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Perth Mint Gold: Monthly Holdings Report – January 2020

Topics [ Perth Mint Gold ]

Perth Mint Gold (ASX: PMGOLD) holdings hit a new all-time high of 137,730.86 ounces (4.28 tonnes) in January 2020, with inflows beyond 3,500 ounces for the month.

Monthly flows into PMGOLD are displayed in the chart below.

Source: The Perth Mint, ASX, Reuters

Inflows in January continue a strong record for PMGOLD that dates back to September 2018, with total fund holdings rising by more than 60% during this time period.

The value of PMGOLD holdings also topped AUD 300 million for the first time ever in January, driven by the 10% rise in the Australian dollar gold price during the month. To learn more about how to access returns on gold using PMGOLD, simply download our PMGOLD Factsheet

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Gold rallies strongly to start 2020 on a high


 • Precious metals have begun 2020 in a strong position, with gold up 4.80% in USD terms and almost 10% in AUD terms.

 • The assassination of Iranian military general Qassem Soleimaini, as well as fears over the spread of coronavirus are helping drive demand for safe haven assets, with bonds and the US dollar also rising. 

 • End of year demand figures for 2019 show near record levels of gold demand from ETF investors and central banks.

 • Outlook for gold demand remains positive, with the global economy and financial markets facing several headwinds

Full monthly review – January 2020 

Precious metal prices continued their rally in January 2020, with the price of gold and silver in USD rising by 4.80% and 1.13% respectively. Australian dollar investors saw even higher returns, driven by an almost 5% decline in the local currency, with the AUD gold price up by almost 10% for the month, comfortably topping AUD 2,300 per troy ounce by the end of January. 

The rally in precious metals was driven by two key events in January. The first of these was the assassination of Iranian military general Qassem Soleimaini, which has investors rightly worried about elevated geopolitical tension in the Middle East.  The second was the discovery and spread of the coronavirus from Wuhan in China, with fears the virus may develop into a global pandemic building by the day. 

Precious metals were not the only safe haven assets that benefited, with the US dollar also rising, whilst government bonds have seen strong demand, with yields plunging (and prices rising) throughout January. 

In the United States 10-year government bond yields fell by 20% for the month, whilst in Australia, 10-year government bond yields fell by 30% during January 2020, the largest monthly decline in percentage terms since the turn of the century. 

Given the demand for safe haven assets, many would have expected share markets to tumble, but this did not transpire. Globally, the MSCI All World and S&P 500 indexes were essentially flat, whilst in Australia, the ASX 200 index reclaimed the 7,000-point mark, increasing by almost 5% for the month. 

This stronger than expected performance from equity markets owes little to improvements in global economic data, with the JP Morgan Global Manufacturing PMI for January 2020 showing only the slightest of expansions in economic activity.

Instead it is largely due to optimism over the US-China trade deal, whilst expectations of continued monetary support from central banks (despite the Fed keeping rates unchanged at their meeting in January) and negative real yields on trillions of dollars of bonds across the developed world continue to provide support for risk assets. 

Gold ETF flows 

Gold ETF holdings hit all-time highs in 2019, as investors in North America and Europe increased their exposure to the precious metal. In total, holdings in global gold ETFs grew by 14% in terms of total tonnes of gold backing the products, whilst the market value of the products increased by almost 40%, owing to the strong rally in the gold price last year. 

The chart below shows annual flows into gold ETFs from 2004 to 2019 inclusive, alongside the price of gold in USD per troy ounce. 

Source: The Perth Mint, World Gold Council

The chart highlights the fact that global gold ETFs saw inflows of over 400 tonnes in 2019, a calendar year figure that has been exceeded only twice in the last 15 years. 

The first of those was in 2009, during the height of the Global Financial Crisis (GFC), when central banks including the US Federal Reserve began quantitative easing programs. The second time was 2016, when Brexit and the election of Donald Trump saw demand for gold ETFs soar. 

If history repeats, then gold investors should be relatively optimistic regarding the potential for gold to perform well in the year after such strong inflows into gold ETFs are seen, with gold in USD rising by 28% in 2010, and 12% in 2017. 

Central bank demand near record highs

Central banks notched up their 10th consecutive year of net gold purchases, with demand in 2019 again topping 650 tonnes. This level of demand has only been surpassed once in the last 50 years (in 2018) with the chart below highlighting central bank purchases on a calendar year basis since 2010.

Central bank gold purchases 2010 to 2019
Source: The Perth Mint, World Gold Council

Over the past decade, central banks have recorded average annual purchases of just over 500 tonnes. This represents a remarkable shift in behaviour that coincides with the onset of the GFC, as central banks averaged net sales of 443 tonnes per year in the decade to end 2009. 

Whilst this buying from central banks arguably has minimal impact on the price of gold on a day to day basis, it is profoundly important medium to long-term driver. It also provides strong evidence of gold’s enduring role as a unique monetary asset. 

Jewellery and bar and coin demand soft

Weakness in demand for gold jewellery, as well as a decline in the demand for physical gold bars and coins offset the strong demand seen from ETF investors and central banks. Investors and consumers bought 2,978 tonnes of physical gold in jewellery, bar and coin format in 2019, a reduction of over 10%, or just over 355 tonnes, relative to the demand for these products seen in 2018. 

Falling demand was driven by declines in China and India, with rising inflation, record high gold prices and deteriorating economic conditions driven by trade disputes all playing a part, with the market for bars and coins hitting a ten-year low. 

Despite the subdued demand from this part of the market, it is worth pointing out that the almost 3,000 tonnes of gold bought in jewellery, bar and coin form throughout 2019 still accounted for over 85% of gold mining production, which came in at 3,463.7 tonnes for the year. 


The pullback in the gold price seen in the first few trading days of February is a reminder of the short-term risks facing precious metal investors, especially given the yellow metal had rallied over 30% in USD terms between September 2018 and end January 2020. 

Short-term volatility aside, the fundamentals remain strong, with many tailwinds supporting gold demand and therefore prices in the period ahead. The low yield environment and elevated geopolitical concerns are likely to support central bank and gold ETF demand, even if investment levels fall short of the near record numbers seen in 2019. 

Financial market uncertainty will also help drive gold allocations, as investors seek to hedge against any potential falls in equity markets. This would seem prudent, not only because equity markets remain at or near all-time highs in parts of the developed world, but also because global price-earnings ratios are at elevated levels, whilst expectations for earnings growth are declining.

These risks and the desire for investors to hedge against them by owning gold as part of their portfolio will only be exacerbated if concerns about the coronavirus continue to build, with China now accounting for close to 16% of global GDP, versus closer to 4% when the SARS virus hit back in 2003. 

The economic threat from coronavirus may be particularly acute in Australia, given our reliance on Chinese demand for commodity exports, as well as our education sector, with the number of Chinese students in Australia more than quintupling since 2002. 

Australia’s tourism industry, already reeling from the bushfire crisis, will also be severely impacted from travel restrictions in place, with these factors contributing to a nine-year low in business confidence, according to a January 2020 survey from Roy Morgan. 

Given these challenges, it is no surprise that an end January 2020 Bloomberg survey on the outlook for Australian interest rates saw the majority of respondents forecast that the RBA will cut the cash rate to just 0.25% by the end of the year. 

Some economists, including Dr Shane Oliver from AMP Capital, are also warning that the Australian economy may already be in recession, with ANZ forecasting a decline in economic output in Q1 2020. 

In due course, the challenges facing the domestic economy can be expected to exert downside pressure on the value of the AUD, boosting the returns that Australian investors may earn from investing in precious metals. 


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

World Gold Council – Gold Demand Trends

JPM Morgan Manufacturing Data

Importance of China Economy – SARS v Corona

Number of Chinese students in Australia

Shane Oliver warning on recession

Roy Morgan Business Confidence

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Gold has been a strong performer when real cash rates are low

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

The income being earned on this cash is at record lows, with the Reserve Bank of Australia (RBA) cutting interest rates three times last year, ending 2019 at an all-time low of just 0.75%.

Given the latest set of Australian inflation data to end 2019 suggests prices across the nation are rising at 1.80% per annum (price rises for essential items like healthcare and utilities have increased by 4.40% and 5.40% per annum over the last decade), much of the money sitting in cash is losing value in real terms.

The question for investors about what to do with the cash in their portfolio will only be exacerbated if the RBA meets current market expectations and cuts rates to just 0.50% at some point in 2020.

In this environment gold is an asset investors should consider, with almost 50 years of market history telling us the precious metal has typically delivered strong returns when real rates have been low.

In Australia between 1971 and 2019 there have been 27 years when real cash rates were 2% or higher and 22 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 rate environments and asset returns (%) – 1971 to 2019

The data tells us that when real cash rates are above 2%, gold recorded an average annual increase in nominal terms of 4.32%, with the yellow metal essentially flat in real terms.

However, in years when the real cash rate was below 2%, the price of gold rose by an average of more than 20% in nominal terms and by over 14% in real terms, with a calendar year increase seen in 19 of those 22 years.

Real cash rates are calculated by subtracting the official inflation figure from the RBA cash rate. As an example, if the RBA cash rate was 8%, and annual inflation was 5%, then the real cash rate would be 3%. If the RBA cash rate was 2% and annual inflation 3%, the real cash rate would be -1%. 

This information tells us that the increase in the gold price of just over 18% in 2019 was entirely in line with historical patterns, essentially matching the average annual return the yellow metal has delivered in low to negative real cash rate environments.

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

This can be seen in the chart 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 cash rates were below 2% - 1971 to 2019

In low cash rate environments,
no single easily accessible asset
has delivered higher returns than gold.

Two key drivers help explain why gold has delivered such strong absolute and market leading relative returns in low real rate environments.

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, then the opportunity cost of investing in gold is significantly reduced or completely eliminated.

These factors should be front of mind for investors trying to protect and build wealth today, as 10 to 15 year Australian government bonds currently yield less than 1.25% (as at end January 2020).

These yields suggest that the period of low to negative real returns on cash and cash-like investments such as term deposits, which gold has historically thrived in, may well continue for another decade or more.

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A review of gold’s performance over the past decade

The past 10 years have been highly positive for the precious metal market, with gold increasing in value in both USD and AUD terms. 2019 in particular was a strong year for the yellow metal, which recorded its largest calendar year increase in price since 2010, with gold in Australian dollars hitting all-time highs above AUD 2,000 per troy ounce.

Returns for gold on an annual basis over the last ten years can be seen in the chart below. As it highlights, 2013 was the only year that gold fell in both currencies, with the yellow metal in a clear uptrend since the end of 2015.

Source: The Perth Mint, Reuters

Based on World Gold Council data, over the course of the decade gold rose from USD 1,087.50 and AUD 1,209.20 per troy ounce at the end of December 2009 to USD 1,514.80 and AUD 2,154.90 at the end of December 2019.

In percentage terms these price increases translate to a total return of 39.30% for USD investors and 78.20% for AUD investors. distinguishing gold as a valuable asset over the decade with annual gains of 3.4% in USD terms and 5.9% in AUD.

Whilst these numbers are solid, they represent a smaller pace of growth relative to the previous decade, with gold rising by 275% in USD terms and 173% in AUD terms between 1999 and 2009.

The stronger performance of gold in the prior decade can be associated with geopolitical and financial market developments including the dot-com crash and September 11 terrorist attacks, as well as the Global Financial Crisis (GFC), which took place between 2007 and 2009.

Overall, gold performed strongly in the last decade, outperforming Australian bonds, cash and housing. This can be seen in the table below, which shows returns over multiple time periods to the end of 2019 for a range of asset classes, with Australian and international share markets the only asset classes to outperform gold in the past 10 years.

Asset Class Returns (%) to end 2019

The outperformance of equities relative to gold over the last decade primarily comes down to the recovery of equity markets from the more than 50% declines they suffered during the worst of the GFC.

Analysis of 15 year returns in the above table identifies gold as the best performer of all, with annual returns of almost 9.50% per annum.

Going forward, we expect demand for gold, and the gold price to be supported by a number of factors, not least of which is the ultra-low yield environment investors now face.

Back in 2009, investors wanting to lock their capital away for a decade could have got a yield of 5.72% by investing in a 10-year Australian government bond. Inflation at the time was 2.06%, giving investors a real return of over 3.5% per annum.

Today 10-year Australian government bonds yield less than 1%, whilst inflation is sitting at 1.80%, meaning investors are now earning a negative real return if they park their money in government bonds like these.

On a relative basis, negative real yields on government bonds make gold a more attractive investment proposition, and they are one of the contributing factors that drove the gold price rally of over 18% in 2019.

This low yield environment, combined with expensive equity market valuations, ongoing geopolitical tension and a troubled outlook for the global economy, are all set to support gold in the decade ahead.


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 leads the way in ethical gold

Topics [ ethical ]


Global leader in precious metals The Perth Mint has joined with leading-edge technology specialists Security Matters Ltd to develop the world’s first mine to market ethical gold supply chain assurance solution.

Titled trueGold, the initiative will lead the commercialisation of a worldwide integrity application for gold mining companies, refiners, vault operators, depositories, mints, wholesalers and retailers.

The high-tech Australian innovation will provide everyone involved in or with the gold industry the surety that the metal they purchase has been ethically sourced and reliably tracked throughout its journey from the mine site to the marketplace.

trueGold is a particularly significant development given the increasing focus on Environmental, Social and Governance (ESG) practices across the world pertaining to the gold supply chain,” Perth Mint Chief Executive Officer Richard Hayes said.

“This game changing technology will report on the origin of the gold and how the metal moves through the entire production and distribution process. This complete transparency will instil even greater trust in a commodity which already provides the ultimate refuge during times of economic and geopolitical turmoil.”

As the world’s largest refiner of newly mined gold and a fully integrated precious metals enterprise, The Perth Mint has long been at the forefront of setting the highest possible ethical standards across all its operations.

“This agreement extends our proactive efforts to maintain integrity throughout the gold value chain and strengthen the precious metals industry’s commitment to sound ethical and governance practices to provide peace of mind to investors and consumers worldwide,” Mr Hayes continued.

ASX-listed Security Matters Ltd specialises in state-of-the-art and reliable operational solutions that can irrevocably mark a range of fungible products and substances. With several supply chain integrity applications already live in other industries, Security Matters Chief Executive Officer Haggai Alon said he is honoured to now work with a leading name in the gold industry.

“We work tirelessly to create an authentic and transparent marketplace for all commercial and consumer goods, so by collaborating with The Perth Mint we can demonstrate how our technology can be used to validate the legitimacy of gold and other premium ores,” Mr Alon said.

“Significant changes can easily be made to supply chain processes when adopted by leading organisations and technology can drive that change.

“By differentiating between and employing a different technique to each of the three major life cycles within the gold supply chain - raw material to production, production to commercial, commercial to recycle - we can create an entire technology driven ecosystem that promotes integrity, corporate transparency and accountability, anti-counterfeiting and sustainability.”

At present, investors and consumers have few assurances and little understanding of the origins of gold, and in line with modern practices, are increasingly looking for surety that the gold they are buying is mined and processed through socially responsible and acceptable sources.

“The metal obtained from war-torn areas, where child labour and other abhorrent practices are widespread, is indistinguishable to the end user from gold that has been ethically sourced from mines in Australia and the United States, for example,” Mr Hayes said.

London is and will remain the pivotal point of the gold industry. The World Gold Council (WGC) has recently issued a set of responsible gold mining principles and the London Bullion Market Association (LBMA) has issued a statement of principles of responsible gold guidance for Good Delivery Refiners. This initiative is being developed against the backdrop of both industry guidance statements.

“Currently there are no overarching standards for the gold industry but instead a mix of legislation (Dodd-Frank in the United States and Conflict Free Minerals in the European Union) and voluntary codes of conduct issued by the WGC and LBMA, which result in potentially opaque gold supply chains.”

The integrity solution to be delivered by The Perth Mint and Security Matters Ltd is based on scientifically proven molecular markers which will enable gold to be traced and tracked. Its patented code identification reader will simply and immediately indicate any integrity anomalies in the supply chain and thereby make it much more difficult for dealers in conflict or ‘dirty’ gold to release it into legitimate supply chains.

The Perth Mint and SMX will be seeking the involvement of other gold industry supply chain participants through expressions of interest as part of the commercialisation.

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Monthly Sales – January 2020

Topics [ Monthly sales figures ]

Total ounces of gold and silver sold by The Perth Mint in January 2020 as coins and minted bars:

  - Gold (Au): 48,299 oz

  - Silver (Ag): 1,450,317 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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