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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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Demand for Kangaroo bullion coins surge as new decade dawns

Topics [ Australian Kangaroo silver bullion coins gold market gold bullion coins ]

The Perth Mint experienced an increase in demand for its signature gold bullion coin, the 1oz Australian Kangaroo, in the latter half of 2019 as investors turned to precious metals in the face of an uncertain 2020. 

Sales of the 1oz gold Kangaroo coin in Australia more than doubled in the six months ending December 2019, rising 63% against the same period in 2018. 

Silver purchases also spiked with more than four million 1oz Australian Kangaroo silver bullion coins sold to investors in Australia, Europe and Asia resulting in a 36% increase in overall sales year-on-year. 

Group Manager, Minted Products Neil Vance said political unease and a struggling retail sector reflected in record low interest rates around the world helped the case for precious metals as investors sought to preserve wealth. 

“Precious metal markets were certainly in the spotlight in 2019 with the price of gold reaching record highs in Australian dollar terms in the latter half of the year as investors sought to hedge against falling markets,” Mr Vance said.

“Our bullion coins have been a popular choice for decades and the rise in demand for both our 1oz silver and gold Kangaroo bullion coins prove that these signature offerings continue to provide investors with trusted quality and value as a leading global investment choice.”

The notable rise in gold purchase has been seen across The Perth Mint’s range of investment options, from physical bullion coins and bars to digital gold via exchange-listed gold products and an innovative digital app. 

With uncertainty about the future of the world economy and escalating tension between the US and Iran, it seems the case for gold remains strong at the dawn of 2020.



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Gold leaps on world tensions

Topics [ gold investing gold bull market gold analysis gold prices ]

Gold prices have begun 2020 on a very strong footing, with the yellow metal rallying beyond USD 1,600 and AUD 2,300 per troy ounce.

The proximate cause of the latest rally is the sharp escalation in tensions between the United States and Iran, with the drone strike that killed Iranian military general Qassem Soleimaini sparking a wave of safe haven buying.

The rally in precious metals is a continuation of a strong upside move which can be dated back to Q4 2018 when a sharp decline in equity markets reignited demand for gold and other safe haven assets.

Since then, gold has rallied by more than 30% in Australian dollar terms, topping AUD 2,000 per troy ounce for the first time ever last year as interest rate cuts and a decline in global bond yields helped fuel investor demand for the precious metal.

This demand has come from a multiple sources including central banks, which bought record amounts of gold in 2019, and gold ETF buyers who increased their holdings to all-time highs last year.

The Perth Mint has seen the growth in investor appetite for precious metals firsthand, with the number of clients opening direct depository accounts more than doubling in 2019. Meanwhile holdings in our ASX-listed product, ticker code PMGOLD, rose by 45% last year.

In troy ounce terms, December 2019 demand for our Australian gold bullion coins and minted bars neared 79,000 ounces – up 45% on the previous month. Driven by strong sales of Kangaroo and Lunar coins, particularly in Germany, the number of ounces sold in December 2019 increased 170% compared to same period in 2018.

The case for gold remains as strong as ever. The likelihood of elevated geopolitical tensions in the Middle East, equity market volatility and the prospect of even lower interest rates in Australia in 2020 are some of the many factors encouraging investors to allocate a portion of their portfolio to the precious metal.



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Koala climbs higher in 2020

Topics [ silver bullion coins Australian Koala ]

The popular Australian Koala Silver Bullion Coin Series returns in 2020 with a new interpretation of the iconic tree-dwelling animal.

Released today, this year’s simple yet effective artistic study portrays the sleepy creature clinging to a branch.

The koala is a marsupial – a type of mammal that carries its young in a pouch. It spends long periods in eucalypt trees, usually dozing during daylight hours and consuming large quantities of its favourite gum leaves at night.


STOP PRESS: In response to the devastating bushfires ravaging Australia, The Perth Mint is donating 15% of profits from 2020 Koala bullion coins sold during the next seven days to the Port Macquarie Koala Hospital.


Issued as Australian legal tender, no more than 300,000 1oz Koala bullion coins will be released worldwide. A 1 kilo version featuring a fully frosted finish has also been released with a time limited production run ending at the end of the year.

The 2020 Australian Bullion Coin Program featuring the Koala and other well-known native species including the Kangaroo and Kookaburra are available from The Perth Mint’s Bullion Trading Desk in East Perth, via telephone on 1300 201 112 or +61 8 9421 7218, and www.perthmintbullion.com.

 

Investors can also check availability of these releases with leading bullion distributors.



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Monthly Sales – December 2019

Topics [ Monthly Sales ]

Total ounces of gold and silver sold by The Perth Mint in December 2019 as coins and minted bars:

  - Gold (Au): 78,912 oz

  - Silver (Ag): 1,361,723 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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Gold ends 2019 up 19%


Summary

Gold and silver prices rallied strongly in the final month of 2019, up 3.63% and 4.76% respectively in USD terms.
For the full calendar year, gold rose 18.26% in USD terms and 18.86% in AUD terms, outperforming silver which was up 15.18% (USD) and 15.98% (AUD).
Gold price gains in 2019 were driven by multiple factors, including interest rate cuts in the US and Australia, declining bond yields globally and escalating geopolitical tensions.
Demand for precious metals was driven by record central bank purchases and inflows into gold ETFs hitting an all-time high in 2019. 
The gold price rise of the past 12 months is particularly impressive given the strength of global equity markets, with the US stock market up 29%, and the ASX up 18% in 2019. 
Outlook for 2020 is positive as multiple tailwinds support demand.

Full monthly review – December 2019

Gold finished 2019 on a positive note, rallying by more than 3.5% in December in US dollar (USD) terms. The rise was in part driven by USD weakness, with the dollar index falling by almost 2% last month. Over the course of the 2019, gold rose from USD 1,282.73 to USD 1,517.01 per troy ounce, an increase of 18.26%. 

In Australian dollar (AUD) terms, returns for gold in December were essentially flat, with the yellow metal rising by 18.86% for 2019 and marginally outperforming silver which increased by 15.98% across the course of the year.

Gold’s strong performance in 2019 represents a continuation of an uptrend that began in earnest at the start of Q4 2018 when the yellow metal was trading below USD 1,200 per troy ounce. Equity market volatility in the last three months of 2018 was a key driver of the gold rally that continued throughout 2019 even as equity markets themselves recovered strongly. 

Recession fears in the US, a meaningful decline in global bond yields, monetary easing from central banks and concerns over the US-China trade war combined to bolster demand for the precious metal pushing prices higher.

The rally in gold during 2019 was particularly impressive given how well the stock market performed, with the S&P 500 up by 28.88% last year and the ASX increasing by 18.38%. Many investors see gold as a safe-haven asset, even though market history indicates that it is often positively correlated to equity markets when those equity markets are rising strongly. 

This can be seen in the chart below, which highlights the annual returns of the ASX 200 and gold priced in AUD from 1993 to 2019 inclusive.

  

Source: Reuters, The Perth Mint

The ASX 200 recorded negative returns in seven of the 26 calendar years across this time period, with gold rising in six of those years. In the 20 years that the ASX 200 delivered positive returns, gold priced in AUD increased in 14. 

This includes last year which helps to highlight why gold may play a positive role in an investor’s portfolio in all market conditions and not only during periods of high inflation or equity market weakness. 

Demand for gold was also strong in 2019, particularly in the exchange-traded fund (ETF), private investor and central bank space. We explore this in detail below. 

Gold ETF buying strong – particularly in Australia

December 2019 capped on an impressive year for global gold ETF flows, with preliminary estimates from Reuters suggesting that holdings grew by more than 2.5% during the month. 

Across the year, holdings in global gold ETFs increased by 14%, with the total tonnes of gold held through these vehicles hitting 2,896 tonnes in October 2019. This represented a new all-time high, surpassing levels last seen in December 2012 when gold was trading closer to USD 1,664 per troy ounce.  

The Perth Mint has seen the growth in demand from ETF buyers firsthand, especially through the growth of our ASX-listed exchange-traded product, ticker code PMGOLD. Holdings in PMGOLD grew by more than 45% across the course of 2019, with inflows seen across 11 months a testament to the ongoing demand for gold we have seen from Australian investors. 

Private investor demand

Investor interest in gold hasn’t been confined to ETF inflows. Private holdings held in custodial storage have also seen significant growth. Research released by Goldman Sachs in late 2019 suggested that up to 1,200 tonnes of gold has been purchased and privately vaulted in countries like Switzerland and the UK across the past three years.

Central bank purchasing

Another key source of demand in 2019 came from central banks which have been net purchasers of gold for a decade now. By the end of Q3 2019, central bank demand had hit 574.5 tonnes for the year, with further acquisition taking place in Q4. 

Whilst the total amount of gold purchased by central banks for the entirety of 2019 is not yet known, current estimates suggest that it will be almost 670 tonnes. This would be a record for any given calendar year, surpassing levels seen in 2018 when just over 650 tonnes of gold were obtained by central banks. This number at the time represented the fastest pace of gold acquisition in five decades. 

Outlook for 2020 and beyond

Whilst short-term gyrations in the gold price are inevitable, we remain optimistic about the outlook for gold and precious metals generally as this decade gets underway with demand likely to be supported by several tailwinds. 

At a central bank level, whilst the rate at which banks acquire gold may ease from record levels seen across the past two years, there seems little question that they will remain net buyers. Geopolitical tensions and low-to-negative real yields are expected to continue to encourage reserve asset diversification into gold. 

Gold is also likely to find favour amongst institutional investors, with the recent Goldman Sachs research report noting that analysts: “still see upside in gold as late cycle concerns and heightened political uncertainty will likely support investment demand.” 

Importantly, Goldman also suggested that: “The case to reallocate a portion of normal bond exposure to gold is as strong as ever”. This is a theme we expect will support demand for gold for much of the decade to come, as in today’s environment, there is simply no real return, and in many cases guaranteed losses (if the assets are held to maturity) on many traditional safe-haven assets. 

This is demonstrated in the chart below, which shows yields on cash and a variety of fixed income investments (as at 30 November  2019) and compares them to average inflation rates of the past decade. 


 
Source: Bentham Asset Management, Livewire Markets, The Perth Mint, Australian Bureau of Statistics

Given a choice between negative real yields or the opportunity to gain from potential increases in the gold price, we believe it is only natural that an increasingly number of investors will choose the latter option by incorporating an allocation to gold in their portfolio, much like they did in 2019. 

This is just as likely in Australia as it is in other parts of the world, with multiple factors supporting gold demand locally including: 

Prolonged softness in the local economy 
The potential for further house price weakness in some parts of the country 
The likelihood that interest rates will be cut again this year 
Continued concerns about a potential decline in the value of the Australian dollar

These factors represent a compelling case for risk-conscious investors to consider gold as part of their portfolio as the asset’s safe-haven attributes come to the fore in the years ahead.

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.

Articles referenced

Bloomberg article referencing Goldman Research
https://www.bloomberg.com/news/articles/2019-12-06/goldman-says-case-for-diversifying-into-gold-as-strong-as-ever

Zerohedge on Goldman Sachs Research
https://www.zerohedge.com/crypto/road-retirement-millennials-put-their-faith-bitcoin-goldman-says-go-gold

World Gold Council on Central Bank Demand
https://www.gold.org/goldhub/research/gold-demand-trends/gold-demand-trends-q3-2019/central-banks-and-other-institutions

Kitco on Central Bank Gold Demand
https://www.kitco.com/news/2019-12-04/Central-bank-gold-demand-has-surpassed-2018-s-50-year-record.html

Deccan Chronicle on Central Bank Gold Buying
https://www.deccanchronicle.com/business/in-other-news/020120/central-banks-gold-buy-highest-since-1970s.html


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Will gold shine again in 2020?

According to more exuberant predictions, gold could soar to USD 5,000 per ounce in 2020. While claims of this magnitude are unlikely to come true any time soon, they do reflect a strong body of opinion that the yellow metal will continue to build on the gains it made in 2019.

Gold ended last year on a high, settling above the psychologically important USD 1,500 mark, a 12-month rise of around 18%. That’s its best year since 2010.

In Australian dollar terms, the price remains close to its 2019 high, comfortably above AUD 2,000 an ounce.

Low interest rates certainly helped the case for gold. When interest offered on bank deposits fail to cover the rate of inflation, investors’ cash loses its purchasing power. The precious metal is seen by many as a great way to preserve wealth – and in this scenario it prompted Perth retiree Ollie Price to switch 20% of his savings into gold.

Equities provided cautious investors with another quandary. Although markets performed well in 2019, experts have warned that stocks could now be at full or near full price, particularly in the US where the market has soared to an all-time high. Worryingly, some commentators have suggested cracks are beginning to show in the world economy and that a recession is possible sooner rather than later.

Because gold tends to hold its value or even rise in times of market turmoil, some investors use it as a type of insurance. The strategy, known as hedging, is defined as an investment designed to reduce the risk of adverse price movements in a separate asset.

So, with uncertainty remaining over the eventual outcome of drawn-out US-China trade negotiations and even Brexit to a degree, it seems key factors that drove gold’s run up during 2019 remain in play.

Meanwhile, the prospect of higher interest rates appears as remote as ever. Indeed, according to a recent poll of Australian economists, the majority believe we’re in for further cuts during 2020.

In such circumstances, Australian investors seeking to preserve wealth and diversify their portfolios may want to investigate gold further. With regular analysis from our Senior Investment Manager Jordan Eliseo and updates demonstrating how easy it is to buy and sell gold, our blog is a great place to start your research for a golden 2020.



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