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With gold prices at record levels, the Scoin Shop is bound to be one of the success stories of the new mall and is aimed, says the owner, at collectors not investors
Alan Demby bought his first kruggerands in 1977, paying £50 each for three of the 1oz gold coins that were first produced by the South African Mint in 1967. Today, a kruggerand will set you back £1,200-£1,300, and Demby owns almost 30 gold coin shops throughout South Africa as well as three in the UK.
At the opening of his latest Scoin Shop store at the new Westfield Stratford City mall, Demby said the range of coins he sells will appeal to the same type of collector that frequents his South African stores: 50-plus men who are typically self-employed.
"Gold does seem to be the money of dictators," he jokes, "but in reality the coins we sell appeal to collectors rather than investors. There are probably about 20 million coin collectors in the world and they tend to be your average man in the street.
"When we opened our first store we thought it would be tourists who would come in, looking to take back some South African gold from their holiday, but it was locals who found it interesting."
The most expensive sale Demby has made in his 40-year career was for a £1.2m set of coins, but the Stratford store has a range of items for those with shallower pockets, with prices starting £150. On the day I visit, the store is also displaying a £63,000 coin to commemorate the Queen's 60th wedding anniversary, and the London 2012 Olympic Games commemorative gold coin collection, struck in 22 carat gold by the Royal Mint.
Anyone opening a gold coin shop in the present climate could face accusations of cashing in on the soaring gold price and taking advantage of guileless consumers who rush to buy the asset just as the bubble looks like bursting.
The price of gold has once again rocketed to record levels, with the spot price hitting $1,921.41 an ounce last week, leading to fears that jittery investors who have swapped the stock market for the precious metal could see their savings decimated if the gold bubble bursts.
With the FTSE100 still 17% below the 2007 highs of around 6370, the Dow Jones 20% off its five-year high of 14093 and the Nikkei having fallen off a cliff – down over 50% since its 2007 high of 18188 – stock market investors have certainly had plenty of incentive to look elsewhere.
But most investors have selective memories: over the past three decades, gold has performed well in only the past 10 years, and there are plenty of question marks for those considering taking the plunge today.
Miles Standish of Fisher Investments said recently that gold was prone to "huge boom and busts and can move choppily sideways for years – even decades – making it the ultimate timing game". He added: "If you're not very good with a proven record of short-term timing narrow categories, you want to stay away from gold.
Demby is not worried that his Scoin Shop will be seen as flogging high-priced gold to gullible consumers. "I suppose the detractors will argue that about us, but we're not selling to investors – we're selling to collectors who tend to take a long-term view and buy a large spread of coins over time rather than buying a huge amount of gold overnight.
"Investors are always looking for more, to sell and make a profit, whereas collectors want to get one of everything to complete their collection," he says. "Our coins are commemorative and can be bought as one-offs to celebrate the birth of a child or they can be bought and added to over time. I don't know which of our coins will do well in the future, in the same way I couldn't tell you which share will go up in price."
Scoin Shop is a chosen partner for minters such as South Africa Mint and Royal Mint because it offers plenty of business and "has scale", according to Demby, meaning the minters can shift more coins by partnering with Scoin.
In return, Demby gets to sell respectable, coveted products such as the 2012 Olympics range, as well as Nobel peace prize issues and William and Kate wedding specials.
The slight downside from this, as Demby admits, is that buyers pay a premium because the coins have been specially minted and there is a buy/sell spread built in. "But we offer a forum where people can resell their coins and we will also store people's coins if they want us to." About 3,000 people do just that.
Demby does have the odd tip for investors though: "Never put more than 15% of your assets in gold, and out of that you only really want a third in coins. You should have the other two-thirds in bullion or ETFs that trade in gold. Do I think the gold price will go down? I'm sure it will at some point – nothing goes up for ever. But we're in it for the long haul, and collectors should be in it for the long haul – there is no easy money and it's true that if something looks too good to be true, it probably is."
Mark King
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