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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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‘Fractionals’ make bullion coin investing more affordable

Topics [ buy gold coins buy gold bullion online ]

Bullion coins made from 1oz of gold make sense for many investors.

But there are denominations made from less than 1oz.

These coins are known as ‘fractionals’ - and they provide investors with a number of practical benefits.

Because they contain smaller amounts of precious metal, fractional coins are sold at lower price points. For those on a tight budget, they make accumulating gold bullion possible for a more modest outlay.

Some people invest in gold to protect themselves against the worse-case scenario - a total collapse in the financial system. This type of investor probably believes fractionals would be useful for barter if paper currency suddenly became worthless.

Disaster scenarios aside, the other main benefit offered by fractionals is flexibility when it comes to converting precious metal back in to cash. For example, a portfolio containing exclusively 1oz gold coins means that a minimum of 1oz must be sold – currently worth more than AUD 2,500.

Sellers who want to redeem smaller amounts of gold could have achieved a more suitable outcome had they diversified through a range of fractional coins.

Australian fractional coins



Fractional bullion coins made by The Perth Mint from 99.99% pure gold feature exactly the same design theme as the full 1oz sizes and each is issued as Australian legal tender.

Each fractional coin receives the same meticulous attention to detail in order to produce an exquisitely detailed product. 

The internationally sought-after Australian Kangaroo and Australian Lunar III Gold Coin Series are struck in fractional weights of 1/2oz, 1/4oz and 1/10oz. Also available in these sizes, the Lunar Series includes a more unusual 1/20oz option.

Our latest fractional offering is the 2021 Australian Kookaburra 1/10oz Gold Bullion Coin, only the second of its kind struck at The Perth Mint. 

With the 2020 coin officially selling out, this release featuring a superb new design is set to be equally popular among stackers. 

Learn more.


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What are currency code standards?

Topics [ invest in gold spot price simple guide ]

Currency codes are the three-letter alphabetic codes that represent currencies used throughout the world. 

Chances are you would be familiar with some major currency codes without explicitly knowing the mechanics of how they work – for instance ‘USD’ is the universally recognisable currency code for US dollars which is the base currency for foreign trade.   

Every country-specific code has a corresponding three-digit numeric code which is identified by the International Organisation for Standardisation (ISO), a non-governmental organisation which provides standards for manufacturing, commerce, technology and communication.

Why are currency codes important to gold?

Modern foreign-exchange (forex) markets trade by quoting prices in a range of currencies.

Forex prices are determined by supply and demand, meaning a higher USD price reflects a higher number of people buying it. Conversely, if demand for a currency, such as the Australian dollar (AUD), drops, those buying USD will get less in exchange for their AUD.

Currency codes are related to all markets and are especially relevant to gold as it is priced in USD.

However before currency codes were introduced, gold was the standard benchmark upon which all currencies were measured.

A brief history of the gold standard

The first system of currency was directly linked to the value of physical gold with countries agreeing to convert paper money into a fixed amount of the precious metal. 

This made gold the initial base currency for world markets. 

The development and formalisation of the gold standard began between 1696 and 1812 as the introduction of paper money posed problems. Yet it wasn’t until 1821 that England became the first country to officially adopt a gold standard. 

The international gold standard emerged in 1871 following its adoption by Germany. By 1900, most developed nations were linked to the gold standard, the price of which was fixed in England. 

Throughout this period all trade imbalances between nations were settled with gold, giving governments strong incentives to stockpile the precious metal for more difficult times. Many of those stockpiles still exist today.

However the gold standard was eventually abandoned in Britain in 1931, replaced with a fiat system. America followed suit in 1933 and by 1973 all remnants of the gold standard system had been dissolved.  

Dollar symbols in a range of colours

With the value of currency no longer based on any physical commodity but instead allowed to fluctuate dynamically against other currencies on the forex markets, a new way of delineating currencies was required.

Rather than currency value being pegged to gold, it was now globally measured against the USD after America emerged a global leader following World War II.

Hence in 1978 the ISO standard committees established standardised currency codes which are used to designate forex prices.

Currency code pairs

Each currency is assigned a three-letter code which is used in global markets. There are hundreds of currency codes however the most commonly traded and well-known are: 

• USD = US dollars
• AUD = Australian dollars 
• GBP = Great Britain pounds (sterling) 
• EUR = Euro
• NZD = New Zealand dollars 
• CAD = Canadian dollars
• JPY = Japanese Yen 
• CHF = Swiss francs
• KRW = Korean won

Codes are determined by the ISO 3166 currency code and the type of currency. For example:

• USD – the US coming from the ISO 3166 country code and the D for dollar.
• CHF – the CH being the code for Switzerland in the ISO 3166 code and F for franc.

With foreign exchange markets trading off the USD, the USD is in many cases known as the base currency. It can be paired with a quote currency which is the currency it is being converted into.

Known as currency code pairs, these are used to determine how much money you can exchange for 1 USD.

For example, USDCAD is the currency pair used to convert 1 USD to Canadian dollars (CAD). This is known as a direct currency pairing and will tell you how much CAD is needed to buy 1 USD.
Conversely, AUDUSD is the currency pair used to convert 1 AUD to USD. This is known as an indirect currency pair and will tell you how much 1 AUD will allow you to buy in USD.

This is important for gold traders as all commodities are measured against the USD.  

Hence the price of the USD will impact the price you can get for the commodity you are trading, whether or not you are buying in USD or in other currencies.

In Australia, gold prices are quoted in AUD which is converted from the USD rate. This is done by calculating the gold price as quoted in USD by the AUD exchange rate. 

It’s important to note that the price you pay for an ounce of physical gold will not be the direct conversion rate. 

Buyers are also paying for fabrication and manufacturing costs and in many cases purchase and administration fees which are absorbed into the quoted price when buying from a retailer. Different margins apply depending on the product being bought. 

This is known as the spot price.

Regardless of whether you are trading solely in AUD, CAD or any other currency, there is no denying the USD has direct impact on how gold is priced in modern markets.

Avenues of trade

The Perth Mint has a dedicated trading desk manned by expert traders operating five days a week for over the phone trade via its Depository Program.

For those wanting the freedom to buy and sell 24/7, our Depository Online program offers just that. 

Our GoldPass app is ideal for anyone comfortable with digital technology who wants to trade in gold through the convenience of their smartphone. 

Alternatively, if you would prefer to invest via a brokerage account on the ASX, our ASX-listed Perth Mint Gold (PMGOLD) tracks the spot price of gold in AUD.

View our full range of investment options here.  

Resources
ISO currency codes, ISO


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Gold still has more to give as global uncertainty continues

Topics [ gold market gold analysis gold investment ]

With 2020 one of the most volatile years in recent history, global investors had to adapt to uncertain markets as the pandemic wreaked havoc on world economies.

While the gold price has dropped off by about 11% since it reached record highs in August, uncertainty surrounding the outcome of the US Presidential election, trade wars and potential impacts of further COVID outbreaks could mean we’re seeing the quiet before another storm.

Perth Mint Global Gold Market Adviser Kevin Rich and Perth Mint CEO Richard Hayes believe there are key lessons to learn from the precious metal market’s performance in recent months.

These gold experts provide insight into market trends and highlight key takeaways for investors.

Gold shines in the media spotlight

With the frenzy of media activity surrounding gold, it’s old news that the asset has been on an upward trajectory for the past year. Peaking at USD 2,000 per ounce in August, gold is settling around the USD 1,900 mark – still a 25% increase over a 12-month period. 

According to Richard Hayes, this is driven by more than COVID.

“What we’ve certainly seen is gold trending upward with the price, in our view, being underpinned more broadly by factors including money printing. The US debt is now close to USD 27 trillion, which is a big number with the US GDP just under AUD 20 trillion,” he says. 

“That tells a story on its own in terms of debasement of the world’s currency. Also underpinning that further are the issues with China and the trade war. More broadly, there are stories coming to light about Chinese surveillance, intelligence gathering and acquisition of Western trade secrets, which all feeds into the broader uncertainty.”

Perth Mint CEO Richard Hayes
Perth Mint CEO Richard Hayes

Other global debt issues such as China’s debt reaching USD 7.3 trillion against its GDP of USD 15 trillion, a stark contrast to where the US is, places further pressure on the US dollar which has fed into gold prices.

As investors flocked to secure physical bullion and ETF inflows increased by 700 tonnes in the first six months of the year, some market commentators predicted the metal would climb to as high as USD 3,000/oz.  

However, in response to the economic uncertainty, central banks have been pumping liquidity into the system, which may halt gold’s potential rise, said Kevin Rich.

“When people ask why gold isn’t running right up to USD 3,000, the answer is that there are technical traders out there and there is profit-taking along the way,” he says. 

“In the same way, if you have a patient in the hospital and you check their vitals every day, some days you have good days and some days you have bad days, but you look overall at where they are headed health wise. I think the same goes with gold.” 

Gold is a safe bet

While some may be surprised by gold’s continuous rally for much of 2020, for seasoned gold market spectators the precious metal’s movements have behaved ‘exactly as many of us had anticipated’.

“The big takeaway for me is that we’ve seen yet again that gold can be a refuge when there is insecurity either from a geopolitical point of view, an economic point of view, or in this case, from a health point of view, which none of us could have ever predicted a year ago,” Richard says.

“Many who are in tune with the gold markets, such as mainstream investors who have a portion of their reserves or a portion of their wealth in gold, would likely agree that gold has performed exactly as many of us had anticipated it would. So, for many of us, there hasn’t been any big surprises.” 
 
Historically, gold performed well during the Global Financial Crisis (GFC) in 2009 when it likewise rose in demand and value rapidly up to USD 1,800/oz. As the financial crisis eased, the asset became more mainstream however in the five years since it has mostly stayed out of the spotlight. 

“What COVID and the health crisis has done is propel gold to the forefront of many investors’ minds once again, being those who may have looked for other ways to diversify their portfolio just a couple of years ago,” Richard adds. 

The unprecedented global situation and the measures taken to mitigate it led to some unexpected movements.

“What has surprised me over these several unprecedented months is that I would have expected gold lease rates to firm, but the market is pretty awash with liquidity at the moment so we haven’t seen any increase in lease rates,” Richard says. 

“Interest rates and bond yields are negative or at best zero. The picture is changing a bit as we move forward, but I am surprised that it hasn’t translated into lease rates. We certainly aren’t seeing the numbers we saw going back 10 to 12 years ago.”

Gold stands apart from other commodities


According to Kevin, gold has proven itself as a unique commodity that stands apart from other similar assets, having outperformed others through this turbulent period. 

“Many people allocate academically to commodities. This is because commodities have less correlation to the other markets and are a diversifier,” Kevin explains. 

“However, through this recent period, I think investors have realised that gold, which is usually grouped in with commodities, is distinct, having outperformed agriculture, base metals and energies. I think it should stand apart from other offerings.” 

Richard agrees that the precious metal occupies an interesting position in the market.

“Gold is a quasi-currency, it’s a quasi-commodity — it almost straddles the two,” he said. 

“Certainly, gold has stood out in the ETF space over the last six to 12 months due to its strong performance in the market. It’s been a great story for Perth Mint Gold (ASX:PMGOLD) and other gold ETFs at this moment.”

While the pace of inflows into gold ETFs has slowed ahead of the election, the World Gold Council reports that holdings increased by 20.3 tonnes in October, continuing to drive net inflows to new all-time highs.

What to watch in the months ahead

With so many factors to consider in an evolving global situation, Kevin and Richard say there are some key developments that may impact the gold price.

Both are ‘watching closely’ the US election, the development of a COVID the vaccine, plus the potential for any further global shocks, most likely from COVID.

“If we see a significant second wave of the virus in the US which leads to a rise in deaths, that is likely to underpin the gold price and propel it forward even further,” Richard says. 

“Regarding other macroeconomic factors, I don’t believe there is anything new on the immediate horizon. A lot as we know is being driven by COVID and countries trying to keep their economies open, along with the many challenges that brings. It’s a balance between trying to keep an economy running without having an infection rate which is overwhelming for hospitals and emergency rooms.” 


Global gold adviser Kevin Rich
Global Gold Market Adviser Kevin Rich

Kevin takes his cues from the news each day, looking out for changes to central bank allocations, jewellery and investment buying in countries like China and India, and energy use.

“As I turn a couple of pages of the newspaper each day, one thing I’m looking for is any change in central bank direction: accelerating, adding or staying the course, or diversifying out of gold,” he said. 

“The other things to watch are jewellery and investment buying in India and China, how much gold recycling is going on in those areas (higher gold prices often lead to higher recycling) and further down the list is energy prices. Energy is a huge factor in how we produce gold, so if energy prices stay where they are, that’s very supportive of gold.” 

Reserves are another factor to consider, adds Richard.  

“We are watching closely what central banks do in terms of policy, but also what countries are doing with their gold reserves; do they increase, do they not increase?”

As the dust begins to settle from the election, gold is a popular choice for investors as a tangible store of value in a world of uncertainty.  

“Gold is once again mainstream compared to where it has been in the past, providing a measurable diversifier for people who invest,” Richard says.

“It’s something that is tangible and solid. For many people, something that is a hard asset versus an arithmetic formula is more appealing.” 
 
Resources

Gold ETF inflows continued, but at a significantly lower pace, World Gold Council 


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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Republican or Democrat, does it matter for gold?

Topics [ market analysis gold investment Market update ]

Gold traded in a narrow range during October, finishing the month down 0.27% in USD terms as market participants looked toward the US Presidential election. While the result is yet to be formalised, gold originally reacted positively, though has sold off sharply on news of a potential COVID-19 vaccine.

Executive summary

Gold finished October trading at USD 1,881.90 per troy ounce (oz), down 0.27% for the month.

In local currency terms, the precious metal ended October trading at 2,671.56/oz, up 1.48%, driven by a fall in the value of the AUD. 

The market has now spent approximately three months in a correction phase after peaking at more than USD 2,050/oz in early August.

The US Presidential Election looks like it will end in a victory for Democrat challenger Joe Biden, though final results may not be known for some time, with US President Donald Trump so far refusing to concede, and a potential recount to take place in certain swing states.

Gold rose to more than USD 1,950/oz in the days after the election however dropped by close to USD 100/oz following news Pfizer may have successfully developed a COVID-19 vaccine.

Irrespective of what happens with the Presidential election, there are several tailwinds which can be expected to support gold going forward. 

Full monthly review – October 2020 

Gold prices traded in a fairly narrow range during October 2020, peaking at USD 1,925 per troy ounce on 12 October before pulling back to as low as USD 1,870 per troy ounce. The precious metal ended the month down just 0.27%. 

The lack of meaningful price action was not unexpected, with market participants unwilling to take major positions given the potential for higher volatility leading into and immediately following the US Presidential election, which took place on 3 November (see below). 

Greater activity was seen in other markets during October, with the S&P 500 dropping by almost 3%. The USD rose marginally, as did US bond yields, with the US 10-year yield increasing from 0.69% to 0.87%. 

Commodity markets were also hit. Crude oil prices were down more than 10% (though rallying in early November) as the re-emergence of COVID-19 in the Northern Hemisphere increased investor uncertainty about the outlook for economic growth as we head toward 2021. 

A review of gold performance after US Presidential elections 

Following the election, market participants are attempting to discern the outlook for various asset classes in the years ahead. 

A review of the performance of gold in the aftermath of previous US Presidential elections is one (admittedly imperfect) way of getting a feel for what might happen next.

Our own analysis based on market moves in the aftermath of every US Presidential election going back to 1968 suggests that the gold price has on average risen 5.58% in the year after each election. However there is a wide disparity within the one-year figures, with a best result of 51.83% (after the 1972 election) and a worst result of -32.67% (after the 1980 election). 

The table below highlights the average, the best and the worst returns over one, three and five years for the USD gold price in the aftermath of US Presidential elections.


Source: The Perth Mint, Reuters

State Street global advisors also analysed the performance of gold in various US political environments, based not only on which party occupied the White House, but who controlled the US Congress.

The results are displayed below.

Source: State Street Global Advisors

The data indicates that whoever occupies the White House has little to no material impact on gold price returns. The table shows that the gold price delivered annual average gains of 11.2% under Democratic Presidents and 10.2% under Republican Presidents.

History suggests it is far more important who controls the US Congress. The gold price under a Democrat-controlled US Congress has historically risen by more than 20% per annum, in comparison to just 3.9% under a Republican-controlled US Congress. 

Interestingly, the worst environment for gold has historically been when the US Congress wasn’t controlled by either party. In such environments, the price only saw average annual increases of 3.5%. 


Another insight from the State Street analysis was that gold tended to outperform both equities (S&P 500) and bonds (US Treasuries) in the year after an election if the party that was challenging for the White House was victorious. 

If instead the incumbent has been victorious, gold has still typically rallied, delivering average gains of 6.5%, but has underperformed both equity and bond markets. 

Gold demand picture remains mixed


While the gold price has had a great 2020, rising by 24% in the 10 months to end October, the demand picture around the globe remains mixed. 

Jewellery demand has been incredibly weak, primarily due to the impact of COVID-19 and record high prices. Data from the World Gold Council suggests that demand for gold jewellery was just 333 tonnes in Q3 2020, a decline of 29% relative to demand seen in Q3 2019. It is also the third lowest quarterly demand figure for gold jewellery seen in the past 20 years. 

Central banks also turned net sellers of gold in Q3 2020 for the first time since 2011, reducing total holdings by a modest 12.1 tonnes. The reduction was predominantly driven by sales in Turkey and Uzbekistan, with the United Arab Emirates, India, Qatar, the Kyrgyz Republic all increasing their holdings. 

Year to date, central banks have added more than 220 tonnes to total gold holdings, with this number expected to grow across the remainder of the year and into 2021 as Emerging Market central banks continue to build their national gold reserves.

ETF flows have been the obvious highlight in 2020, with more than 1,020 tonnes of gold being bought through these vehicles in the first ten months of the year. 

Even here though, it must be stated that the pace of inflows into gold ETFs has slowed down. In the first seven months of the year, these products saw average inflows of more than 125 tonnes per month. Since then, the pace of inflows has dropped to approximately 43 tonnes per month, with just 20 tonnes flowing in during October.

The outlook for gold  

Irrespective of the ultimate outcome from the US Presidential election and the news that Pfizer may have developed an effective COVID-19 vaccine, there are multiple tailwinds supporting gold which we think investors will come to more fully appreciate in time.

Monetary policy is a key tailwind, with the decision this week by the Reserve Bank of Australia to cut interest rates, target lower bond yields and launch an AUD 100 billion Quantitative Easing program an illustration of how much easy money will be injected into the financial system in the years to come. 

This should be particularly positive for gold in time given we are already operating in an environment of negative real yields on cash and most government bonds. 

Gold should also be supported by investors looking to hedge against equity market risk, which remains high. This is driven by multiple factors, including: 

The continued threat posed by COVID-19, the spread of which has worsened in developed market economies in the Northern Hemisphere over the past month.
Equity market valuations, which remain stretched by historical standards.
Potential for ongoing gridlock in Washington.  

Trade tensions are also likely to remain, even if the rhetoric is dialled down with a change in the White House. These ongoing pressures, coupled with the supply chain concerns posed by COVID-19, suggest that inflationary risks may be more apparent than the market is currently anticipating, despite the very real demand deficit in the global economy today. 

Fiscal policy in the developed world is also expected to remain loose for years to come. This too should prove supportive of gold if history is any guide, as the precious metal has typically performed well in environments of rising fiscal deficits.  

Finally, we are encouraged by the fact gold has now been in a corrective phase for the past three months, since hitting all-time highs above USD 2,050 per troy ounce in early August 2020. Back then, the gold price was trading at more than 20% above its 200-day moving average (200DMA), which was a clear warning sign that a correction was likely. 

All markets need time to work out the short-term excesses that build up from time to time, and that is exactly what gold has done over the past three months. Not only has the precious metal corrected by approximately 10% since early August, but it also ended October 2020 trading just 6% above its 200DMA.

This is not to say that the price could not fall further, but it is clear that the market is in a far healthier place today, which bodes well for prices in the medium to long-term. 

Jordan Eliseo
Manager – Listed Products and Investment Research 
The Perth Mint
11 November 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. 



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Perth Mint Gold holdings October 2020

Topics [ PMGold ]

Holdings of Perth Mint Gold (ASX:PMGOLD) continued to rise in October 2020, increasing by more than 2,000 ounces for the month. The product ended the month with holdings of 233,387 ounces (7.26 tonnes). 

Monthly flows into PMGOLD can be seen in the chart below, with holdings increasing by almost 75% in the first 10 months of 2020. 

Monthly change in ounces held: Perth Mint Gold (ASX:PMGOLD)
August 2017 to October 2020



Source: The Perth Mint, ASX, Reuters

The growth in the product seen in 2020 continues a strong period of demand for PMGOLD that dates back to September 2018, with total holdings increasing by more than 175% over this more than two-year period.

PMGOLD holdings finished September 2020 with a value of more than AUD 621 million, based on a last traded price of 26.62 per unit on the ASX on 30 October 2020. 

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


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Gold demand eases in October 2020 ahead of US election

The Perth Mint shipped 1,228,713 ounces of silver coins and minted bars in October 2020, down 26.7% on the previous month and 11.8% lower than October 2019.

The decrease in volume shipped did not reflect actual demand for Perth Mint silver, which remained robust. Instead, a temporary production bottleneck affected the manufacture of finished product, including kilo coins which were halted during the month.

“We sold every ounce of silver product we were able to fabricate in October 2020,” explained Neil Vance, General Manager – Minted Products. “Technical issues in our factory will shortly be resolved, allowing us to resume full production and meet more of the demand from our clients.”

In gold, 38,367oz of coins and minted bars were shipped during the month, a 38.7% decline on the previous month but 18.1% higher than October 2019. Demand for Perth Mint product eased in line with the market, particularly in the US, which our wholesale distributors attributed to uncertainty surrounding November’s presidential election.

Ounces of gold and silver sold in October 2020 as coins and minted bars
Gold (Au): 38,367 oz   |   Silver (Ag): 1,228,713 oz

NB The above 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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