UBS is reporting that the global race to acquire physical bullion is on...

Regards - VHF

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Physical Gold Grabbed

UBS Metals Daily

Author:Edel Tully

May 7, 2010 3:56:12 AM

The flight to safety in gold intensified yesterday, as our Zurich and Geneva sales desk experienced exceptionally strong demand for small bars and coins. All size bars up to 1kg are wanted by retail investors. Buying has been evident all week, but demand yesterday was the greatest that we have experienced since 2008. It is little surprise then that the important $1200/oz level was taken out yesterday.

Current gold demand reflects investor fear and extreme risk aversion, in contrast to Tuesday, when liquidation in other markets caused a shallow selloff in gold. On Wednesday, the UBS Risk Index moved into risk aversion territory for the first time this year and yesterday this extended to its most risk averse level since March 2009.

Coin demand is so intense that supply struggles to match, even as premiums rise. Capacity constraints, greatly evident last year, are once again a feature.,* We saw particularly strong demand for Kruggerands, but all coins are being sought right now. On the US Mint website, demand for American Eagles for the first four days of May is reported at 24,500 oz. Should this level of demand persist, then US Mint coin sales could challenge the December 2008 record of 176 koz. Coin demand in 2008 reflected panic buying, and current demand is firmly on this path. Yesterday's staggering price activity in equities and the dramatic surge in the VIX index - trading error or not - compounds the fear factor. This should help gold.