Recent years have seen a dramatic resurgence in investment in gold and precious metals, partly due to a surge in demand from an increasingly prosperous
Asia as well as due to forces such as a weaker dollar, fears about rising inflation and relative shortage of supply.

In the world of alternative investments, the enthusiasm for precious metals has fused with investor appetite for collectable items to produce growing interest in rare coins, according to London-listed firm Avarae Global Coins. The business recently issued results for the year ended 31 March 2008, showing a net profit of £290,000, reversing a net loss for the previous 12 months of £70,000.

The firm said coins and coin collections of the highest quality can produce annual compound returns in excess of 10 per cent, which compares favourably to flat or declining stock markets.

However, although this specialist area has witnessed robust growth, some markets in precious metals have lost some of their lustre in recent months – gold prices, which hit a record over more than $1,000 per ounce (based on the London afternoon fix), have since dropped, in part due to fears of slowing growth and the impact on demand for precious metals.

Avarae said it has been building its collection with particular areas of focus, adding numerous English, Islamic, Chinese, Indian, Russian and Polish coins, which continue to be the sectors showing the strongest price increases.

It said English coins fared well last year, with market leading commentators reporting that the value of the top quoted grade of hammered English coins rose by 15 per cent on average last year, with extremely fine examples of early milled English coins rising by 11 per cent.

The interest in such collectables has been seen in sectors such as fine wines, art, antiques, classic cars, movie and rock memorabilia. The collectable coins market is fractured among dealers, auction houses and firms such as Avarae.