About Perth Mint Bullion Blog

This blog discusses The Perth Mint's bullion coins and bars, providing information about our latest designs, mintages, sales volumes and sell outs. On a broader front, we share relevant research and opinions for anyone interested in gold and silver bullion investing.

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Why invest in gold?

Topics [ gold minted bars gold investing gold bull market gold investment ]

Many investors are averse to gold because, as Warren Buffet argues, it’s an unproductive asset. Whereas equities and property are useful and provide a return, gold “doesn’t do anything but sit there”. Consequently, it has little inherent value from his point of view.

So why do some people ignore the advice of the world’s most famous investor and buy gold? In short, they believe it has a valuable role to play in protecting their wealth. How is this so and how can Australian Securities Exchange (ASX) investors take advantage?

Over time, gold is considered to hold its value in real terms. According to the old adage, throughout history an ounce of gold has always bought a man’s quality suit. The World Gold Council illustrates the point with a similar analogy. Back in 1971, USD 25,000 – the equivalent of 700 ounces of gold – was enough to purchase a family house. That amount of cash today would hardly pay for a mortgage deposit, whereas 700 ounces of gold, worth approximately USD 875,000, is still enough to get a foot on the property ladder.

The Perth Mint Gold Cast Bars

Professor Roy Jastram provided statistical evidence of gold’s ability to provide a hedge against inflation in his seminal work, The Golden Constant. His detailed examination of the English and American financial systems between 1560 and 2007 concluded that despite some severe fluctuations, gold has held its value over the centuries, offering an effective means of protecting wealth.

While it would be unwise for any investor to invest solely in gold, it is worth considering the shiny yellow metal for portfolio diversification. Thanks to its ‘safe haven’ characteristics, gold tends to have a low correlation to ‘risk’ assets – that is it tends to go up in value when other asset classes go down. In this way, it can play an effective role in mitigating overall losses during the downside of the business cycle.

History shows that in extreme circumstances, many investors join a ‘flight to quality’. As we saw in 2008 – 2009, when confidence in the global financial system was severely tested, many sold out of what they perceived to be higher risk investments and piled heavily into gold. The subsequent spike in price to more than USD 1,900 per ounce proved to be a great strategy in preserving portfolios values.

Advisors who support the role of gold in a portfolio generally recommend an allocation of somewhere between 5% and 10% to provide ‘insurance’ against similar crashes.

Today, the argument for an allocation to gold is strengthened by uncertainty on several macroeconomic and geopolitical fronts. Commentators see significant risk in the underlying strength of the Chinese economy, protectionist trade policies, Brexit and the forthcoming Euro elections, as well as emerging tensions in the Korean peninsula and the Middle-East region. So called ‘black swan’ events, any unforeseen development with the power to shock markets, remain an ever present possibility.

Fortunately, gold is no longer the preserve of institutions or wealthy private investors. It’s readily accessible in the form of retail bullion bars and coins to Exchange Traded Funds. Servicing clients from ‘mum & dad’ investors, through to Self-Managed Super Funds, institutional and sovereign buyers, The Perth Mint offers a range of different ways to gain exposure to gold – including a wide choice of physical products for delivery or safe storage, certificates, and a product designed specifically for anyone preferring to trade via the ASX.

Perth Mint Gold (PMG) is a warrant providing a right to 1/100th of a troy ounce of gold created by the Mint. Traded on the ASX under the code PMGOLD, its price closely tracks the international over-the-counter market spot price of gold in Australian dollars. While not the only warrant available to investors who prefer to hold gold within their stockbroking account, it does offer an exclusive and invaluable set of reassurances – not least The Perth Mint’s status as a global leader in precious metals.

Established in 1899 to refine Australian gold and to make sovereigns, today’s modern Mint operates across the precious metals value chain, including refining, manufacturing, investing and storage.

As the operator of Australia’s only gold and silver refinery accredited by the London Bullion Market Association (LBMA), clients are assured of the stated weight, purity, and integrity of its gold, silver and platinum products.

During the past 30 years, the Mint has made almost 51 million bullion and numismatic coins, which have the reputation for being among the highest quality coins in the world. In the process, it has added value to nearly 270 tonnes of gold and more than 3,000 tonnes of silver.

Also offering secure storage for investors who prefer not to take physical delivery, its depository currently manages precious metal valued at more than AUD 3.11 billion on behalf of more than 30,000 clients worldwide.

Accounting for a further 2.2 tonnes (at the time of writing) of client gold held on the Mint’s secure premises, PMG is the only ASX gold product which can be redeemed for physical Perth Mint bullion coins or bars, while the option to take delivery can be exercised at any time. But it is the fact that PMG is physically backed and fully West Australian government guaranteed that truly sets it apart.

As with its certificate and depository investment solutions, The Perth Mint backs every ounce of PMG gold it sells on a 1:1 basis with physical metal – ensuring that all metal held on its clients’ behalf is 100% backed. As an institution subject to rigorous corporate governance and control, this undertaking is critical to the Mint’s exemplary reputation.

Investors can also have complete confidence in the Mint’s ability to deliver from the fact that since 1971 it has been wholly owned by the government of Australia’s largest resource rich state, which guarantees its liabilities - including obligations under the PMG Terms and Conditions. Enshrined in the Western Australian Gold Corporation Act 1987, under which the Mint’s operator Gold Corporation was created, Section 22 states:

“The payment of the cash equivalent of gold due, payable and deliverable by Gold Corporation ...  is guaranteed by the Treasurer, in the name and on behalf of the Crown in right of the State." 

The Perth Mint’s government guarantee is unique in the world, offering all investors an unprecedented level of security. Consequently, for those seeking gold with the same ease and convenience of trading in shares, together with one of the lowest management fees associated with any gold exchange traded product, The Perth Mint’s PMG could be the perfect answer.


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Perth Mint CEO talks about Precious Metals Investment Symposium

Topics [ gold investing ]

A keynote speaker at 7th Annual Precious Metals Investment Symposium in Sydney, Perth Mint Chief Executive Officer Richard Hayes will explain his view that gold is the only true value of wealth in the world today. In this video, Richard previews his address at next week’s event and answers how investors can best gain exposure to gold.



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Message From Perth Mint Analyst Bron Suchecki

Topics [ gold investing financial crisis gold bull market gold prices gold bear market ]

CONFERENCES

Hi, Bron Suchecki here, precious metal analyst for The Perth Mint.

Gold and silver are at a crucial inflection point right now and if you want to know what the future holds then the 2015 Precious Metals Investment Symposium is a must-attend event.

The Symposium will be held in Sydney on 26 and 27 October and features a great speaker line up including John Butler (Amphora Capital), Keith Weiner (Monetary Metals), Nick Giambruno (Casey Research), Greg Canavan (Daily Reckoning) - and me, explaining Why hasn't the bullion banking system failed?

 

See this podcast interview about my talk.


Now in its 8th year, the Precious Metals Investment Symposium is the largest precious metals event in the Southern Hemisphere, bringing together every aspect of the precious metals investment industry from mining explorers and producers, to bullion companies and other investment products. I look forward to seeing you there - register online here.

Regards,

Bron Suchecki
MANAGER, ANALYSIS AND STRATEGY
THE PERTH MINT



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How Is Gold Produced?

Topics [ gold investing buy gold coins gold coins gold bullion bullion coins gold gold bullion coins gold bullion bars buy gold ]

PRECIOUS METAL SERIES – 7

The days when miners could dig or pan for nuggets of gold are largely gone. Today, gold is generally extracted from the Earth’s crust as microscopic particles. 

Estimates put the amount of gold in the Earth’s crust at just 11 parts per billion! To recover a single ounce of gold, many tonnes of material must therefore be blasted and processed.

Gold mines sell unrefined gold in the form of doré bars. Australian doré bars are usually composed of between 70-80% gold and 10-15% silver. The lion’s share of these rough bars are processed into fine gold at The Perth Mint, which operates the largest LBMA-accredited gold refinery in the Southern Hemisphere.

Each doré bar first goes through a chlorine refining process, also known as the Miller Process. Originally conceived by Francis Bowyer Miller in Sydney during the 1860s, the Miller Process involves bubbling chlorine gas through molten doré gold so that silver (and most other metals) react with the chlorine to form silver chloride as slag on the top. The resulting gold is 99.5% pure and typically it’s cast into bars weighing about 400oz for use in wholesale markets.

The Wohlwill process is used to increase purity further. A casting of 99.5% pure gold is lowered into a bath of hydrochloric acid and then has an electric current passed through it. Acting as an anode in this electrolytic refining process, the casting dissolves and then deposits on a cathode with a purity of 99.99%.

The resulting cathodes are melted, granulated and then the granules are used to measure out exact weights of gold for casting into bar sizes from 1oz up to 50oz for retail investors.

How Is Gold Produced?


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How Much Gold Is Enough?

Topics [ gold investing investment gold investment invest in bullion gold bars gold bullion bars buy gold bullion bars ]

PRECIOUS METAL SERIES – 6

If you’re persuaded by the argument that it’s important to diversify your investment portfolio with gold as an insurance against global gloom-and-doom scenarios, you need to consider how much gold is enough.

Roughly two years after the price of gold had declined from its all-time high in 2011, Professor of Economics at Harvard University, Greg Mankiw, concluded that it still made sense to hold a “small sliver” of gold in his portfolio. About 2 percent, he said.

In response, financial advisor, author and advisory board member Joshua M Brown argued that amount was nowhere near enough.  “It’s not ever going to have a large enough impact on a portfolio to matter,” he stated. But in advocating 25 – 50 percent of total assets, was he going over-the-top?

How Much Gold Is Enough?

The World Gold Council (albeit an industry body) is well respected for its research and analysis. Its suggestion falls into line with the many more moderate recommendations we’ve seen. Having crunched some relevant numbers, it states that “modest allocations to gold of 2 – 10 percent can protect and enhance the performance of an investment portfolio. A 5 – 6 percent allocation is optimal for investors with a well-balanced 60/40 portfolio.”

While warning that 20 percent is way too much, former hedge fund manager and now popular US financial commentator Jim Cramer also favours 10 percent as an upper limit. “I consider gold as an insurance policy and no worthwhile insurance policy should be 20 percent of the money you have invested," he said recently.

Ultimately, of course, it’s down to you, but take time to research the topic before deciding your personal ‘allocation to gold’.



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12 Reasons To Own Gold

Topics [ gold investing gold bull market gold bear market ]

RESEARCH BLOG

Perth Mint finance manager Anthony Hart held the fort over on our Research blog this week with a couple of posts that summarised many of the arguments in favour of owning gold.

Anthony neatly analysed 12 key reasons he considers crucial for investors to consider:

  1. Excessive Global Debt
  2. Low Interest Rates
  3. Money Printing
  4. Currency Wars
  5. Financial System Fragility
  6. Geopolitical Risk
  7. The Rise Of Chindia
  8. Equity Market Valuations
  9. Diversification
  10. Eliminate Counterparty Risk
  11. History
  12. Insurance

In the interest of balance, Anthony will shortly be presenting reasons not to own gold. To stay on top of the debate, head over the Research blog to read his current posts now.



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