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.

PLEASE READ
Our Blog Disclaimer.

Our Comments Policy.
Our Copyright Policy.

GROUP PROFILE
Our Visions, Our Values.

Perth Mint Bullion BlogSubscribe
« Back to full list

Gold vs superannuation funds

Topics [ superannuation gold investment ]

Gold prices rose by 27.86% in the 2019/20 financial year. This was a hugely positive performance in comparison to the median return delivered by diversified superannuation funds, which ranged from -2.1% to +1.0% over the same period, depending on the investment strategy of the fund.

Gold’s strong performance in the past financial year continues a primary bull market trend that has been in place since the turn of the century. From end December 1999 to end June 2020, the precious metal rose by 486% (9.49% annualised) in Australian dollar (AUD) terms. 

This bull market has been driven by multiple factors, including:

• The severe economic shocks (NASDAQ crash, the Global Financial Crisis, European Debt Crisis and COVID-19 pandemic) that have hit the global economy in the past 20 years.

• The significant decline in interest rates and long-term government bond yields over this time, with the Reserve Bank of Australia (RBA) cash rate 95% lower today relative to where it was at the end of 1999.

• An increase in demand for gold, driven by consumer markets in Asia, central bank buying and the growth of gold exchange traded funds (ETFs) in Western financial markets

In the past 15 years, these factors have helped gold outperform traditional asset classes, and diversified investment strategies. 

The table below highlights the median performance of superannuation funds over multiple time periods to the end of June 2020. It also displays the returns of the assets that are held in these funds in comparison to gold’s performance.

 
Source: The Perth Mint, Chant West, World Gold Council

The table makes it clear that over 15 years gold has been by far the highest performing single asset class, rising by 10.51% per annum. This result is significantly ahead of the second-best performing asset class, which increased by less than 7.50% per annum.

The performance of gold over the short-to-medium term (one through to 10 years) has also been impressive. As demonstrated by the data, the asset was one of, if not the, highest performing asset class over most timeframes.  

How much does this mean in monetary terms?

The graphic below charts the outcome from investing AUD 10,000 in gold 15 years ago and AUD 1,000 each following year and compares this to results from an identical investment in the median performing ‘growth’ superannuation fund. 

We chose ‘growth’ funds for comparison as this is what the majority of Australians invest in with their superannuation. We included the additional AUD 1,000 contribution each year given most Australians do make regular contributions to their superannuation fund. 

Note the chart does not take into account transaction fees or taxes etc, which can vary depending on which asset class or investment structure you are analysing.



Source: The Perth Mint, Chant West

The chart shows that in total, the AUD 25,000 invested in gold (AUD 10,000 up front and AUD 1,000 each year for 15 years) would have grown to almost AUD 75,000, whilst the money in a regular superannuation fund would have grown to just over AUD 45,000.

There will, of course, be time periods where regular superannuation funds outperform the gold price and the above graph should not in any way be interpreted as a message that Australians should solely invest in gold at the expense of the assets that make up their superannuation fund.

Instead, it merely highlights the fact that gold can also deliver strong long-term returns, and that the yellow metal can play an important role as part of a diversified investment strategy. 

What does the future hold?

Whilst there are no guarantees, a solid case can be made that going forward, gold prices will remain biased to the upside. Demand is expected to be supported by investors looking to protect and grow capital in an environment of negative real yields and expensive asset valuations. 

Demand is also likely to be bolstered by the economic fallout from steps taken to control the spread of COVID-19 as the unprecedented fiscal and monetary policy stimulus fuels concerns about higher inflation. 

Should those concerns be realised, then it would not surprise to see gold lead the way in terms of asset class performance for some time to come.

Jordan Eliseo
Manager – Listed Products and Investment Research

28 July 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.

Resources

Super funds navigate the crisis to deliver surprise result, Chant West





Blog DisclaimerComments PolicyCopyright Policy

Perth Mint app gives US investors the golden touch

Topics [ buy gold online GoldPass ]

One of the world’s largest precious metals enterprises, The Perth Mint, has introduced its acclaimed smartphone app Goldpass to investors in the United States.

Part of its commitment to taking Australian gold to the world, the app allows investors to securely buy, sell and transfer Perth Mint gold in US dollars (USD) at the touch of a screen.

The secure investment platform, powered by InfiniGold technology, was launched in Australia in 2018 and has since amassed more than 17,000 registered users. 

Gold in the modern era

Gold, traditionally considered an asset favoured by seasoned investors with existing wealth, has moved firmly into the modern arena in recent years with developments in technology making it increasingly easier to access.

The ability to purchase physical gold though digital means with platforms such as GoldPass has made the precious metal more attractive to those beginning their wealth creation journey. 

Perth Mint Manager Listed Products and Investment Research Jordan Eliseo said during the past 12 months The Perth Mint has watched a distinct trend emerge as new and younger investors turn to gold, particularly when it is offered via digital products.

“We’ve certainly seen an increased appetite for gold among US investors, particularly in the current climate,” Mr Eliseo said. 

“What has become more apparent is the need for a broader range of gold products and platforms to meet the demands of contemporary investors.”

At the forefront of innovation for decades, The Perth Mint is an early adopter of cutting-edge technology that aims to bring gold to every investor – no matter their background or experience in investing.

“Technology is changing the way people invest and manage their wealth, with younger Australians leading the way in buying gold,” Mr Eliseo said. 

“Security and peace of mind still underpin investment decisions. However, immediacy, convenience and accessibility have become equally important, and GoldPass offers all these benefits.”

Providing a credible alternative to risker digital assets such as cryptocurrencies, GoldPass digital holdings will pave the way for gold to be used as an easy and convenient store of wealth and allow instant transfer to other GoldPass users.



How GoldPass works

GoldPass is ideal for anyone comfortable with digital technology who wants to invest in gold. Their holdings are doubly protected through the use of digital encryption and by the fact that their metal is held by a government-owned institution with a reputation of 121 years standing.

All digital certificates are 100% backed by physical Perth Mint gold stored in its network of central bank grade vaults. 

With no minimum investment, those just getting started with gold can easily buy and sell miniscule amounts as little as 0.001oz to build their confidence in gold as an asset and grow their wealth over time. 

An investor’s digital holdings, which reflect their gold balances in ounces, are visible in the app’s interface along with any deposited funds in the same way that balances are seen on an online banking system.

Using GoldPass, investors may buy Perth Mint gold and redeem their digital holdings or ounces for physical gold or cash at any time.

GoldPass is now available for free download for Android and iPhones on Google Play and the App Store.


Blog DisclaimerComments PolicyCopyright Policy

Dollar cost averaging: What is it and how does it relate to gold?

Topics [ gold market invest in gold ]

There is a popular saying in financial circles that “you can’t time the markets”. This is the simple reality of investing in the modern age – and even truer in 2020 as the markets react to the unpredictability of a global pandemic.

One way to mitigate the risks of investing a large amount in a single investment or portfolio at the wrong time is a strategy known as dollar cost averaging.

A simple, flexible investment tool suitable for younger investors or those new to the market, it is especially worth considering during periods of volatility. Let’s examine why.

Cost per ounce

When investing in gold, it’s natural for investors to think in terms of cost per ounce. When the price of gold is down, many people decide to jump in by making a one-time investment. Then they wait for the price to go up.

While gold has been on a record-breaking upward trajectory for much of 2020, there is a natural fluctuation in pricing which has been demonstrated in recent months as the world adjusts to life with COVID-19. 

Dollar cost averaging, also known as the constant dollar plan, uses the moving price of gold to your advantage. Rather than making a single investment, you invest a fixed amount on a set schedule. 


Here’s an example of how it might work.

You have AUD 10,000 to invest. Using dollar cost averaging, you decide to invest AUD 1,000 per month in Stock A.

The first month Stock A sells for AUD 50 per share, so you buy 20 shares.

The second month it drops to AUD 25 per share, so the AUD 1,000 can purchase 40 shares.

The third month, Stock A has risen to AUD 40 per share, so you can grab 25 shares.

Now you own 85 shares of Stock A at the average price per share of AUD 35.29.

If you had spent the entire AUD 10,000 in a single up-front investment, you would have paid AUD 50 per share. By dollar cost averaging, after three months you only paid AUD 35.29 per share.

Why precious metals?

If investments only went up, this would not be an advisable way to invest - but in a volatile and unpredictable market environment dollar cost averaging has been proven to help reduce risk by averaging out market lows.

As a tool an investor can use to build savings and wealth over a long period, this strategy is especially applicable to long-term investments such as superannuation, mutual or index funds, and gold, which is traditionally held as a safe haven asset. 

It removes much of the detailed work of attempting to time the market in order to make purchases at the best prices. 

It is important to note that dollar cost averaging works on the assumption that prices will, eventually, always rise. 

While it has been established that this strategy can improve the performance of an investment over time, this is only if that investment increases in price across the period in question. The strategy cannot protect the investor against the risk of declining market prices. 

With gold’s performance over the past 20 years resulting in an annual average gain of more than 8%, there is little wonder why it is a common strategy for precious metal investors. 

When can you use it?

Although it's one of the more basic techniques, it is known to be one of the best strategies for investors looking to trade on a stock exchange via exchange-traded products such as Perth Mint Gold (PMGOLD).

Ideal for people looking to save, our Depository Online service can easily adapt to a dollar cost averaging approach with the option of scheduling an investment of as little as AUD 50 each month and 24/7 access.

For those new to gold who prefer to invest via their smartphone, digital platforms such as GoldPass may also lend itself to such a strategy. With no minimum investment, it’s easy to get started and test out your dollar cost averaging plan.

Had success with dollar cost averaging? Let us know why it works for you in the comments below.

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.  



Blog DisclaimerComments PolicyCopyright Policy

Gold ends financial year at record high as investors continue to accumulate precious metals

Topics [ market analysis Market update ]

Gold ended June trading at more than USD 1,760 per ounce. Now up by 25% in the last year, the outlook is promising for a continued bull run in precious metals.  

Executive summary

Gold finished June trading at USD 1,768.10 per troy ounce, rising by 2.27% in June.
The price of gold has risen by 16.55% in US dollar terms (USD) and 18.83% in Australian dollar (AUD) terms in the first six months of 2020.
Silver prices also continued to rally, finishing the month up 2.4% in USD terms.
Demand for physical gold remains robust, though has eased from record levels seen earlier this year.
Expensive equity markets, low yields on traditional safe haven assets and the ongoing threat from COVID-19 are expected to support continued gold demand in the second half of 2020.

Full monthly review – June 2020 

The price of gold continued to rise in June, finishing the month trading at more than USD 1,760 per ounce. Matching the highest calendar quarter close on record set back in 2012, the yellow metal is now well and truly back on the investment radar after a strong rally in H1 2020 that has seen the price rise by more than 15% in USD terms. 

In AUD terms, while returns were more subdued the price closed June trading at more than AUD 2,500 per troy ounce, an increase of almost 20% in the past six months. 

Silver prices continued to rally in June, up 2.41% in USD terms, with the gold silver ratio (GSR) finishing the month at 99. Whilst this a sharp decline from where this ratio sat at the end of March when it was over 110, its worth remembering that the GSR started the year at just 85. Silver may have outperformed gold in the past three months, but it has a lot of catching up to do. 

Continued inflows into ETFs, rising inflation expectations and a minor pullback in equity markets in the last three weeks of June all contributed to the rally in precious metals, with gold finally pushing through USD 1,750 per ounce, a level that had provided some resistance earlier in the year. 

In this month’s report we look at the likely drivers of gold moving forward, as well as the latest developments in financial markets, including:

The ongoing threat from COVID-19;
Seasonality trends and why we are entering a historically strong quarter for gold prices;
Why managed money positioning in the futures market is a positive sign for precious metal bulls; and
Why soaring equity markets prove there are multiple drivers of gold demand today.

COVID-19 threat remains

The latest data from around the world indicates that the COVID-19 virus is spreading faster than ever, surpassing 10 million cases in late June. The United States and Brazil seem particularly hard hit, whilst Australia itself is not immune, with community transmission in places like Victoria now at record levels. 

The threat from COVID-19 will continue to complicate the path forward for the global economy for some time to come. It will weigh on economic output, negatively impact company earnings and force fiscal and monetary authorities to deploy larger amounts of stimulus for longer than they would like.

We’d expect to see gold continue to benefit from these trends, as it has for much of the past six months. 

Managed money positions are starting to build

Managed money positioning in the gold futures market has been relatively subdued since the COVID-19 threat emerged, with speculators positioned to benefit from a gold price increase paring back their exposure.

Indeed, between mid-February and early June, gross managed money long positions fell from 278,286 contracts to just 126,407 contracts, a decline of more than 50%. 

In the past two weeks gross managed money long positions rose to 161,593 contracts in a sign that speculators are again willing to increase their long exposure to the gold price. 

Note that as per the chart below, which shows movements in gross long positions and the USD gold price over the past 10 plus years, there is no sign of overexuberance. 

Holdings remain in line with their long-run averages, and at barely half the levels seen at some points in the past, with large increases in managed money longs typically helping push the gold price higher. 
 

Source: The Perth Mint, CFTC 

The fact that gold prices have performed as well as they have over the past three months without much support from this sector of the market is of itself a positive sign. 

If positioning in this space continues to build in the coming weeks, it could very easily help propel gold prices back towards all-time highs in USD.  


Equity markets remain euphoric

Despite the unprecedented slowdown in economic activity caused by COVID-19, equity markets enjoyed an enormous rally in Q2 2020, with the Dow Jones for example recording its strongest calendar quarter since 1987.

The rise in equity markets has been supported by all types of investors to a varying degree. Millennial investors in the US flocked to trading platforms like RobinHood, as well as traditional brokerage accounts offered by the likes of Charles Schwab and TD Ameritrade. Similar trends have also been seen in Australia.   

Hedge funds have also dramatically increased their allocations to the stock market in the past three months. Survey data from Bank of America Merrill Lynch suggests net exposure to stocks from these investors is near record highs, having risen from below 20% to more than 50% since April.

Institutional investors like pension funds also seem to have increased their exposure across the quarter, adding to the upside move in markets. 

The fact that gold rallied by more than 10% in USD terms alongside the huge increase in risk assets seen in Q2 aligns with historical observation which illustrates gold’s typically positive correlation to rising equity markets. It is also a positive sign as it demonstrates that investor appetite for bullion is not strictly limited to those seeking a hedge against falling equity markets, which was undoubtedly a major factor supporting demand in Q1.

Whether it be fears over higher inflation (with 10-year break even inflation rates continuing to rise in June, though they admittedly remain at low absolute levels), a desire to hedge against a potential weakening of the USD, or simply a wish to broaden the range of defensive assets within a portfolio given continued negative real yields on most government bonds, there are multiple factors supporting demand for gold and its price at present. 

Should equity markets experience a second wave of selling in the months to come, this would likely serve to act as a further catalyst for gold prices.
 
Seasonality a tailwind for gold in Q3

Gold is entering a seasonally positive period according to analysis of historical data which suggests third quarter returns are typically the strongest on record. This is demonstrated in the chart below, which shows the average monthly return of gold priced in USD for each calendar month. 
 

Source: The Perth Mint, Reuters 

Whilst historical performance patterns do not guarantee that prices will not fall in the coming quarter, the data does suggest that a continued increase in the USD gold price would not be unusual.

Jordan Eliseo
Manager Listed Products and Investment Research 
The Perth Mint
6 July 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. 




Blog DisclaimerComments PolicyCopyright Policy

Perth Mint Gold: Monthly holdings report – June 2020

Topics [ Perth Mint Gold ]

Holdings of Perth Mint Gold (ASX:PMGOLD) continued to rise in June 2020 to an all-time high, topping 200,000 ounces for the first time.

PMGOLD ended the financial year with total holdings of 205,628 ounces (6.40 tonnes). Inflows of more than 10,000 ounces were recorded for the month. 

Monthly flows can be seen in the chart below which shows that holdings increased by more than 50% in the first six months of 2020. 


Source: The Perth Mint, ASX, Reuters

As demonstrated above, demand for PMGOLD has trended upwards since September 2018. Over this 21-month period to end June 2020, total holdings increased by almost 150%.

The value of PMGOLD holdings has also continued to grow. The product ended the month of June with a market value of AUD 529.9 million, based on a last traded price of 25.77 per unit (AUD 2,577 per ounce) on the ASX on 30 June 2020. 

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


Blog DisclaimerComments PolicyCopyright Policy

How big is the global gold market?

According to the World Gold Council, the best estimates suggest that by the end of 2019 more than 197,000 tonnes of gold had been mined across the course of human history. 

Despite the fact that gold has been valued and sought after by humans for millennia, the majority of this gold – roughly two thirds – has been mined in the past 70 years.

This gold is owned in a variety of forms which can be grouped into several major categories of gold demand. These include:

Jewellery
Physical bars and coins
Exchange Traded Fund (ETF) holdings 
Official holdings (central bank reserves) 
Fabrication (industrial demand)

These are highlighted in the chart below which indicates the percentage of total gold holdings held in each:

Source: World Gold Council, based on end 2019 data

The table below shows total global gold holdings held in the above categories by percentage, actual tonnes held and market value based on the 31 December 2019 LBMA AM gold price of USD 1,523.00 per ounce. 


Source: World Gold Council, Kitco, The Perth Mint

As demonstrated by the above data, the size of the gold market at the end of last year, based on the amount that has been mined and its end-December 2019 price, was more than USD 9.6 trillion. 

Whilst not all these holdings can be considered ‘near market’ gold (particularly gold that has been used in fabrication), even the gold held for private investment and as central bank reserves has a market value in excess of USD 3.7 trillion. 

Note that the above table does not include exposure through derivatives (either exchange traded or over the counter), with the World Gold Council estimating that by the end of 2018 some USD 400 billion in exposure was held through these investments. 

At over USD 9.5 trillion, the gold market is valued at more than five times the size of the entire Australian superannuation market as at the end of 2019. 

To put the size of the global gold market in further perspective, in the chart below we compare it to some of the largest sovereign bond markets in the world as measured by the Bank for International Settlement (BIS) general government debt securities outstanding.
 
We highlight the gold market in two ways. The column titled ‘GOLD’ shows the size of the entire gold market, including jewellery and gold that has been used for industrial purposes. 

We also focus on what we term monetary and investment gold, which is the metal held by private investors in bar, coin and ETF form, as well as official reserve holdings by central banks. This is noted as ‘INVESTMENT GOLD’ in the chart. 


Source: World Gold Council; BIS total credit statistics, end Q2 2019, The Perth Mint

As you can see, if gold were a sovereign bond market, it would either be the second or third largest on earth, depending on which way you chose to measure it. 

It is of course also worth noting that unlike the size of the government debt markets highlighted in the chart above, gold has no credit risk or long-term inflation risk. 

The issues surrounding risk in sovereign debt markets is something that the World Gold Council has also commented on. In a report titled Liquidity in the global gold market, it noted that “ever increasing debt markets driven by consistent fiscal deficits may benefit market participants from the perspective of market size; however, ultimately this also increases credit risk of the underlying bonds.”

The huge size of the gold market, the stability of the total gold supply and its total absence of credit or long-term inflation risk only add to the asset’s attractiveness as an investment. 

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.



Blog DisclaimerComments PolicyCopyright Policy

  • Page
  • 1
  • 2
Confirm
No
Yes