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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October effect may lie behind heightened interest in gold

Topics [ gold prices ]

We’re now a little over half way through the 10th month but the ‘October effect’ has seemingly jangled investors’ nerves again.

Some of the most notable stock market crashes have occurred during October, including the Panic of 1907, Black Tuesday (1929), Black Thursday and Black Monday (1929), as well as Black Monday (1987).

Volatility in global markets amid growing trade tensions, rising US interest rates and troubles in Europe with Brexit and Italian fiscal policies has some fearing another potential market correction.

Traditionally, gold has been the go-to asset in times of fear thanks to its historical negative correlation with equities and its ability to withstand depreciation over time.

 

However, following the GFC it has been hard to hold this traditional view.

Recently investors have witnessed any number of potentially destabilizing events but have remained largely indifferent to gold, maintaining confidence in the world economy to weather the storms.

That’s why it was interesting to read this article by Luke Burgess on Energy & Capital arguing that the price of gold is once again acting ‘normal’. For the first time in a long while, he sees a “return of normal trading behavior, where gold is actually used as a safe haven asset to hedge economic and market risk.”

One reason may be the number of bearish reports that are casting severe doubts over continued global growth.

Highlighting an increase in the level of risk among multiple global metrics, this week’s IMF Global Financial Stability report came hot on the heels of the recent sell-off of equities in the US, Europe and Asia – and the flight to safety in the form of gold.

The World Gold Council discusses the IMF report further in its latest Investment Update, which is available for download here.



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How the USD/AUD exchange rate is supporting Australian gold price

Topics [ gold prices ]

The gold price is making headlines for all the wrong reasons.

On Monday, gold futures in New York dropped back to their lowest finish since December, ending the trading day at USD 1,241.70 an ounce.

Here in Australia, some media have referenced gold’s losing streak. However gold, like other commodities, is traded internationally in US dollars. This means media reports often fail to point out the impact of the AUD/USD foreign exchange rate on the local price of gold.

The red line on this graph represents the price of gold in US dollars which in January topped USD 1,300. Slipping below this level for the first time in May, it declined consistently in June.

This movement coincided with a marked strengthening of the US dollar against other world currencies, including the Australian dollar.

The result of such a move in the exchange rate has the effect of supporting the local price of gold.

The AUD/USD rate has now declined from 0.81 at the end of January to around 0.74, meaning one Australian dollar is now worth about 74 US cents. The graph’s blue line represents The Perth Mint spot price over the same period. It demonstrates how the decline in the value of the Australian dollar relative to the US dollar has helped protect the value of Australian investors’ gold holdings in terms of their own currency.

Looking at this from another perspective, those who bought in January actually saw an increase in the value of their gold holdings priced in Australian dollars.



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Gold price to stay stable says Chief Economist

Topics [ gold prices ]

Investors prepared to hold gold over the long term will be encouraged by the latest findings from the Office of the Chief Economist at Australia's Department of Industry, Innovation and Science.

According to its latest forecast, the price of gold will be driven by the metal’s safe haven status to an average of USD 1,350 an ounce in 2019.

Following a predicted drop in the price of gold in 2020, declining world mine supply will help it regain momentum in 2021-23.

Publishing details of its analysis in the March 2018 edition of Resources and Energy Quarterly, the Office says it expects Australian dollar gold prices to remain steady over the outlook period as higher world prices offset unfavourable moves in the exchange rate.

According to experts, gold can play a valuable role in any investment portfolio. An asset that’s been shown to withstand depreciation over time, gold has traditionally displayed a negative correlation to equities and may play a role in mitigating overall losses in volatile markets.



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2017 LBMA Precious Metals Forecast Survey reveal analysts are bullish

Topics [ gold prices silver prices ]

Thirty analysts representing twenty six different companies participated in the London Bullion Market’s latest annual Precious Metal Forecast competition.

Contributors were bullish across the board for the four key investment metals, with analysts forecasting that the average gold price in 2017 will be 5.3% higher than the average price in the first half of January 2017.

They were slightly more bullish about the prospects for silver prices, with an increase of 7.1%, but less bullish about PGM prices. For platinum, they forecast an increase of 4.9%, but expected a more modest outlook for palladium, with a forecast increase of just 2.4%.

The full 2017 LBMA Precious Metals Forecast Survey, including each analysts’ supporting commentary, can be downloaded here: www.lbma.org.uk/assets/Forecast_2017_Interactive.pdf



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Gold price spikes high in Aussie dollars

Topics [ gold prices ]

GOLD PRICE

When the nightly newscaster reports the price of gold per troy oz, more often than not it is quoted in US dollars. That’s because gold is traded on commodities markets in US dollars. Of more interest to investors in Australia, however, is the price of gold in our local currency.

Gold looks more affordable in Australia when the Aussie rises against the US dollar. Conversely, it becomes more expensive when the Aussie weakens against US dollar. So whether you’re buying or selling gold, it makes sense to keep an eye on this important relationship.

 

The red line in this graph shows the price of gold* in US dollars for the past six months. The blue line shows the gold price in Australian dollar terms over the same period. The latter reflects not only the inherent value of gold, but also the relative strength of the Aussie against the Greenback.

Amid Brexit and other global concerns, gold priced in Australian dollars is currently near record highs at around AU$1,800.

*Perth Mint Spot Price



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Bullion pricing – how it works

Topics [ gold prices buy silver bullion online buy gold bullion online ]

 

So, you’ve made the decision that it’s time to add gold and/or silver bullion to your investment portfolio. Now it’s time to understand how the price of your coins and bars is calculated.

Spot Price & Futures Price

There are two benchmarks for precious metals – spot prices and futures prices. These prices are determined by ‘over-the-counter’ markets and ‘futures exchanges’. We’ve explained more about both of these here

Even though they tend to be reported on TV and radio news, spot and futures prices are unavailable to retail buyers of gold and silver bullion coins and bars.

Retail price

When setting the price of bullion for retail investors, The Perth Mint takes into account these international benchmarks. Our calculations include a ‘premium’ over the metal price to cover the cost of fabrication of raw gold into coins and bars. To ensure we have a viable business, the Mint’s premium also includes a profit margin.

 

There are a couple of general rules worth knowing about premiums.

They are lower on bullion cast bars because the fabrication process is fairly straightforward. Bullion coins, which offer a number of important benefits including legal tender status, greater divisibility, rarity and detailed designs, are more complex to fabricate. As a result, the premium paid is slightly higher.

Notice, however, that premiums per ounce are usually lower on larger coins. You’ll also be able to discount the premium per ounce by taking advantage of volume breaks.

Live price

Taking their lead from international benchmarks, retail prices of gold and silver bullion fluctuate during the course of the day. To reflect this, our advertised prices are constantly updated.   

When placing an order for bullion on the Mint’s bullion website, you have one minute to lock-in the ‘live’ price of gold or silver before it is automatically revised – either up, down or no change.

When ordering by telephone, a customer service officer will confirm the price before completing a purchase on your behalf.     

Local currency

The price of gold and silver bullion is also directly affected by the relationship between the U.S. and Australian dollars.

This is because precious metals are U.S. dollar denominated commodities. But for the convenience of local customers, The Perth Mint prices its bullion in Australian dollars.

So if the Australian dollar strengthens relative to the U.S. dollar, the local price of bullion will fall. Conversely, if the value of the Australian dollar weakens relative to the U.S. dollar, the local price of bullion will rise.

The Australian dollar last hit parity with the U.S. dollar in 2013, negating this effect. More recently, the Aussie’s value has declined somewhat, explaining why the price of gold in Australian dollars has remained strong.



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