Gold Coins Sell Out in Lisbon as Biggest Bet Sees 22% Gain

Rui Lola says gold sales at his foreign exchange and coin store in downtown Lisbon almost doubled this year, draining inventories faster than he can replace them. What’s happening at the Mundial Agencia de Cambios in the historic center of the capital underscores the global rush from investors seeking refuge from debt and banking crises. Holdings in exchange-traded products backed by gold reached a record $113 billion July 29, data compiled by Bloomberg show. Rand Refinery Ltd., operating the world’s biggest refining complex east of Johannesburg, is selling the most Krugerrands in almost a year.

Purchases accelerated as Greece was bailed out for a second time, U.S. leaders wrangled over borrowing limits and the cost of insuring against bank defaults hit a six-month high. While George Soros sold most of his gold in the first quarter, a year after calling it the “ultimate asset bubble,” John Paulson, who made $15 billion betting against subprime mortgages, remains the biggest investor in the largest ETP backed by bullion. “The top of the bubble will be euphoric action, a big accelerated price move, and that’s just not the case at the moment,” said Charles Morris, who oversees $2.5 billion at HSBC Global Asset Management in London. “I would expect it to be a very popular asset at its peak, and I don’t think we’re anywhere near that. We think it’s a bull market and we’re on it.”

Rand Refinery sold about 66,400 ounces of Krugerrands last month, the most since August 2010. Britain’s Royal Mint used 36,219 ounces in the first half of 2011, 8.9 percent more than a year earlier, data obtained by Bloomberg under a Freedom of Information Act request show. Krugerrands and British pieces are among the coins Lola is finding hardest to replace. “People are nervous about the banking system and the euro and believe that investing in gold will help them protect their savings,” said Lola, who manages coin sales at the shop near the Rua do Ouro, once a center for goldsmiths working with metal brought back from Brazil in the 18th and 19th centuries. Central banks, the world’s biggest holders, are also accelerating purchases, adding 155 metric tons valued at about $8.1 billion to reserves in the first five months, according to the London-based World Gold Council. That’s about double the amount bought in all of 2010. “Since the dawn of recorded history, gold has been a parking place, a store of wealth, and that’s never changed,” said Michael Pento, the economist at Euro Pacific Capital Inc. in New York who correctly predicted the collapse in commodity prices in 2008. “Gold is more and more an essential part of investors’ portfolios.”

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