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Precious metal prices continue to climb

Topics [ invest in gold ]


August 2019 update

August was another solid month for precious metal investors, with the price of gold rising by just over 7.5% in USD terms. The Australian dollar gold price closed the month above AUD 2,250.00 per troy ounce, up more than 9% for the month.

Silver investors fared even better, with the price rising by almost 13% in USD terms, while silver priced in Australian dollars closed the month above AUD 27.00 per troy ounce. 

The strong performance for August continues what has been a positive year for precious metals bulls, with gold and silver up 36% and 26% respectively. The precious metals have strongly outperformed risk assets such as shares, with the ASX 200 and S&P 500 up just 4% and 1% respectively over the same time.

What’s driving the gold price?

The drivers of the gold price over the past year are now well established.

First is safe haven buying as recession fears around the world intensify. The uncertainty has been driven by the continued escalation of the US-China trade war and the recent inversion of the US yield curve.  Historically a very reliable recession indicator, an inverted yield curve occurs when long-term interest rates are lower than short-term interest rates.

The continued plunge in global bond yields is also driving demand for gold. In August, the market value of negative yielding debt rose beyond USD 17 trillion, with 30% of all investment grade securities now having yields below zero.

Given gold now has a higher yield than all these negative yielding bonds (and carries no credit risk) it is no surprise that it has benefitted from the rapid decline in global bond yields. In Australia, for example, the 10-year government bond yield has dropped by 65% over the past year.

Central banks also continue to be active in the gold market, buying more than 220 tonnes of gold in Q2 2019. That is a 47% increase on Q2 2018, with central banks on track to purchase more than 650 tonnes this year, according to recent research released by ANZ Bank.

What happens next?


After such a large rally in the gold price over the past year, a period of consolidation would not be unusual. No market goes up (or down) in a straight line, with some volatility along the way to be expected, especially in the short term.

Two indicators worth monitoring are managed money positioning in the futures market and the gold to silver ratio (GSR).

Below we share our thoughts on what these indicators are telling us and share two charts that help illustrate current conditions in precious metals markets.

Managed money positioning in effect represents the bets that shorter term traders such as hedge funds have made in the gold futures market. Managed money participants can and will bet that the gold price is going up or down based on their view of the market.

The chart below shows gross long positions (blue shaded area) and gross short positions (red shaded area) from 2009 to today. These positions effectively represent how many bets have been made that the price will rise (longs) and how many bets have been made the price will fall (shorts). You can also see movements in the gold price in USD terms over the same time period on the chart.

The chart is telling us that over the past year those betting the gold price will fall have drastically wound back their positioning, reducing them from almost 200,000 futures contracts to barely 20,000 today.

On the long side, those betting that the price will rise have significantly increased their exposure. Gross long exposure is now back at levels seen in the aftermath of the Brexit vote and the 2016 US Presidential election. 

Managed money participants are bullish on gold, some would say exuberantly so, and their actions have been a major contributor to the rise in the gold price of gold over the past 12 months.

The second indicator we mentioned, the GSR, can be seen in the chart below. It highlights movements in the GSR (the crimson line on the chart) from December 1999 to the end of August 2018, as well as a long-run average (black line). The chart also shows the movement in the USD price of gold over the same time period (gold line). 



As you can see the GSR is currently falling, approaching 80:1, which means silver is outperforming gold. Many will interpret this as a signal that the current precious metals bull market has longer to run as previous periods of silver outperformance (2002 to 2006 and late 2008 to 2011) coincided with strong rises in the price of precious metals.

Outlook for gold still bright


Though we are cautious about the outlook for prices in the short-term, we remain confident in the outlook for gold in the years ahead. Going forward we expect investment demand for gold to be supported by many factors including:

Despite their recent volatility, many share markets are still trading at or near all-time highs. Given gold has a long track record of outperforming when share markets decline, we expect demand to be bolstered by investors seeking a hedge against equity market declines.

Continued recession fears are not likely to abate any time soon, with recent global manufacturing data from JP Morgan indicating a global slowdown is underway. This will continue to boost safe haven demand for gold.

Cash rates are still likely to fall in the coming months, with markets expecting another rate cut by the US Federal Reserve in September. In Australia, markets expect the local cash rate to be cut to just 0.50% by May 2020. Low rates can be expected to support gold demand given they reduce the opportunity cost of investing in the yellow metal.

Add all these factors together and it is easy to understand why astute investors are likely to continue incorporating an allocation to gold as part of a diversified portfolio in the years ahead.

Jordan Eliseo
Senior Investment Manager
The Perth Mint
9 September 2019

Sources

JP Morgan Global Manufacturing
https://www.markiteconomics.com/Public/Home/PressRelease/cd5ff69a25e34fb29f365f8c87d5ed5d

Central Banks and Gold
https://centralbankgold.org/gold-reserve-asset
https://www.bloomberg.com/news/articles/2019-08-27/central-bankers-new-found-love-of-gold-seen-bolstering-demand

Negative Yields
https://www.livewiremarkets.com/wires/the-bizarre-world-of-negative-interest-rates
https://www.bloomberg.com/graphics/negative-yield-bonds/

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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How to buy gold: simple, safe and secure options available at The Perth Mint

Topics [ how to buy gold investment invest in bullion invest in gold ]

Interest in precious metals investing is growing once again.

A decade ago, the global financial crisis helped popularise gold as a go-to asset in times of economic crisis. Now, with serious talk about the possibility of a potential downturn in international economic growth, many people are again considering gold as a ‘safe haven’ investment with the power to preserve wealth.

Reflecting the way in which gold is becoming more mainstream, small investors account for a large percentage of the mounting inquiries we’re receiving at The Perth Mint.

To cater for our diverse clients, we offer an extensive range of traditional and contemporary products and services suitable for private investors through to sovereign wealth funds. As a result, we not only offer world renowned coins and bars for delivery, but also depository services via our online portal, exchange traded products and even a handy smartphone trading app.

Below is a more detailed look at our solutions:

Online Trading Portal

Perth Mint Depository provides a 24/7 online trading portal with live pricing for investors to buy, store and sell gold, silver and platinum.

Online Depository Account holders have the choice of a range of storage solutions offering different pricing structures.

Additionally, Depository Online includes a monthly savings plan for accumulating precious metals over time with a minimum contribution of only AUD 50 per month.

Telephone/Email


Modelled on a traditional service with personalised contact, the Depository Program is tailored to investors who wish to operate their account by telephone or email.

As a Depository Program Account holder, you communicate directly with our in-house traders who provide live pricing and instant confirmation of trades.

This account also offers several storage solutions in gold, silver and platinum.

Share Trading Accounts

Trading on the Australian Securities Exchange (ASX) under the code PMGOLD, Perth Mint Gold is a fully paid warrant on 1/100th of a troy ounce of physical gold.

Able to be accessed through a standard Australian share trading account, PMGOLD is structured to track the international spot price of gold in Australian dollars.

Trading on the New York Stock Exchange (NYSE), AAAU is unique in the marketplace as it is the first gold ETF to have the precious metal held on behalf of investors guaranteed by a sovereign entity.

Designed to track the international price of gold in US dollars, it is available to Australian investors through an international share trading account.

Mobile App


GoldPass® is a full-service investment app that allows users to buy, store, sell and transfer physical gold via a 24/7 trading platform on their smartphone.

The physical gold backing each investor’s GoldPass® holdings is represented in the form of digital certificates within the app.

Buy and Store Independently


For investors who wish to store physical precious metals themselves, our bullion range comprises:

 •  Gold and silver minted bars
 •  Gold and silver cast bars
 •  Gold, silver and platinum bullion coins

Bullion products can be ordered online or by phone for secure delivery to an approved location of the investor’s choice. Alternatively they can be purchased over the counter in our Bullion Trading Room.

Why The Perth Mint?

The Perth Mint is a global leader in precious metals. We process more than 90% of Australia’s and approximately 10% of the world’s newly mined gold, distributing precious metals worth more than AUD 18 billion annually throughout 130 countries.

We are the sole manufacturer of the official Australian Bullion Coin Program and make bullion bars at our refinery, one of only a few global precious metal facilities accredited by all five of the world’s major gold exchanges: London Bullion Market Association (LBMA), New York Commodities Exchange (COMEX), Shanghai Gold Exchange (SGE), Tokyo Commodities Exchange (TOCOM), and the Dubai Multi Commodities Centre (DMCC).

Importantly, investors who choose any of our products do so with the knowledge that their underlying physical holding is guaranteed by our sole owner, the Government of Western Australia, under the Gold Corporation Act 1987.




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How much do you know about gold investing?

Topics [ invest in bullion invest in gold invest in silver ]

It’s easy to fall in love with gold. After all, the rich and famous have obsessed over it for millennia.

During the past two decades, gold ownership has become much more widespread. No longer a sole preserve of the elite, every day and mum and dad investors have also taken a shine to the glittering yellow metal.

Accessibility to gold through bullion bars and legal tender coins, certificates and exchange traded products makes buying and storing gold simple. Driving folk to take advantage is this new found convenience is the growing appreciation of gold’s beneficial role within a diversified investment portfolio.

Before jumping in, it’s definitely a good idea to acquire a firm understanding of the case for gold. Here’s a short quiz designed to test your existing knowledge - answer these questions correctly and you’re well on the way to being an ace gold investor!

1. How many Jumbo jets would all the gold mined throughout history fit into?
a) 10
b) 20
c) 30

2. Gold and other precious metals are traditionally weighed in ounces known as:
a) Avoirdupois
b) Tower 
c) Troy

3. Between 2000 and 2012, the price of gold went up 800 per cent. What was the approximate price of an ounce of gold at the start of the millennium?
a) USD 440
b) USD 550
c) USD 660

4. When the exchange rate between the United States and Australian dollars goes up, Australian investors are likely to:
a) Pay more for gold
b) Pay less for gold 
c) Pay the same for gold

5. What purity constitutes investment grade gold for coins and bars, making them exempt from Australian GST? 
a) 92.5%
b) 99.5%
c) 99.99%

6. The gold to silver ratio (ounces of silver it takes to buy an ounce of gold) averaged 47 throughout the 20th century. What is its current level?
a) 55
b) 65
c) 75

7. When the gold to silver ratio drops below 50, practised investors are more likely to:
a) Buy gold and sell silver 
b) Sell gold and buy silver
c) Divest their gold and silver holding

8. Professor Roy Jastram’s landmark statistical examination of how gold’s purchasing power has remained consistent over the centuries is entitled:
a) A Pot of Gold
b) The Golden Constant
c) The Gold Standard

9. According to various portfolio theories, investors could benefit from holding anything between 1% and 15% of their assets in gold bullion. However, as part of his famed Permanent Portfolio strategy, investment analyst Harry Browne suggested the allocation to gold should be high as:
a) 20%
b) 25%
c) 30%

10. Which of these statements is false?
a) There is no counterparty risk associated with owning physical gold.
b) The market for gold bullion is highly liquid, making it easy to sell.
c) Central Banks around the world hold less and less gold.


Answers:
1. a) 187,200 tonnes, the latest estimate of gold ever mined by mankind, has a cubic capacity of approx. 9,700m3. According to this source, a 747 -400 Jumbo jet has a combined passenger and cargo volume of 1,035m3. The gold would therefore fit comfortably within 10 of  these aeroplanes.
2. c) One troy ounce equals 31.1034768 grams or about 1.0971 avoirdupois ounces.
3. a)  USD 440.
4. b) If the exchange rate goes up, the AUD price of gold goes down.
5. b) 99.5% pure gold in an investment form is GST-free in Australia.
6. c) 75.
7. a) The gold:silver trading strategy suggests it’s time to buy gold and sell silver.
8. b) The Golden Constant 
9. b) 25%
10. c)  Central Bank’s around the world hold less and less gold.



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‘Brexit’ fuels demand for gold

Topics [ gold market invest in gold gold bullion prices ]

NEWS

 

‘Brexit’ is shorthand for the possibility of a British exit from the European Union following a UK referendum on 23 June 2016.

Extremely close, the most recent opinion polls show the possibility of the Brexit camp coming from behind to snatch what was until recently thought to be an unlikely victory.

With worries that the 28-member EU could consequently begin to unravel, equity markets are gripped by uncertainty. In the past four days, the UK’s FTSE100 stock index has recorded losses of £100 billion.

Fuelled by fears for the British economy, some investors are turning to gold in an effort to protect their wealth. One major gold dealer in the UK has reported it is already experiencing increased sales, and is forecasting a huge rush for gold if the leave campaign is successful.

Turmoil in Europe, like the earlier possibility of Greece’s exit (Grexit), is likely to be contagious. Being an economic powerhouse, the impact of a British exit will have far greater ramifications than Greece’s prior exit threat. Among global equity markets turning sharply lower on Tuesday, the ASX lost over 2% as nervous investors dumped shares for less risky bonds and gold.

With the rhetoric heating up between the pro and anti-European campaigners in Britain this week, experts are broadly in agreement that the price of gold will climb further. Should voters confirm a Brexit in eight days time, the possibility of further slides in equities and declining world trade would only further strengthen its safe haven appeal.

If, on the other hand, those who wish to stay in the EU, led by Prime Minister David Cameron, are successful, plenty of risk factors with potential to damage world financial markets remain.

Along with other risk factors including worries about the underlying strength of China’s economy and the possibility of a Trump presidency, the allure of gold only gets brighter.

Brexit



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WGC Reports Surge In Gold Demand During Q3 2015

Topics [ gold market invest in gold ]

RESEARCH AND ANALYSIS

Key findings from ‘Gold Demand Trends Third Quarter 2015’

Global demand for gold rose 8% in Q3 2015, according to a new report published by the World Gold Council.

With their eyes on lower prices, bargain-hunting investors purchased 295.7 tonnes of gold bars and coins, it said, pushing demand for these products 33% higher year-on-year.

Demand from central banks and other official institutions almost matched the 179.5 tonnes record from Q3 2014. Meanwhile, demand for gold jewellery grew 6% year-on-year as lower prices during July and early August attracted buyers.

Gold consumption totalled 1,120.9 tonnes between July and September this year, up from 1,041.9 tonnes during the same period in 2014, the report said.

Download your full copy Gold Demand Trends Third Quarter 2015 (1.3MB)



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Big Cut In Gold Bar Price Presents Perfect Opportunity To Build Bullion Stack

Topics [ invest in gold buy gold bullion bars ]

BULLION BARS AND COINS

The Perth Mint has developed the perfect package for anyone thinking about buying gold.

Ultra-low priced bar

While stocks last, the premium on 1oz cast bars made from 99.99% pure gold has been slashed from $35 to just $20. Backed by a Government guarantee of purity and the Mint’s century of refining expertise, this popular bar now represents an unbeatable proposition for new investors and well as seasoned gold bugs.

[‘Premium’ is the amount charged by every refiner to cover costs of fabrication, such as wages, and other marketing and distribution costs.]


Representing the best combination of value and trust in Australia, the re-priced Perth Mint 1oz gold cast bar offers a great incentive to get into bullion buying.

Hassle-free buying

Announced earlier this month, proof of ID is no longer required for anyone buying up to $5,000 of precious metal by phone from The Perth Mint. New customer accounts can be established immediately and buyers can place their first order during the same call!

Shopping for bullion in person at The Perth Mint Shop is equally straightforward.

With new ultra-low pricing, both telephone and walk-in customers could currently easily acquire two 1oz cast gold bars and still have plenty of room within the price limit to take advantage of a range of silver coins and bars.

[To purchase the 1oz cast bar or place an order in excess of $5,000 online at www.perthmintbullion.com, customers are required to satisfy ID requirements specified in the Australian Government’s Anti-Money Laundering and Counter-Terrorism Financing Act 2006.]

To take delivery or not?

While many investors prefer to have bullion shipped to their home or another convenient address, others are sensitive to issues of safety and security. With billions of dollars of investors’ gold and silver securely stored in its vault, The Perth Mint Depository provides a convenient and cost-effective solution for anyone looking for complete peace of mind.

Shop, Ship, Store Advice Line

To purchase the ultra-low price 1oz cast gold bar while stocks last, or ask about shopping hours, the cost of shipping or secure storage facilities, customers are invited to contact The Perth Mint on: 1300 201 112 or +61 8 9421 7218.

More: http://www.perthmintbullion.com/au/Ultra-low-priced-1oz-gold-cast-bar



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