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Gold vs superannuation funds

Topics [ superannuation gold investment ]

Gold prices rose by 27.86% in the 2019/20 financial year. This was a hugely positive performance in comparison to the median return delivered by diversified superannuation funds, which ranged from -2.1% to +1.0% over the same period, depending on the investment strategy of the fund.

Gold’s strong performance in the past financial year continues a primary bull market trend that has been in place since the turn of the century. From end December 1999 to end June 2020, the precious metal rose by 486% (9.49% annualised) in Australian dollar (AUD) terms. 

This bull market has been driven by multiple factors, including:

• The severe economic shocks (NASDAQ crash, the Global Financial Crisis, European Debt Crisis and COVID-19 pandemic) that have hit the global economy in the past 20 years.

• The significant decline in interest rates and long-term government bond yields over this time, with the Reserve Bank of Australia (RBA) cash rate 95% lower today relative to where it was at the end of 1999.

• An increase in demand for gold, driven by consumer markets in Asia, central bank buying and the growth of gold exchange traded funds (ETFs) in Western financial markets

In the past 15 years, these factors have helped gold outperform traditional asset classes, and diversified investment strategies. 

The table below highlights the median performance of superannuation funds over multiple time periods to the end of June 2020. It also displays the returns of the assets that are held in these funds in comparison to gold’s performance.

 
Source: The Perth Mint, Chant West, World Gold Council

The table makes it clear that over 15 years gold has been by far the highest performing single asset class, rising by 10.51% per annum. This result is significantly ahead of the second-best performing asset class, which increased by less than 7.50% per annum.

The performance of gold over the short-to-medium term (one through to 10 years) has also been impressive. As demonstrated by the data, the asset was one of, if not the, highest performing asset class over most timeframes.  

How much does this mean in monetary terms?

The graphic below charts the outcome from investing AUD 10,000 in gold 15 years ago and AUD 1,000 each following year and compares this to results from an identical investment in the median performing ‘growth’ superannuation fund. 

We chose ‘growth’ funds for comparison as this is what the majority of Australians invest in with their superannuation. We included the additional AUD 1,000 contribution each year given most Australians do make regular contributions to their superannuation fund. 

Note the chart does not take into account transaction fees or taxes etc, which can vary depending on which asset class or investment structure you are analysing.



Source: The Perth Mint, Chant West

The chart shows that in total, the AUD 25,000 invested in gold (AUD 10,000 up front and AUD 1,000 each year for 15 years) would have grown to almost AUD 75,000, whilst the money in a regular superannuation fund would have grown to just over AUD 45,000.

There will, of course, be time periods where regular superannuation funds outperform the gold price and the above graph should not in any way be interpreted as a message that Australians should solely invest in gold at the expense of the assets that make up their superannuation fund.

Instead, it merely highlights the fact that gold can also deliver strong long-term returns, and that the yellow metal can play an important role as part of a diversified investment strategy. 

What does the future hold?

Whilst there are no guarantees, a solid case can be made that going forward, gold prices will remain biased to the upside. Demand is expected to be supported by investors looking to protect and grow capital in an environment of negative real yields and expensive asset valuations. 

Demand is also likely to be bolstered by the economic fallout from steps taken to control the spread of COVID-19 as the unprecedented fiscal and monetary policy stimulus fuels concerns about higher inflation. 

Should those concerns be realised, then it would not surprise to see gold lead the way in terms of asset class performance for some time to come.

Jordan Eliseo
Manager – Listed Products and Investment Research

28 July 2020

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.

Resources

Super funds navigate the crisis to deliver surprise result, Chant West





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Gold during the GFC vs COVID-19: Is it really just a repeat performance?

Topics [ market analysis financial crisis silver investing gold market gold investment silver market ]

Gold prices have continued their positive market run in Q2 2020, with the yellow metal trading above USD 1,700 per troy ounce.

The spread of COVID-19 and the economic fallout from steps taken to contain it have been major drivers of gold’s upward move as risk-conscious investors take steps to diversify their portfolios.

The last time the market experienced such huge global economic impact was during the 2008 Global Financial Crisis (GFC) when gold’s upward trajectory seemed to mirror what we’ve seen so far in 2020. 

This has led to speculation that gold’s current behaviour is essentially a repeat of its performance during the GFC. 

While there are certainly similarities between the gold market during both crises, there are also significant differences.

We explore these below.

Key similarities between COVID-19 and the GFC

1. Gold price movements 

Gold prices were strong leading into the GFC, suffered a correction as a liquidity crunch saw investors desperate to raise cash, and then rebounded. 

A similar dynamic is at play today. Gold prices shot higher after a dip in March 2020, down from record highs as the crisis escalated around the world. 

2. Demand for the precious metal

There is no denying a surge in demand for gold in recent months, with The Perth Mint recording its highest ever month for sales in April 2020. 

Sales also peaked during the GFC, with General Manager Minted Products, Neil Vance, commenting to The Canberra Times that “we have seen sales in the last two months that we haven’t seen since the Global Financial Crisis in 2008 and 2009.” 

3. Managed money activity 


Managed money, a means of investment whereby investors rely on the decisions of professional investment managers rather than their own, has seen a similar movement in activity during the two crises.

Managed money long positions rose from around 65,000 contracts to more than 200,000 contracts at the beginning of the GFC. Following the announcement of quantitative easing (QE) packages they dropped to below 63,000 before increasing over the subsequent 12 months to more than 225,000 contracts as spectators helped push the gold price up by more than 45%. 

Ahead of the global economic shutdown caused by COVID-19, managed money long positions rose strongly from just 80,000 contracts in November 2018 to almost 280,000 by late February 2020. Over the past three months they have again been pared back, dropping to just over 140,000 by 12 May 2020. 

4. Equity valuations

The Shiller CAPE price-to-earnings ratio shows that equities peaked at a price earnings multiple of around 30 in 2007.
 
Today, despite the sharp sell-off seen during the first quarter of 2020, the latest estimates suggest multiples are still sitting around 30. This is roughly the same valuation point seen before the more than 50% decline in equities during the GFC. 

History demonstrated that investors who hedged against the risk of a sharply falling equity market during the GFC strongly outperformed those who didn’t. 

There are no guarantees as to what the future holds, but there seems little reason to think those hedges are not needed in today’s COVID-19 environment. 

Differences between COVID-19 and the GFC

1. Health crisis complicates path forward

The nature of the COVID-19 threat itself indicates the potential for a different market outcome for gold to that seen in the aftermath of the GFC.

The GFC was a result of capital misallocation, excessive debt and over-reliance on the financial system itself. 

Challenging though it was, there was no public health threat complicating the policy response or the path out of the crisis. 

The as-yet unresolved health hazard has forced a policy response which has led to the economic fallout - but there is no way to legislate or print a vaccine into existence. There’s no denying the road forward is significantly more uncertain. 

2. Debt levels 

Total levels of debt, specially government debt, is another major difference. According to an April 2020 update from the Institute of International Finance (IIF), global debt levels have now topped USD 255 trillion and are sitting at more than 322% of GDP. 

That is some 40% higher than when the GFC hit. 

There’s no doubt public balance sheets are in a more overextended starting position today relative to a decade ago. 

3. Lower yields 

Yields are much lower now relative to the GFC. 

Across 2007 and 2008, US 10-year treasury yields averaged 4.10%. On 15 May 2020 the US 10-year yield was sitting at just 0.64%, a decline of almost 85%.

Cash rates, too, are the lowest they’ve ever been. Even during the worst of the GFC, the cash rate in Australia never dropped below 3%. Today’s cash rate is 0.25% and implied yields suggest there will be more easing to come. In the US, markets are now pricing in the arrival of negative interest rates by early 2021. 

At a portfolio level, the negative real yields on cash and vast swathes of the sovereign debt market combined with richly priced equity markets means prospective returns for diversified investors are far lower today than they’ve been in the past. 

This backdrop, combined with the fact that the opportunity cost of investing in gold is significantly lower in 2020 relative to the GFC environment, suggests gold should be well supported for some time to come. 

4. Monetary and fiscal policy more expansive

The fiscal response to COVID-19 is dwarfing what was deployed during the GFC. 

According to the statistics in this article, the fiscal deficit of all the nations highlighted (when weighted by each nation’s 2009 output) was 4.34% of GDP. The same measurement gives us a projected fiscal deficit of 7.34% of GDP in response to COVID-19. 

Government attitude to emergency monetary policy has also differed, with QE packages and zero interest rate policy (ZIRP) now standard elements of the monetary policy response kit. During the GFC, these stimuli were treated as extreme measures, to be used with caution and removed as quickly as possible.

Indeed, in the aftermath of the GFC, it took almost seven years for The Federal Reserve balance sheet to grow by USD 3.5 trillion to a pre-COVID-19 high of USD 4.52 trillion. This time around The Federal Reserve has added more than USD 3 trillion to its balance sheet in just over three months. 

5. Supply chain issues and trade uncertainty

Trade tensions and supply chain issues playing out in what may well prove to be a fragile geopolitical environment in the years ahead are another important distinction between the COVID-19 crisis and the GFC. 

In time, this will flow through to either lower company profits, higher inflation, or a combination of the two. These trends can be expected to support gold demand going forward. 

6. Commodity prices are much cheaper

Leading into the GFC, commodity prices were high, having outperformed stock prices for most of the early 2000s. The situation today couldn’t be more different. 

Even before COVID-19 hit, commodity prices were at the lower end of their historical range, having fallen approximately 75% from their record levels seen a decade earlier. 

Relative to stocks, they have never been cheaper. The S&P Goldman Sachs Commodity Index to S&P 500 ratio are comfortably below 1 today. When the GFC hit the ratio was more than 8, as shown in the chart below. 

 
Source: The Perth Mint, Reuters, au.investing.com 

Any investor who believes in ‘mean reversion’ will look at a chart like this and be encouraged by the potential for commodities to outperform in the decade ahead. 

7. Social impacts

Most investors are at least somewhat concerned at what the ‘post’ GFC world looks like, given it is characterised by ever-widening wealth inequality and political fragmentation.

COVID-19 has shone an even harsher light on the gap between the haves and the have-nots. This unease has fed higher gold demand. 

Summary

There are broad similarities in the performance trajectory of gold through both the GFC and COVID-19 crises and the market response in terms of demand for the precious metal.

However the differences in the macroeconomic, market and monetary sphere suggest wider implications for the asset’s future movements. 

The result is that the path toward economic recovery and the outlook for diversified investors is significantly more challenging today than it was just over a decade ago. 

This suggests that the outlook for gold is even more positive today, with demand likely to be more sustained as we navigate the uncharted territory of COVID-19. 

The article above was adapted from a more detailed analysis by The Perth Mint titled Gold: GFC vs COVID-19 and the inflation myth which was recently published on Livewire. For an in-depth study of the factors impacting gold during COVID-19 and the GFC, read it now.

The Perth Mint offers a range of precious metals storage solutions for investors who want the convenience and security of offshore storage. For further information please see perthmint.com/storage/


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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Is gold a commodity or a monetary asset?

Topics [ gold investment ]

Some people regard gold as simply another commodity. However, it can be argued that gold performs differently to commodities in general and more like a monetary asset. Some of the reasons for this are outlined below:

 • Gold does not typically move in step with the broader commodities market, especially during times of financial uncertainty and geopolitical turbulence. It is at these times that gold has often outperformed other assets, including a broad commodities index.

 • While the US may have abandoned the gold standard in 1971, central banks maintain huge reserves of physical gold.

Indeed, according to the Refinitiv Gold Survey 2019, in Q4 of calendar 2018 central bank buying recorded its largest quarterly net purchases this century, of 196 tonnes. This brought total estimated net purchases for the year to 571 tonnes, the highest annual figure since 1971. It also continued a trend in net buying by central banks from the beginning of this decade.

The first quarter of 2019 was also strong, with central bank gold purchases more than doubling year-on-year and Refinitiv expecting another year of elevated demand.


 • In the world’s two largest gold consumers, China and India, gold jewellery has been used for centuries as adornment and a store of wealth.

The lead-up to Lunar New Year in late January or early February is one of the busiest gold-buying times in China when consumers purchase various gold products as gifts or as personal investments.

During Indian wedding season, from October to December, large quantities of gold are traditionally bought not only for brides to wear, but also to give new couples what is seen as a time-honoured means of wealth preservation.

 • Gold is no longer used in currency that can be used in our daily transactions but it is highly liquid and readily exchangeable for local currency all around the globe.

In summary, gold is a finite resource that has been valued as a store of wealth for thousands of years encompassing countless periods of political tension and market volatility.

How to invest in gold

For those wishing to add gold to their portfolios, The Perth Mint offers a range of options for the modern investor.

These extend from traditional trade platforms and physical precious metal products to online accessibility and storage. We even offer a smartphone app that puts gold literally at your fingertips, enabling users to buy, sell and transfer gold.

Making gold investment more convenient than ever before, our GoldPass® app is meeting demand by utilising technological advances which are moving the asset firmly into the digital arena.

While gold is no longer used in currency, it could be on the way to re-establishing its traditional role.

More on this in a future blog post.

Find out more about our range of innovative investment solutions here.



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Warning sign suggests now may be the time for gold!

Topics [ gold market gold analysis gold investment ]

Key Points

 • History suggests we are at a point in the market cycle from which gold will outperform stocks in the coming years.

 • Gold’s outperformance relative to stocks has averaged over 50% in the five years following previous yield curve inversions.

 • Nominal returns on cash and bonds, as well as inflation rates, are lower today than recorded levels at previous yield curve inversions.

 • Equity valuations are higher today compared to all previous yield curve inversions except for February 2000.


Global bond markets dominated the attention of investors and financial market commentators last week, with yields on some developed market government bonds falling to record lows. In Australia, 10 year government bonds dropped to all time record lows around 1.75% at one point.

Attention has particularly focused on the US, where the yield curve has inverted for the first time in more than a decade. The last time this phenomenon occurred was just before the start of the Global Financial Crisis (GFC).

What does yield curve inversion mean?

For those unfamiliar with the phrase ’yield curve inversion’, it is simply a circumstance where short term bonds, for example a two year government bond, have a higher return than a longer term bond, for example a 10 year government bond.

Note that yield curve inversion doesn’t have to refer to two year and 10 year bonds exclusively. Indeed right now it’s one year and 10 year bonds that have inverted.

Irrespective of which bonds you’re specifically referring too, typically you’d expect longer term bonds to have higher yields than shorter term bonds. There are a number of reasons for this including the need to compensate investors for taking on greater risks in a longer term loan, as well as them having a greater opportunity cost in terms of investment they’ll have to forego. This is because it will take longer for them to get their money back in a long term bond, relative to a short term bond.

As such, yield curve inversions do not occur all that frequently in financial markets, and when they do, they are typically seen as a bad omen in terms of what is likely to happen in the economy in the years that follow. As one market analyst, Jeffrey Halley, stated to Bloomberg earlier this week: “Bond markets globally, along with dovish central banks, have been telling us a slowdown is on the way.”

Yield curve inversions often, though not always, precede recessions, or outright falls in total economic output. This is why market analysts, economic commentators and policy makers are concerned with present day developments, and the inversion that is taking place today.

What has happened to markets in the past?

Over the past 40 years in the US there have been four previous periods where the yield curve has inverted, with a US two year government bond having a higher yield than a US 10 year government bond. These occurred in August 1978, a decade later in December 1988, again in February 2000, and most recently in December 2005 (please see end of article for our data sources and inversion methodology).

The chart below highlights what happened to the price of gold, and the price of the S&P 500*, in the one, three, and five year periods that followed those four previous yield curve inversions, with all returns expressed in percentages.

Note that the data in the chart below represents the average return across all four periods, with a more granular and highly detailed breakdown of the returns generated by gold and stocks following each individual yield curve inversion provided at the end of this article.

*The S&P 500 is widely regarded as the best single gauge of large cap US equities.

As you can see, on average, gold prices have strongly outperformed equities in the one, three and five year periods following on from previous yield curve inversions, with a positive performance differential that gets larger over time.

Over one year, the average performance of gold at just over 16% is almost double that of equities, whilst over three years, the average return for gold is more than 45% higher, with equities actually suffering a minor decline in value.

Extend the analysis out to five years and the average return of gold is more than 50% higher than equity markets historically delivered, with gold prices up almost 80%.

Were a similar scenario to play out in the years ahead, it would not be unreasonable to expect the gold price to be trading at almost USD 2,400 per oz by 2024, based on the gold price today, which is trading just below USD 1,300 per oz.

As the more granular data at the end of this article will highlight, the above chart doesn’t mean that gold outperformed each and every time the yield curve inverted, and indeed in the one, three and five years that followed the 1988 inversion, stocks turned out to be a more profitable place to invest than gold.

Is gold guaranteed to outperform?

In a word, no.

There is a good reason why fund managers and the like must disclose the fact that past performance is no guarantee of future returns, or results. Gold for one didn’t outperform in all prior periods of curve inversion, with the years following the 1988 yield curve inversion far kinder to stock markets than bullion investors.

There are also some obvious differences between the current scenario we are facing in markets, and historical periods where the curve inverted. Inflation for one is far lower today than the 1970s and 1980s, while central bank activity in the bond market over the last few years may have impacted the effectiveness of yield curve inversion as a recession risk warning.

While US, and indeed global growth rates are slowing, the US economy is still expanding, growing at an annualised rate of 2.6% in the last quarter of 2018 (the latest available data). We are likely some time away from a recession, should it eventuate at all.

Be that as it may the data presented above, and below in the more granular breakdown of each period below, is clear. If history is any guide, there is a good chance that gold bullion will outperform financial assets in the years ahead.

This argument is further supported not only by the rich valuations in stock markets today, but the very low real yields on offer in traditional defensive assets, including the almost USD 10 trillion in negative yielding sovereign debt.

At the very least, prudent investors will be looking at gold as a way of protecting capital in what may turn out to be a challenging period for the global economy and financial markets.

Until next time…

Jordan Eliseo

1978 yield curve inversion

The following chart highlights the one year, three year and five year performance for gold and the S&P 500 following on from the 1978 yield curve inversion. The table that accompanies it highlights nominal two and 10 year yields, the gold price, CPI, the Federal Funds rate, and “real” cash and bond rates. The table also shows both the price level of the S&P 500 and the cyclically adjusted price to earnings ratio (CAPE) for the S&P 500 as well, with these data points shown in the month the curve inverted, as well as in the two years preceding inversion, and the three years after.

Highlights:

 • Gold outperformed equities over one year, three years and five years following on from the 1978 inversion

 • Outperformance was most pronounced over three years, with a differential of almost 80%

 • While nominal cash and bond rates were high in the 1970s (above 8%), so was inflation, which was on its way from under 6% in 1976 to almost 12% by 1979

 • From a valuation perspective, equities remained “cheap” over this entire time period, with the CAPE ratio sitting between eight and 12.

1988 yield curve inversion

The following chart highlights the one year, three year and five year performance for gold and the S&P 500 following on from the 1988 yield curve inversion. The table that accompanies it highlights nominal two and 10 year yields, the gold price, CPI, the Federal Funds rate, and “real” cash and bond rates. The table also shows both the price level of the S&P 500 and the cyclically adjusted price to earnings ratio (CAPE) for the S&P 500 as well, with these data points shown in the month the curve inverted, as well as in the two years preceding inversion, and the three years after.

Highlights:

 • Gold underperformed equities over one year, three years and five years following on from the 1988 inversion

 • Underperformance was most pronounced over 5 years, with a differential of almost 70%

 • Nominal cash and bond rates were high in the late 1980s, whilst inflation was more subdued, with real yields of over 4%, whilst equities were re-rated higher in the aftermath of the 1988 inversion, with the CAPE ratio rising from 14.70 to 21.16 between 1988 and 1993

 • This more positive environment for financial assets helps in part to explains gold’s relatively poor performance in this time period

2000 yield curve inversion

The following chart highlights the one year, three year and five year performance for gold and the S&P 500 following on from the year 2000 yield curve inversion. The table that accompanies it highlights nominal two and 10 year yields, the gold price, CPI, the Federal Funds rate, and “real” cash and bond rates. The table also shows both the price level of the S&P 500 and the cyclically adjusted price to earnings ratio (CAPE) for the S&P 500 as well, with these data points shown in the month the curve inverted, as well as in the two years preceding inversion, and the three years after.

Highlights:

 • Gold and equities fell in the one year following the February 2000 yield curve inversion

 • Gold outperformed over three and five years, beating equities by 60% over both timeframes

 • Real cash and bond rates were still positive (2.5%-3% depending on duration), giving investors multiple defensive options for their portfolios

 • Equities were incredibly expensive heading into 2000, trading at over 40 times CAPE. This number fell dramatically in the five years that followed, helping to explain the poor results for the share market, and the strong returns delivered by gold

2005 yield curve inversion

The following chart highlights the one year, three year and five year performance for gold and the S&P 500 following on from the 2005 yield curve inversion. The table that accompanies it highlights nominal two and 10 year yields, the gold price, CPI, the Federal Funds rate, and “real” cash and bond rates. The table also shows both the price level of the S&P 500 and the cyclically adjusted price to earnings ratio (CAPE) for the S&P 500 as well, with these data points shown in the month the curve inverted, as well as in the two years preceding inversion and the three years after.

Highlights:

 • Gold strongly outperformed equities over one year, three years and five years following the 2005 inversion

 • The most pronounced outperformance occurred over five years, with gold up almost 175% whilst equities were largely flat

 • This outperformance was driven by a handful of factors, including the occurrence of negative real interest rates, and the Federal Reserve undertaking Quantitative Easing in the aftermath of the GFC, both of which limited the attractiveness of traditional defensive assets and buoyed gold demand

 • A sharp decline in equity valuations also contributed to the outperformance of gold

Notes on data and calculations

Where possible, we have used monthly data points for calculations included in this article, with much of that data sourced from Reuters. Inflation data was sourced from the St Louis Federal Reserve, whilst S&P 500 data (monthly prices and CAPE) was sourced from Robert Shiller/Yale, which is available for public download from here

The article and the charts and tables used within it are based on our classification of yield curve inversions as having occurred from the month end that two year yields first closed above 10 year yields, provided two year yields then remained above the 10 year yields for at least three months.

As an example, according to Reuters data, two year yields exceeded 10 year yields at the end of June 1978, but not in July 1978. By end August 1978, two year yields again exceeded 10 year yields, and did so until April 1980. Hence we use August 1978 as the starting point for that yield curve inversion.

Using daily or weekly data points, a different data source, or a different definition for yield curve inversion would generate different results to those we have published.

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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Why gold has a role in every portfolio

Topics [ gold investment ]

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

The World Gold Council, however, says investment demand for gold exceeded 1,500 tonnes in 2016. As well as being the second-best year on record for inflows to gold exchange-traded funds (ETFs), sales of coins and bars also finished the period strongly.

Despite Buffett’s objections that gold does not pay interest or dividends, many people are clearly ignoring his advice, including dispassionate buyers with objective and logical reasons for adding gold to their portfolios.

Store of wealth

To further understand gold investors, it is helpful to recognise gold’s function as an asset that withstands depreciation over time. For hundreds, if not thousands of years, humans have been psychologically attached to gold as a solid store of wealth.

Today, the overwhelming majority of gold is either in bullion vaults or as jewellery, as a protection against declining values among other assets such as cash.

This is a result of the fact that gold has historically acted as a hedge against inflation. As the famous anecdote tells us, an ounce of gold was enough to purchase a fine toga in Roman times and today is still able to buy a decent suit.

Professor Roy Jastram provided statistical evidence of gold’s property as an inflation hedge 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 considerable fluctuations, gold has held its value over the centuries.


The precious metal is an unparalleled wealth protector in volatile markets.

Diversification

Gold can be a diversifier because traditionally it displays a negative correlation to equities – it tends to increase in value when they decline. In this way, gold may play a role in mitigating overall losses in fluctuating markets.

This was apparent in the the global financial crisis. Many investors sold out of what they perceived to be higher-risk investments and piled heavily into precious metals in a classic demonstration of confidence in gold as a means of protecting wealth. The subsequent spike in the price of gold to more than US$1,900 an ounce.

Geopolitical tension

Gold has shown its ability to outperform other assets in times of geopolitical tension. Armed conflict almost inevitably pushes the gold price higher, as happened during the 1991 Gulf War and the subsequent Iraq War.

Currently, tensions surrounding North Korea and uncertainty over US President Donald Trump’s ability to push his growth agenda through Congress, threatens to undermine confidence in global markets. These are precisely the types of situations in which gold can become a sought-after haven.

However, even in this environment it would be deeply unwise for anyone to invest solely in gold. According to various portfolio theories, just a modest allocation is enough to provide an effective insurance policy in times of crisis. The work of Richard and Robert Michaud indicates that investors who hold 2–10 per cent of their portfolio in gold can significantly improve performance.

How to buy

Gold can be acquired in several ways, starting with direct ownership in the form of coins and bars purchased from a reputable supplier. A depository service will keep it safe and secure for a fee.

Another approach is to use an exchange-traded fund. These offer convenience, but it’s important to ensure the fund owns the underlying physical gold. Gold mining stocks provide an interesting alternative for ASX investors, although you are also exposed to the overall performance of the company.

ASX investors looking for a more focused approach could choose to trade gold via their stockbroking account with PMG, a warrant providing a right to 1/100th of a troy ounce of gold created by The Perth Mint.

As Australia’s precious metals specialist, the historic Perth Mint is a London Bullion Market Association accredited refiner, producing the nation’s official bullion coin program, and providing a trusted range of investment and storage solutions. Owned by the Government of Western Australia, which guarantees all it precious metals, the Perth Mint is renowned worldwide for the quality and purity of products.

Currently accounting for 2.2 tonnes of client gold held in the mint’s security vaults, PMG is the only ASX gold product that can be redeemed for physical Perth Mint bullion coins or bars, and the option to take delivery can be exercised at any time. But the fact that PMG is 100 per cent physically backed and fully Western Australian Government guaranteed is what truly sets it apart.

This article originally appeared in ASX Investor Update



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Perth Mint unveils Australia’s official bullion coin program for 2018

Topics [ Year of the Dog Australian Kangaroo buy gold coins gold investment Australian Lunar Australian Koala bullion coins Australian Kookaburra buy silver coins ]

The Perth Mint has unveiled shining new designs for Australia’s official Bullion Coin Program.

Issued annually since 1987, the trusted releases offer an outstanding choice of pure gold, silver and platinum coins, each authorised by the Australian Government as official legal tender.

Characterised by outstanding craftsmanship, iconic artistry and assured purity, the new coins, which include the first ever Australian Kangaroo in pure platinum, will become available from The Perth Mint and its authorised dealers worldwide from 11 September 2017*.

 

2018 Australian Lunar Gold and Silver Bullion Coin Series

AVAILABILITY: 11 SEPTEMBER 2017

Extremely popular with investors and collectors, Australian Lunar coins celebrate the 12 animals of the Chinese lunar calendar. In 2018, artistry portraying a labrador retriever on the 99.99% pure gold releases, and German shepherds on the 99.99% pure silver coins, mark the Year of the Dog.

 

The Australian Lunar 2018 Year of the Dog Gold Bullion Coin Series is available in 1 kilo, 10oz, 2oz, 1oz, 1/2oz, 1/4oz, 1/10oz and 1/20oz sizes. A maximum mintage of 30,000 applies to the 1oz coin.

 

The Australian Lunar 2018 Year of the Dog Silver Bullion Coin Series is available in 1 kilo, 10oz, 5oz**, 2oz, 1oz and 1/2oz sizes. No more than 300,000 1oz will be released.

Availability of a special 10 kilo coin (maximum mintage of 100), will be announced later this year.

 

2018 Australian Kookaburra Silver Bullion Coin Series

AVAILABILITY: 4 OCTOBER 2017

Now struck from 99.99% pure silver, the Australian Kookaburra Bullion Coin Series was originally issued in 1990. In 2018, each coin portrays a stunning representation of the emblematic bush bird on a moonlit night.

 

The 2018 Australian Kookaburra Silver Bullion Coin Series is available in 1 kilo, 10oz, and 1oz sizes.

A maximum of 500,000 1oz coins will be released.

 

2018 Australian Kangaroo Gold, Silver and Platinum Bullion Series

AVAILABILITY: 23 OCTOBER 2017

Thanks to a landmark development, Australia’s original bullion coin series is for the first time offered in three highly sought after investment metals. Portraying imagery of the nation’s most evocative wildlife emblem, the Australian Kangaroo comes in 99.99% pure gold, 99.99% pure silver and 99.95% pure platinum options.

 

The 2018 Australian Kangaroo Gold Bullion Coin Series is available in 1 kilo 1oz, 1/2oz, 1/4oz and 1/10oz sizes. A new design featuring two kangaroos bounding across a rural landscape is included on the four smallest releases.

No more than 100,000 1/2oz, 150,000 1/4oz, and 200,000 1/10oz gold coins will be released.

In common with the 1 kilo gold coin, the 2018 Australian Kangaroo 1oz silver bullion coin and the new 2018 Australian Kangaroo 1oz platinum bullion coin portray classic artistry representing a ‘red’ kangaroo encircled by symbolic rays of sunshine.

 

2018 Australian Koala Silver Bullion Coin Series

AVAILABILITY: 8 JANUARY 2018

In 2018, the Australian Koala also comes in 99.99% pure silver. The 12th annual design portrays one of Australia’s most loved marsupials astride two branches in a flowering eucalyptus tree.

 

The 2018 Australian Koala is offered in 1 kilo and 1oz versions only. Just 300,000 1oz coins will be released.

 

For further information

Download a pdf of the 2018 Australian Bullion Coin Program brochure – ‘Investments destined to shine’.

 

How To Purchase

The following options exist for buyers of the 2018 Australian Bullion Coin Program:

1. Visit the Bullion Trading Room

Invest and pick up in-store from the Bullion Trading Room, 310 Hay Street, East Perth, seven days a week between 9am and 5pm (AWST).

2. Visit the Bullion Sales Website

Register at perthmintbullion.com to order online from the comfort and convenience of your own home between 8.30am and 5pm (AWST).

3. Telephone the Bullion Call Centre

Order from a Customer Services Officer on 1300 201 112 or +61 8 9421 7218 during Monday to Friday between 8.30am and 5pm (AWST).

4. Contact an Authorised Distributor

Contact your local authorised Perth Mint distributor in Australia/New Zealand, Asia, United States, Canada or Europe.


* coin availability dates are subject to minor change should production flexibility be required.
** availability of 5oz Year of the Dog silver bullion coin will available approximately two weeks after the official release date of 11th September.

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