Western retail demand for gold surges in rush for hard assets

By Ashitha Shivaprasad

LONDON (Reuters) -In London's historic Hatton Garden, where diamonds have long been the star, gold is commanding more attention. The famed jewellery district is abuzz with customers seeking bullion bars and coins, broadening the investor pool for tangible assets.

"There's a mix of buying and selling gold, but buying is definitely stronger. Even though prices are high, people are still buying. Many believe prices will go even higher," said Mashhood, a staff member at a local shop.

Spot gold hit a record high of $4,381 per ounce on Monday. Even though a steep selloff on Tuesday and Wednesday took it down 7% to around $4,076 per ounce, retail interest remains strong.

For Britain's Royal Mint, the surge in investor appetite has translated into record-breaking activity. The Mint recorded its strongest single day of e-commerce trading this month, reflecting heightened demand for physical precious metals.

"The surge in demand has also led to exceptional individual transactions. We're seeing roughly 60% existing customers and 40% new customers, with existing investors notably increasing their average order values and doubling down on their positions," said Stuart O'Reilly, market insights manager at The Royal Mint.

TAX STRATEGY

Customers are also exploring tax-efficient strategies. "I'm converting my gold bar into coins to avoid Capital Gains Tax (CGT). I'll sell a portion but hold on to two-thirds, as I keep hearing everywhere that prices could rise further," said Cherry Jephson, a customer at Hatton Garden.

In the UK, CGT applies to profits made from selling gold bars, which are treated as taxable assets. However, certain British gold coins, such as Sovereigns and Britannias, are classified as legal tender and are fully exempt from CGT.

OTHER REGIONS

Traders and banks in Germany and Austria are also reporting exceptionally strong retail demand for physical gold.

"I saw long queues of customers both at the Viennese Shop of Ögussa as well as the Austrian Mint shop in the city centre. Traders in Germany report the same picture in front of their shops," said Wolfgang Wrzesniok-Rossbach, founder of precious metals consultancy Fragold GmbH.

Gold's retail investor appeal has grown sharply this year, driven by global economic uncertainty and rising geopolitical tension highlighting its safe-haven cachet. Prices have doubled over the past two years and are up 55% so far this year.

The Perth Mint, one of the world's leading producers of newly mined gold, is witnessing a similar surge.

Visitors to our "East Perth premises have increased from an average of 5,000 a week to about 8,750 over the past four weeks. This has prompted us to recruit an additional eight staff to assist across our retail and customer operations teams", said Tina Kircher, general manager of retail.

World Gold Council data showed investment demand for gold bars rose 10% in 2024, while coin buying fell 32%.

With investors seeking security and liquidity, physical gold could remain a key part of retail portfolios in the months ahead.

"The world remains deeply unsettled, and gold is reflecting that," said Adrian Ash, head of research at online marketplace BullionVault.

(Reporting by Ashitha Shivaprasad in London; additional reporting by Polina Devitt; Editing by Veronica Brown and Arun Koyyur)