbers of folks buying into Gold and other PMs are not driven by immediate profit motive.  I'll bet fewer than a third even own stocks (outside of a 401K plan).  This is insurance.  This is something solid they can hold in their hand and it gives them a sense of protection.

Not trying to bash your position - I applaud someone trying to swim against the tide by warning others that they may be buying in on the high.  That is useful information to traders, not necessarily for those that are just trying to ensure that they can provide for their families in the event of an economic catastrophe.

 

akak's picture

This post and its content is a very probable indicator that we are near a significant top in gold. Will these people still want delivery in ten days when the price is significantly lower than when they ordered?

And for everyone who is still short the euro, consider this comparison of recent comments:

Euro leaders: Europe must tackle budgets (Trichet and Merkel), say they have only gained time to fix spending

Dollar leaders: White House aide Romer-more [stimulus] needed to aid recovery

Everybody betting on a decline of the euro ... what can possibly go wrong?

 

JayBayBaker, may I ask how you managed, very late in this thread, to post an unreplying comment near the very top of the thread, when that should not be possible? 

SOMETHING is very fishy about this!

Pat Hand's picture

Au contraire.  This is looking like priming for a blow-off.  $2K gold within two months, but back to $1100 by the end of the year?

Common_Cents22's picture

Gold will be the new $147 oil.

Karston1234's picture

As a result, the premium paid for krugerrands in the secondary market has risen from about 2 per cent to 6-8 per cent.Online High School

LoneStarHog's picture

I wonder what a panicking Douchinger looks like?

akak's picture

That asshat Denninger just made another slam at gold on Friday, feebly trying to discredit  it as an inflation hedge, or as hyperinflation insurance, as follows:

"If you fear hyperinflation do not look to Gold, instead buy a small (5% of your total portfolio) position in far out of the money LEAP CALLS on the major indices, spread across them.  Why?  Because (1) the tax structure on gold is unfavorable, (2) gold has never performed well on a contemporary basis .vs. inflation and (3) you can't eat it."

http://market-ticker.denninger.net/archives/2319-Ten-Things-For-2010.html

Note that he is grossly oversimplifies and generalizes in point #1, is patently incorrect and/or lying in point #2, and displays his puerile, Nadleresque mean streak and/or his profound idiocy in point #3.

Thank you, Karl, for further discrediting yourself on the topic of gold.

 

unwashedmass's picture

 

actually, i don't know what this guy is talking about when he says gold isn't performing well. i started buying at 425......so, over the past four years, i'm looking at a triple now, before the hysteria has really started. sure beats something like INTC which is where it was four years ago......

akak's picture

For all his acumen in dissecting many of the lies and the self-serving corruption paraded as "public policy" of the power elite in this country, Karl Denninger, so like so many Americans, displays a profound ignorance of monetary history and theory, and explicity takes sides with the paper Ponzi crowd when it comes to monetary matters, hating gold categorically and without reservation, and denying its past and current monetary roles and value as financial protection despite the evidence of thousands of years of history which supports those roles.  Like Jeffrey Christian, he has repeatedly expressed his wholehearted support for fiat currency and fractional-reserve banking, stating that modern life, and civilization itself, would be "impossible" without such fiscal and monetary dishonesty and corruption.  It seems that like so many others who have lived their lives and careers within the belly of the beast, Karl Denniger cannot bring himself to fully disown the corrupt system within which he has handsomely profited ---- sure, he will criticize particular aspects of it, but still refuses to acknowledge and condemn the fundamental elitist lies and manipulation that are at the very heart of it.

Miyagi_san's picture

The tax structure is bad and will get worse...the Gov hacks wont stop at simple tax changes.

merehuman's picture

akak, well said. You should know that you are one of my heroes on ZH. I have the utmost admiration for all of you who speak truth in the face of ridicule, harassment and exposure. We all know big Brother is watching us. These are Orwellian times, 1984 and all it implied.

I look forward to a simpler time when Honor and trust, honesty and love for the greater good prevail within us.

 

cossack55's picture

Guess which finger I'm going to use to poke big bro in the eye.

A Nanny Moose's picture

Occular penetration. Look ma' no hands.

akak's picture

Merehuman, I sometimes have this dream in which like-minded people like us could live in a consolidated community with each other, instead of just being widely-scattered voices whispering to each other over the internet.

In a truly free society, authoritarian-minded individuals would be free to assemble and form a community based on their common shared values and beliefs.  But in the authoritarian world in which we live today, freedom-loving individuals such as we are NOT free to do the same.

merehuman's picture

Akak , i lived in a community like that in oregon. One fellow was a piano tuner, others started a co op in town and sold the food we grew. I recall milking the goats and the outdoor shitter. That was 30 years ago. There is strenght in numbers and a lot of personal growth by living closely with diverse folk.  If/when the government falls i expect more of us to pull together.  So far not enough people are suffering evidently. Makes we wonder how bad its gotta get before we say NO MORE and are willing to stand behind our words.

Iam_Silverman's picture

"I recall milking the goats and the outdoor shitter."

Ewwwww, not the goat milk, but what do you get when you milk the outdoor shitter?

merehuman's picture

dollars? Poor sentence structure on my part. Lol

jaybaybaker's picture

@akak You mean it is not authoritarian to ask for me to banned because I do not conform to the group think that you have chosen to adhere to.

Sorry, you have just been punked. You are the authoritarian here.

akak's picture

You, Jay, are a disingenuous liar and nothing but a troll.  It is YOU who are the authoritarian, trying to bully those who refuse to knuckle under to the malicious and self-destructing financial and political status-quo.  But I hardly need to state that, as everyone else here clearly sees you for what you are.

jaybaybaker's picture

Do I want to ban you? Do I bully anyone? Do I use profanity?

You have more than 10 posts here, I have 3 (with this one), talking about "monopolizing". Are you representative of the ZH crowd??

Anyway, I thought this site was for adults sincerely exchanging ideas, perceptions, and info. And not for kindergartners who have to learn that they are not alone in the world.

I will stop posting here, since this is really a waste of time if nothing constructive comes back.

Have fun being the kindergarten group think thought police, I'll move on to a site for grown-ups.

akak's picture

.

The difference between my posts here and yours is that mine are made to add to the dialogue here, and are part of an honest intellectual exchange, while yours are only intended to disrupt, confront and antagonize, while adding little or nothing of actual value to the dialogue.

But please, if you feel that the discourse here is unworthy of your exalted "adult" character and intellect, feel free to go elsewhere.  In fact, I would encourage you to do so, if you cannot find it within yourself to engage in a meaningful, honest and non-confrontational discussion.

Cheeky Bastard's picture

Anyway, I thought this site was for adults sincerely exchanging ideas, perceptions, and info. And not for kindergartners who have to learn that they are not alone in the world.

It is and continue to offer your view. I dont want to be a part of an echo chamber. As for your second sentence; You are, and will, forever, be; alone in the world; and contrary to popular belief; every man is an island; the difference being some are connected with bridges and ferries with other islands, while some are deserted and function on their own. 

Bringin It's picture

Nice.

Question?

Is jaybaybaker = V-Idiot?

Like Batman and Bruce Wayne they never appear in the same place at the same time?

http://www.youtube.com/watch?v=RLZQ3OLEJWE&feature=related

Bringin It's picture

Community is a threat to the PTB.

MsCreant's picture

You can keep bringing that.

Bringin It's picture

Thanks MsCreant.  I do what I can.

A Nanny Moose's picture

"When destroyers appear among men, they start by destroying money."

currency based on the physical world, and not the whim of politicians might teach us the value in conserving, rather than consuming so many of the world's limited resources.

At the very least, it would limit the ability of The State to steal the wealth of other nations at the point of a gun.

economicmorphine's picture

I stopped reading Denninger months ago.  Anyone still demanding that the criminals be brought to justice obviously isn't playing with a full deck.  Between that and his petulant little fits where he bans everyone, well it just isn't worth it.  The clock is ticking Karl....14:57...14:58....14:59.....

trav7777's picture

Douchinger brags about having made his money in the .com bubble.  He's a paper pusher.

He's also lined up with EVERY SINGLE DEFLATIONIST and announced that he is going to convert his FRNs to real assets prior to the collapse of the FRN.

All of them on TF say that.  They intend to scoop up land, housing, producing assets, gold, younameit, as the FRN gains in value due to the deflation.  Besides this being vulture-like and classic rent-seeking, they all foresee the dollar rising in value but then self-destructing.

So in other words, they are all closet hyperinflationists.  None of them could be stupid enough to believe that the notes of a bankrupt state, a massive debtor, in the throes of a deflationary spiral, would remain worthful for long.

The problem with deflationists like Douchinger is they cannot understand or study history.

Argentina is a CLASSIC deflationary example.  When everyone ran to access their money, they locked the banks!  You cannot get a PURER form of sucking money out of the system than that.  They throttled ALL velocity to a standstill.

But, then they revalued.  I can see how the math suggests deflation, but I don't see how history and reality suggests that I will be able to stockpile cash and access it "when the time is right."

akak's picture

You know, trav777, I really hate this overused phrase, but I can only say:

Spot on.

Bringin It's picture

Argentina was the dress rehersal.  Lock them in and detonate.

Johnny Bravo's picture

"before the hysteria has really started."

"Panicked Germans are buying gold faster than dealers can meet demand."

Hmmmm... to me, those statements don't reconcile with one another.

akak's picture

Hey there Johnny!

Just curious, why is it that you ONLY post comments here on ZeroHedge when the topic turns to gold and/or monetary collapse, and always with a pronounced anti-gold, pro-establishment bias?

Isn't there some pro-fiat currency, pro-Federal Reserve, or pro-equities blogs that you could swarm, in which to make affirmative or postive posts?  What motivates you so highly to incessantly troll every single gold-related thread (and ONLY the gold-related threads) here on ZeroHedge, to slam somebody else's particular chosen vehicle of financial investment and insurance?

I hate fiat currency, central banking and our monolithic two-party political dictatorship, but I do not seek out online forums dedicated to such themes in order to criticize, annoy, denigrate and attack those participating in them --- in my mind, that would he hateful and destructive.  I choose to be positive and constructive.  But I guess that's just me.

ufamizm's picture

I welcome the JBs.

Disagree with them heartily, but welcome the diversity!

DoChenRollingBearing's picture

Yeah, me too.  The JBs and Leos are important and welcome as far as I am concerned.  Help us make OUR side's case better.

Cheeky Bastard's picture

+10000

Even if they appear totally moronic in wholly without an knowledge; it welcome them; as i said; i dont want to be a part of an echo chamber. Fuck the whole "impose your opinion on others" bullshit. We are all grown ups and can think for ourselves; if they want to et burned; be it. Diversity is good; it challenges your mind. Embrace it or GTFO.

trav7777's picture

I am going to disagree with you.

There is nothing inherently wrong with fiat currency.  The government should print and tax the money out of existence, like tally sticks.  It's an inherently stable system.  The problem comes when the sovereign defaults, which they always do eventually.

A production-backed or asset backed currency is the answer and will be the eventual outcome, where labor and goods back real bills.  Simple system, really; let the market decide.

But governments don't like markets or physical laws or reality.  They want it THEIR WAY.  Must be megalomania or something, trying to repeal the law of gravity.

Bringin It's picture

Must be megalomania or something, trying to repeal the law of gravity. 

To me, the game is not to repeal gravity, but to timeshift the gain from the future to the pockets of the connected few today.

tmosley's picture

Do you know how to read, you ignorant fuck? He clearly said he bought at $425, quite a bit before the current panic.

I mean, there is no other explanation for it other than you are a paid shill.  That or your Mommy came in to read it for you and left that part out.

Oracle of Kypseli's picture

It's time to repeat this story:

While I was traveling in the Sinai dessert, I stopped at a town to buy gold jewelry. A Bedouin family traveling with Camels was buying 22K gold wire. (Semi-circle profile 1.4″ wide.) At the end of the bargaining, the store owner cut the wire into several 6-7 inches long pieces and crudely created bracelets. The Bedouin wife dressed in long black garb lifted her long sleeves and slipped the bracelets into her arms. To my amazement it looked like she had bracelets going al the way up to her underarms.

The owner explained to me later that they were traveling between Egypt, Israel, Gaza, Jordan and other countries. No trust in paper money and counterfeit bills. Any time they make money on trading, they buy more gold wire, anytime they need money, they go to the gold market of whichever country they are in and sell bracelets.

 

Iam_Silverman's picture

Ahhh, the portability of Precious Metals!  It is like having a universal translator.  No matter where you go you can convert it to local scrip.

That is one reason why I recommend recognizable PM's to friends and family.  Silver Eagles, Silver Maple Leaves, 10 oz. bars marked from reputable and known foundries.

Junk silver may not have the same universal recognition, same as generic rounds.