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 do investors turn to gold in low interest rate environments?

Topics [ gold market buy gold ]

Much of the developed world, including Australia, has experienced low interest rates since 2009 when monetary authorities introduced cuts to stimulate economic growth following the global financial crisis. 

In Australia, interest rates reached a record low this year when the reserve bank reduced its cash rate to just 1.00% in July. 

The decision to leave this rate unchanged in August and September on the back of continued uncertainty about the world economy has suggested interest rates will remain low for the foreseeable future.

Indeed, market predictors expect the Reserve Bank of Australia (RBA) to cut rates further to just 0.75% before the end of 2019.

What does this mean for investors?

In today’s low interest rate environment one of the most topical issues for many investors is what to do with their cash holdings. 

With 56% of Australian investors holding cash, according to Australian Tax Office data, this issue will have been brought into sharp focus for many. 

Given the latest set of Australian inflation data suggests prices across the nation are rising at 1.60% per annum, much of the money sitting in cash is losing value once real interest rates are considered. 

Real cash rates are calculated by subtracting the official inflation figure from the RBA cash rate. As an example, with the RBA cash rate at 1%, and annual inflation currently at 1.60% per annum, the real cash rate is -0.6%. 

Moreover, the fact that 10 to 15-year Australian government bonds yield between 1.25% and 1.50% suggests this period of low returns on cash or cash-like assets may well continue for another decade or more. 

In such an environment many investors are considering gold as a safe haven thanks to the asset’s historical outperformance when interest rates are low. 

Real cash rates and gold

More than 45 years of market history tells us gold has typically delivered strong returns when real rates have been low. 

In Australia between 1971 and 2018 there have been 27 years when real cash rates were 2% or higher and 21 years when they were 2% or lower. 

The table below highlights the returns on cash and gold, in both nominal and real terms, during these periods. 

Real cash rates between 1971 and 2018




Source: The Perth Mint, Australian Bureau of Statistics 

As can be seen, in environments where the real cash rate was above 2%, gold rose in nominal terms by an average of 4.32%. It therefore underperformed cash, which during these times rose by an average of more than 9%. 

However, in years when the real cash rate was below 2%, the price of gold rose by more than 20% in nominal terms and by almost 14% in real terms. Additionally, it rose during 18 of the 21 years when the real cash rate was below 2%. 

Gold has not only performed strongly in absolute terms when real cash rates have been low, but on a relative basis as well. The yellow metal outperformed both stocks and bonds during the years when real cash rates were below 2%. 

This can be seen in the graph below, which plots the nominal and real returns for Australian stocks, bonds and gold during years when real cash rates were below 2%. 

Australian asset class returns when real rates are below 2%



Source: The Perth Mint, Australian Bureau of Statistics

It should be no surprise that gold would perform so well during periods when real cash rates have been low for two key reasons: 

1. Low or even negative real cash rates are typically only implemented as a form of monetary stimulus when the economy is weak or softening. In such environments it’s natural that investors adopt a more defensive approach by seeking out safe haven assets such as gold. 

2. If the real rates one can earn from cash or short-term bonds are low, or even negative, the opportunity cost of investing in gold is significantly reduced.

It therefore makes sense that historically no other single, easily accessible traditional asset has delivered higher returns than gold in environments where real cash interest rates have been low. 


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The centenary of the first London gold price

Topics [ gold market investment buy gold ]

12 September 2019 marks the centenary of the first gold price, or what is now known as the LBMA Gold Price. To mark this momentous occasion LBMA are planning a series of celebratory events during 2019. This article first appeared in Alchemist magazine as the first of four from Alered Connelly, PR Officer at LBMA, which draw on his academic analysis of the gold price over the last 100 years.

A brief history

On 12 September 1919, the Bank of England made arrangements with NM Rothschild & Sons for the formation of a free gold market and the establishment of a daily gold price. 

The first “fixing” took place at 11am when the price of gold was settled at £4 18 s 9d by the five founding members: NM Rothschild & Sons (chair), Mocatta & Goldsmid, Pixley & Abell, Samuel Montagu & Co. and Sharps Wilkins. The bids were made by telephone for the first few days, but it was then decided to hold a formal meeting at New Court, the London offices of NM Rothschild & Sons. 

The original members of the Fixing were all historically linked with the gold market in London. Mocatta & Goldsmid dated back to the early origins of the market in the late 1600s, when it became silver broker to the Bank of England, at a time when London was usurping Amsterdam as the international centre for the gold market. 

In the late 18th century and early 19th century, Mayer Amschel Rothschild rose to become one of Europe’s most powerful bankers and it was his third son, Nathan Mayer Rothschild, who founded NM Rothschild & Sons in London in 1811. As gold began to pour into London from the gold rushes, first from California and then Australia, Pixley & Abell was set up in 1852, swiftly followed by Samuel Montagu in 1853. 

In the intervening years, mergers have seen Pixley & Abell and Sharps & Wilkins in 1957 form Sharps Pixley, which is still in existence to this day, and Samuel Montagu become part of the private banking service of HSBC. 

As we reflect on the last 100 years of the gold price, we equally look forward to the next 100 years. Today, it continues to be set in London and remains the international benchmark price for the gold market. However, over the years it has evolved and modernised. One of the most significant changes was on 1 April, 1968 when the price changed from sterling to dollars and took place twice a day. 


More recently in 2015 responsibility for the administration and governance of the price was transferred to an independent administrator, ICE Benchmark Administration who have also established an external oversight committee to assist them in ensuring the effective governance of what is a transparent, trusted and tradable process. 

The auction provides the opportunity to buy or sell precious metals via a transparent electronic platform. Everyone can see the same, publicly available information at the same time - providing a level playing field to all participants. The administrator monitors the benchmark settings before during and after the process to ensure its integrity. 

The tradable reference price is used by miners, refiners, central banks, investors, traders and fabricators around the globe. The auction is centrally cleared which allows a broad range of firms to become Direct Participants. Currently there are now 13 direct participants rather than just the original five, including Chinese banks. 




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Monthly Sales – October 2016

Topics [ minted bars bullion coins buy silver buy gold ]

  - Gold (Au): 79,048 oz

  - Silver (Ag): 1,084,213 oz

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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Perth Mint branded gold in great demand in China

Topics [ gold refining buy silver buy gold ]

MEDIA INTERVIEW

Richard Hayes, CEO of The Perth Mint, explains to 2GB’s Ross Greenwood how China’s continuing appetite for Perth Mint branded gold has contributed to its strong performance in the first half of this financial year.



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Is gold a good investment?

Topics [ buy silver buy gold ]

BULLION BARS AND COINS

With help from Perth Mint CEO Richard Hayes, financial expert Nick Bruining examines gold, revealing how much economists say is wise to include in your portfolio.


[Footage courtesy of 7 News Perth].



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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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