The price of gold in Australian dollars rose by 4% in July 2019, closing the month at AUD 2,065 per troy ounce. It has continued to rally in early August, with the price topping AUD 2,200 per troy ounce earlier today. So far it has been a very strong year for precious metals, with the gold price rising by 25% in Australian dollar terms over the past 12 months.
The robust performance has led to a notable uptick in investor demand for precious metals of late, which is evident across The Perth Mint’s range of investment solutions.
Over the past few months we’ve seen significant inflows into our ASX-listed gold product, ticker code PMGOLD, which was launched back in 2003. July 2019 was particularly positive with PMGOLD now holding more than $200 million assets under management after topping 7% growth last month, the strongest in more than three years, according to the Australian Securities Exchange (ASX).
This growth aligns with the trends we are seeing in our depository offerings, which allow online, phone and email based trading for clients who wish to trade gold, silver and platinum with The Perth Mint directly. We’ve also seen a significant increase in sales of our minted bars and coins, with demand for silver products almost trebling in July.
Finally, we’ve seen a huge increase in the number of Australians downloading our digital app GoldPass®, with the number of registered users and the volume of gold traded more than doubling since the start of the year.
The growing demand for precious metals is reflected in the strong rally we’ve seen in the gold price in recent months.
There are multiple tailwinds driving the uptick in demand for gold, and the gold price itself, which include:
- The continued plunge in global bond yields, with 10-year US government bonds now yielding less than 2%, while 10-year Australian government bonds now yield under 1%. Globally, the pool of negative yielding debt recently topped USD 15 trillion, according to a Bloomberg article.
- Volatility in equity markets, with the ASX 200 dropping from over 6,800 points on 30 July to below 6,500 points by 6 August.
- Continued concerns regarding the trajectory of the US-China trade war.The reduction in the US Federal Reserve funds rate, with expectations that the Fed will follow up with additional easing before the year is out.
In Australia, precious metal prices have received a further boost from the decline in the local currency, which was been falling against the US dollar for most of the past 12 months.
The currency weakness has been driven by the sharper fall in Australian government bond yields relative to those in the US. We had reductions in the local cash rate in June and July, with market pricing now suggesting we’ll see a further two rate cuts by May 2020.
The recent decline in the price of some of our key commodity exports such as iron ore, which has fallen by approximately 20% in the past month, has put even more downward pressure on the Australian dollar.
Given the economic and monetary environment investors are facing, we are not surprised to see gold performing as well as it has been.
Astute investors often allocate up to 10% of their portfolio to gold as potential protection against the type of volatility we are currently seeing in financial markets.
Gold’s historical outperformance in low interest rate environments, such as the one we are in today, is also encouraging investors to move a portion of their portfolio into the metal. This is a trend that could be reinforced if central banks continue to ease rates in the coming months.
To find out more about investing in our ASX-listed gold product, ticker code: PMGOLD, please download the factsheet
Alternatively, if you would like to speak to our depository team about our direct investment options, please contact us at firstname.lastname@example.org or call on (61 08) 9421 7250.