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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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Gold's role in diagnosing disease

Precious metals have and will continue to play a vital role in helping to protect humans from serious disease.

In fact, gold has several known medical applications. While many of us are aware of its long history of use in dentistry, less well-known is its role, in injectable form, as a treatment for rheumatoid arthritis. Doctors are also experimenting with gold nanoparticles to target the delivery of drugs in the fight against certain cancers.

Similarly minute particles of gold are at the heart of lateral flow assays (LFAs) - simple to use, disposable diagnostic devices that can test for biomarkers in samples such as saliva, blood and urine.

Capable of delivering instantaneous diagnosis directly to patients without recourse to time-consuming and costly laboratory analysis, millions have been used worldwide in recent decades to screen for diseases such as malaria, HIV and many others.

According to an article by consultant Trevor Keel for the World Gold Council, the speed and low cost of these devices could be critical in the global response to COVID-19 (Coronavirus), a pandemic unprecedented since the Spanish flu of 1918-20.



Given the nature of the current pandemic, quick and accurate diagnosis is absolutely critical to help understand, track and tackle the outbreak,” he said.

Among the many diagnostics which are either commercially available or in development, “increasing numbers of first-generation biomarker LFAs are being registered and evaluated, many of which are gold-based.”

Encouragingly, authorities worldwide appear to be accelerating the route to market for these new COVID-19 diagnostics, Mr Keel said.

Silver also has its role to play in combating serious diseases like Coronavirus, with its germ-killing qualities having been recognised for thousands of years. 

Known to have helped prevent the spread of disease-causing pathogens across history, silver kills microorganisms by releasing ions (charged atoms or molecules) that interfere with the bad cells’ DNA in a lethal manner – an attribute that could be useful in the fight against Coronavirus and other modern day bacterial infections. 

Indeed, you may already be using silver to safeguard your health during these uncertain times. With soap and sanitiser declared the best possible defence against the deadly Coronavirus, you might find yourself using a hand sanitiser that includes ‘colloidal’ silver – tiny particles of silver suspended in liquid. 

Trusted to help protect livelihoods – and lives – for generations, these precious metals are continuing to prove their value in more ways than one. 


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Why you should carefully watch this one ratio as market volatility escalates

The S&P 500 to Gold ratio measures how many troy ounces of gold you could purchase with one 'share' of the S&P 500. If gold was trading at USD 1,000 per troy ounce, and the S&P 500 price index was at 1,000 points, then the ratio would be 1. 

The reason this ratio is popular and worth monitoring is because it can easily gauge the ‘mood’ of the investment community. A low ratio indicates investors are feeling pessimistic about the outlook for the economy and financial markets, whilst a high ratio suggests investors are optimistic. Many believe a low ratio indicates that gold is expensive relative to equities, whilst a high ratio indicates that equities are expensive relative to gold. 

The chart below plots the movements in the S&P 500 to Gold ratio from the beginning of the 1970s through to the end of last month, with the ratio sitting at 1.86 at the end of February 2020. 

Source: The Perth Mint, Reuters

The chart highlights that there have been four distinct multi-year trends in the Gold to S&P 500 ratio over the last 50 years.

• A decline in the ratio throughout the 1970s, as stagflation saw equity markets disappoint and gold prices soar. The ratio fell from over 2.25 to below 0.2 between 1971 and February 1980.

• An increase in the ratio throughout the 1980s and 1990s, as equities embarked on one of their greatest ever bull-market runs and gold prices languished in a two-decade bear market. As the chart highlights, the ratio peaked at almost 5.5 in August of 2000. 

• A decrease in the ratio from August 2000 through to August 2011, driven by a multi-year bull market in gold which saw the price rise from below USD 300 to above USD 1,800 an ounce. Equities were battered by the NASDAQ crash, the September 11, 2001 terrorist attacks and the Global Financial Crisis, which contributed to the ratio dropping from 5.47 to just 0.67 during this period.

• An increase in the ratio from 0.67 in late 2011 to 2.45 by September 2018. This was driven by a rally in the S&P 500 where it rose from 1,219 to 2,913 points and gold prices (in US dollars) fell by 35% over this time period. 

The table below plots the price of gold, the price level of the S&P 500, and the S&P 500 to Gold ratio at each of the inflection points mentioned above. It also details the reading as at the end of Friday 13 March 2020, when data for this article was collated.

Source: The Perth Mint, Reuters

The ratio has begun to turn down again

The table above highlights the fact that the S&P 500 to Gold ratio has begun to move lower over the past 18 months, falling from 2.45 at the end of September 18 to 1.77 on Friday 13 March 2020. 

This highlights the fact that gold has outperformed the S&P 500 recently, with the USD price of gold up by 28.31%, whilst the S&P 500 has declined by 6.97% over this time period.

This is important as a declining ratio will likely encourage further investment into gold going forward, particularly when the fall in the ratio is being driven by  heightened volatility in equity markets. 

In periods where gold and equities rise together (like they did for most of 2019), there is minimal to no opportunity cost if a portfolio manager or personal investor doesn’t own gold, as their stock portfolio is growing. 

Gold going up alongside the equity market is a curiosity to many investors. Gold going up whilst equities are tanking and fear abounds is an entirely different phenomenon. One that typically leads to an increase in all types of investors wanting to own the precious metal. 

What happens next?

From 1971 through to the end of February 2020, the S&P 500 to Gold ratio has averaged 1.54, roughly 13% below the 13 March 2020 reading of 1.77. By this metric, gold is somewhat cheap relative to equities, though nowhere near as cheap as it was on a relative basis back in August 2000, when the ratio was above 5. Gold is also not as expensive as it was on a relative basis in February 1980, when the ratio bottomed out at 0.18.

Whilst no one can state definitively which way this ratio will move going forward, there is a good chance it will continue to decline, with gold continuing its recent outperformance relative to equity markets.

Even if the impact of Coronavirus is less severe than currently anticipated it remains a fact by many metrics, including price to sales and cyclically adjusted price earnings ratios, that equity markets even after their recent correction are still expensive by historical standards.

To that end, whilst the recent pain we have seen in equity markets has been swift, it has not yet been brutal, at least not relative to prior periods where equities were trading at such lofty multiples, with historical drawdowns of over 50% not uncommon. 

The policy response that we have seen from central banks since late February, coupled with already low to negative real interest rates and government bond yields, will of course provide some support for equity markets going forward, but history would suggest it will also benefit gold. 

Indeed research from The Perth Mint looking at investment returns from 1971 to 2019 found that gold delivered average annual increases of just over 20% in years where real interest rates were 2% or less, like they are today. 

Given all of these factors, the strategic case for including gold in an investment portfolio today remains compelling.

Disclaimer

Past performance does not guarantee future results.
The information in this article and the links provided are for general information only and should not be taken as constituting professional advice from The Perth Mint. The Perth Mint is not a financial adviser. You should consider seeking independent financial advice to check how the information in this article relates to your unique circumstances. All data, including prices, quotes, valuations and statistics included have been obtained from sources The Perth Mint deems to be reliable, but we do not guarantee their accuracy or completeness. The Perth Mint is not liable for any loss caused, whether due to negligence or otherwise, arising from the use of, or reliance on, the information provided directly or indirectly, by use of this article.



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SIMPLE GUIDE Gold as a hedge against financial calamity

Topics [ gold investing simple guide ]

Investopedia says a hedge is “an investment to reduce the risk of adverse price movements in an asset”.

In other words, a hedge is an investment that is more likely to move up in value when other assets in a portfolio decline in price.

It has often been observed that gold has an inverse relationship with the stock market. When equities are high, gold can be relatively cheap.

When equities take a marked nosedive, often as not, demand for gold as a safe haven skyrockets.

In this sense, gold can be regarded as ‘insurance’ against financial calamity. In theory, at least, it may help to maintain overall portfolio value.

Our Senior Investment Manager, Jordan Eliseo, turned to recent history to test the validity of the idea.

His chart plots the returns for gold and for equities in the worst five calendar years for Australian equity markets between 1971 and 2019.

“With the exception of 1990, when it was basically flat, gold delivered exceptionally strong gains in the years when equity markets suffered their largest falls,” Jordan reported.

The figures equate to an average increase of almost 40% for gold, whilst the share market saw average falls of almost 25%, he observed.

Jordan’s investigation also revealed that in these years of extreme volatility, gold outperformed bonds and cash as well.

While the data for 2020 is yet to be crunched, it looks almost certain that this year will deliver an even stronger message about the reasons to hedge your portfolio with an allocation to gold.




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1oz gold, silver and platinum coins from Australian Lunar III sell out at The Perth Mint

Topics [ platinum bullion coin silver bullion coins gold bullion coins ]

The Australian Lunar Bullion Coin Series III has been enthusiastically received by investors with news that all 30,000 1oz gold coins, 300,000 1oz silver coins and 5,000 1oz platinum coins marking the 2020 Year of the Mouse have sold out.

These popular Australian Lunar releases lay claim to be part of the first major coin program in the world to celebrate the ancient Chinese lunar calendar. Introduced in 1996, they’ve been mimicked many times, but retain their reputation as the highest quality Lunar coins in the world.

“Sales of Series III coins celebrating the Year of Mouse are very encouraging to date,” Group Manager – Minted Products Neil Vance said. “The popular 1oz gold and silver denominations have now sold out for 13 consecutive years, and we’re also delighted by the reaction to our first ever platinum Lunar bullion coin.”

He added: “We’re already looking forward to offering our clients 11 more fresh animal designs from Series III to continue the Australian Lunar’s huge international success.”

Buyers keen to add Lunar Mouse coins made from 99.99% pure gold and 99.99% pure silver to their bullion stacks can still invest in variety of other denominations.

A choice of 1/20oz, 1/10oz, 1/4oz, 1/2oz, 2oz and 10oz gold coins and 1/2oz, 2oz, 5oz and 1 kilo silver coins will remain available until the launch of 2021 Year of the Ox releases next September.

Registered clients may order online at perthmintbullion.com. All buyers are welcome to visit our Bullion Trading Desk at 310 Hay Street in East Perth (open 7 days), or call the BullionLine on 1300 201 112 (Australia) / +61 8 9421 7218 (International).

Alternatively, please contact one of our authorised distributors.



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Perth Mint Gold: Monthly holdings report – February 2020

Topics [ Perth Mint Gold ]

Perth Mint Gold (ASX: PMGOLD) holdings hit a new all-time high of 150,480 ounces (4.68 tonnes) in February 2020, with inflows of over 12,700 ounces for the month.

Monthly flows into PMGOLD can be seen in the chart below, with last month setting a new record for inflows, marginally exceeding the prior record which was set back in August 2019.

Source: The Perth Mint, ASX, Reuters

Inflows in February continue a strong run for PMGOLD that dates back to September 2018, with total fund holdings rising by more than 78% during this time period.

The value of PMGOLD holdings also topped AUD 350 million for the first time ever in February, driven by  the record inflows, as well as the 2.76% rise in the Australian dollar gold price, which ended the month at AUD 2,441 per troy ounce.

To learn more about investing in PMGOLD, simply download our PMGOLD Factsheet.




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Monthly Sales – February 2020

Total ounces of gold and silver sold by The Perth Mint in February 2020 as coins and minted bars:

  - Gold (Au): 22,921 oz

  - Silver (Ag): 605,634 oz


NB This chart shows total monthly ounces of gold and silver shipped as minted products by The Perth Mint to wholesale and retail customers worldwide. It excludes sales of cast bars and other Group activities including sales of allocated/unallocated precious metal for storage by the Depository.



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