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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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Australia’s happiest animal smiles on new silver bullion coin

Topics [ silver bullion coins ]

The Perth Mint has responded to calls for a quokka – one of Australia’s cutest marsupials – to be celebrated on the face of a coin.

Cherished by many Australians, the quokka achieved worldwide fame when tennis legend Roger Federer’s lovable quokka ‘selfie’ of 2018 reached more than 580 million people in 45 countries through global online news*.

The small, wallaby-like creatures have subsequently appeared in adorable photographs uploaded to social media by celebrities including actors Margot Robbie and Chris Hemsworth, as well as large numbers of annual visitors to Rottnest Island, home to an estimated population of 12,000 quokkas.

Perth Mint General Manager Minted Products, Neil Vance, said he expected the silver bullion coin, which portrays a quokka on a beach, would prove popular. “Visitors to the Mint and many of our customers have asked for a coin featuring the much-loved quokka, so we are delighted to bring this release to market and help to promote one of our unique and native attractions,” he said.

Quokkas lived alongside Aboriginal people long before Dutch explorer Willem de Vlamingh mistook them for giant rats in 1696. Once plentiful on mainland Australia, they’re now classified as vulnerable, having suffered from predation by dingos and the arrival of European foxes. Just a few kilometres off the coast of Perth, the pest-free island of Rottnest is the quokkas last stronghold.

An irresistible subject for photography, they have friendly and curious natures and are often content to interact with human visitors. Adding to their appeal, furry-faced quokkas appear to smile, a characteristic that has earned them a reputation for being the happiest animals on Earth.

Struck from 1oz of 99.99% pure silver, the Australian legal tender coin portrays a quokka standing on its hind legs while eating its preferred diet of leaves. No more than 30,000 coins will be released featuring a high-quality bullion finish.

With a limit of just 10 coins per customer, investors, collectors and gift buyers can purchase the coin at The Perth Mint shop located at 310 Hay Street, East Perth, on toll free 1800 098 817, or at perthmintbullion.com.

* Government of Western Australia Media Statements



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Charting the performance of gold ETFs

Topics [ gold investment ETF ]

Note: In this article the terms exchange-traded fund (ETF) and exchange-traded product (ETP) are used interchangeably. Technically, not all gold ETPs are ETFs, however the term ETF is widely used to describe the industry as a whole.

Gold ETFs were first introduced to the market more than 15 years ago. The Perth Mint was at the forefront of the development of this industry, with Perth Mint Gold (ASX: PMGOLD) launched back in 2003.

In the years since, gold ETFs have proven very popular with investors. These products now collectively hold more than 3,600 tonnes of gold, worth over USD 200 billion (data as at end of June 2020).  

There are a several key reasons investors will use gold ETFs, including:

• It can be more cost effective than buying and storing bullion directly.

• Gold ETFs can be bought and sold like a regular share, eliminating the need for a separate investment account with a bullion dealer or depository.

• There is no need to arrange for storage or insurance of the metal.

• Liquidity is available via an exchange on a daily basis, which is not always the case with privately stored bullion.

• Regulatory restrictions might mean gold ETFs are the only vehicles an investor can use to get gold exposure in their portfolio.

Gold ETF flows in 2020

Inflows into gold ETFs have been unprecedented in 2020, as the following chart highlights. It shows calendar year flows into or out of gold ETFs in tonnes since the first ETFs were launched back in 2003.

Source: World Gold Council, The Perth Mint

Even though the year is only half complete, net inflows of more than 700 tonnes into gold ETFs are already higher than the full calendar year inflows seen in any of the past 16 years. 

To further contextualise these purchases, net inflows into gold ETFs this year are more substantial than the 50-year record high levels of central bank gold buying seen in 2018 and 2019. Nation states added 656 tonnes in 2018 and 650 tonnes in 2019 to their national reserves. 

Impressive as the 2020 inflows are when looked at in pure tonnage terms, the chart below is arguably an even better illustration of the scale of the investment into these products today. It looks at calendar year inflows into gold ETFs as measured in billions of US dollars.


Source: World Gold Council, The Perth Mint


At just under USD 40 billion, inflows into gold ETFs in the first six months of 2020 have almost doubled the previous records set in the full 2009 and 2016 calendar years.

Whether it be due to the threat from COVID-19, uncertainty regarding the consequences of the monetary and fiscal stimulus being deployed, the lack of real return available in traditional safe havens, or a combination of these factors, there can be no doubting the investor appetite for gold bullion today.

Australian investors leading the way

Whilst the Australian gold ETF  market is only a small fraction of the global gold ETF market, it has been an outperformer in terms of the increased demand being seen from investors in 2020.

This can be seen in the chart below, which highlights the monthly change in ounces held in Perth Mint Gold (ASX: PMGOLD) from August 2017 through to end July 2020.

Source: The Perth Mint

Since late 2019, inflows have picked up noticeably, with total holdings increasing by more than 50% in the first half of this year. That is more than double the rate of growth that we have seen for gold ETFs across the globe over the same time period, evidence of how strong the demand for gold exposure is amongst Australian investors today.

Learn more about gold ETFs 

We recently published a detailed article exploring inflows into gold ETFs and the implications for the global gold market. This article can be accessed at Livewire Markets.

Learn why PMGOLD is a popular choice among Australian investors here.



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Monthly Sales – July 2020

Topics [ Monthly sales figures ]

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

  - Gold (Au): 56,104 oz

  - Silver (Ag): 1,567,900 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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Australian Kangaroo sales jump on silver surge

Topics [ Australian Kangaroo silver coins ]

While gold’s historic highs have been the talk of the town for much of 2020, silver has also been firing on all cylinders. The precious metal breached USD 25 an ounce last night to trade near six and a half year highs – and it has been matched by overwhelming demand from investors worldwide.

The extraordinary investor appetite for silver coins has been reflected in record sales of our iconic Australian Kangaroo 1oz Silver Bullion Coin, with more than 10.7 million sold in the past financial year.

Silver demand rise mirrors gold growth

Following a price fall in March, investors flocked to silver as an alternative safe-haven asset in the second quarter of the year amid ongoing uncertainty in the wake of COVID-19. 

While there was significant growth in silver exchange traded products (ETPs), which reached 925 million ounces at the end of June, retail bullion sales also jumped by an estimated 60% year on year.

According to The Silver Institute, in the first half of 2020 “silver bar and coin sales surged in response to a deteriorating economic outlook linked to the global COVID-19 pandemic.” 

A trusted manufacturer and supplier of quality silver coins and bars and one of only a handful of mints to remain open throughout the COVID-19 crisis, The Perth Mint has seen a significant uptick in demand for its products. 

Among the most popular choice is its Australian Kangaroo Silver Bullion Coin, which is a relatively new offering but undeniably one of the most sought after in recent years. 

A staple of the Australian bullion range

With a design honouring the classic depiction of the native marsupial which has graced the Australian Kangaroo gold release for more than two decades, the Silver Kangaroo has been an investor favourite since its introduction in 2015.

It was unveiled as the first Australian coin to be struck from 99.99% pure silver to the exacting standards and unwavering quality for which the Mint is renowned. Designed to meet the requirements of bullion coin ‘stackers’, the coin’s success lies in a combination of factors including its trusted legal tender status, guarantee of purity, convenient 1oz format and exceptional affordability.

Available in a range of convenient quantities including individual purchase, in tubes of 25 and even a ‘monster box’ of 250 coins, the Silver Kangaroo offers investors a wealth of choice. 

Quickly becoming a staple of the Australian bullion range, it has sold in excess of 35 million coins since its inception and more than 10 million in the past year. 
 


Manager Minted Products Neil Vance said it was proof that The Perth Mint is taking more Australian silver bullion products to the world than ever before.

“Demand this year has been incredible,” he said. “Being one of the few global mints to remain open during COVID-19, we've taken stringent measures to keep our people safe and continue to supply investors around the world with quality gold and silver products.” 

“The Silver Kangaroo is a key part of that strategy as one of our major investor coins and an extremely popular annual release.”

Reasons to invest in silver 

Silver is rallying for many of the reasons that gold is, in that they are both precious metals that are sought as a refuge in times of economic uncertainty and financial market instability. 

However, unlike gold, which is seen more as a monetary metal by the market, silver is also widely used in industry, which is one of the reasons why silver price movements can often be more volatile.

Manager Listed Products and Investment Research Jordan Eliseo says, “Right now, we think investors are attracted to silver for a few reasons. The first of those is momentum, with the price almost doubling from the lows seen in mid-to-late March.” 

“The second reason is that silver is still historically cheap relative to gold. Today you need approximately 80 ounces of silver to buy one ounce of gold, whereas in 2011 you needed only 35 ounces of silver to buy that same ounce of gold.”

There are no guarantees history will repeat, but a growing number of investors are positioning their portfolios to benefit should silver outperform gold in the years to come, as it has over the past three months.

An attractive option for those wishing to invest in the precious metal, the 2020 Australian Silver Kangaroo has an unlimited mintage and is available for purchase here.


Watch the manufacturing process below:


Resources

Silver investment demand up by 10% in first half of 2020, The Silver Institute


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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Silver surges as gold hits all-time high in USD

Topics [ gold analysis GoldPass Market update ]

The USD gold price hit record highs in July, trading above USD 1,960 per troy ounce. Silver also rallied strongly, up by more than 30% for the month. Declining real yields and a weak US dollar are driving the market higher, with investors increasing their portfolio allocations to the precious metals. 

Executive summary

•  Gold prices rose 11% in July to hit an all-time high in USD terms, trading at more than USD 1,950 per troy ounce.

•  Silver was an even better performer, increasing by 35% to close the month at more than USD 24 per troy ounce.

•  A decline in the USD, which fell by more than 4% during the month, and a continued plunge in real yields were the primary drivers of the precious metals market. 

•  Gold ETF holdings increased again in July, continuing their record run seen in 2020.

•  Overall gold demand has been held back by a circa 50% drop in demand from China and India in H1 2020 relative to a year ago. 


Full monthly review – July 2020 

Precious metal prices delivered one of their strongest months on record in July. Gold captured most of the headlines with prices touching a new all-time high in nominal USD terms above USD 1,960 per troy ounce toward the end of the month.

Prices have continued to climb in early August, with spot gold topping USD 2,000 in overnight trading.

The precious metal has now hit record prices in most currencies over the past few years, with the gold price in USD the last domino to fall.  

July 2020 also saw other markets making records, with the S&P 500 ending the month at an all-time high and the US 10-year treasury yield finishing the month at an all-time low. 

Whilst gold has now risen by almost 30% for the year, silver was the star performer in July, rallying by an incredible 35%. From the lows seen in late March 2020, silver has almost doubled in price and is now outperforming gold on a calendar year-to-date basis. 

AUD returns for gold and silver were modest, with the metals gaining 6% (gold) and 28% (silver) respectively in July. The smaller gains are a result of the continued strength in the AUD, which ended the month above USD 0.72, having now rallied by more than 30% vs the USD since its late March lows. 

The strong moves in precious metals seen in July were driven by multiple factors. These included weakness in the USD, a continued decline in the real yield on US Treasuries and rising market concerns regarding the economic impact of the steps being taken to slow the spread of COVID-19. 
 
This report addresses some of those factors.

USD weakness boosting gold

The USD index fell by more than 4% in July, its largest monthly decline in a decade. Various factors, including rising political uncertainty in the lead up the US Presidential election and a more than 30% decline in US GDP in Q2, contributed to the fall. 

Mounting concern about the long-term implications of the fiscal and monetary policy support being deployed into the US economy was also a contributing factor. A more than USD 2 trillion rise in the US budget deficit over the past year is being matched dollar for dollar with an increase in the holdings of US Treasuries sitting on the balance sheet of the US Federal Reserve. 

The weakness in the USD has been a tailwind pushing gold higher since late March. This can be seen in the chart below which shows both the gold price in USD and the USD index since the end of December 1999.

Source: The Perth Mint, Reuters

The chart highlights the fact that a weak USD is typically beneficial to gold, though it’s important to remember that gold is not dependent on a weak dollar to perform well. 

As an example, from the end of 2017 through to March 2020 the US dollar increased by approximately 10% while gold rose by more than 20% over this same period. 

Whilst a short-term snapback in the USD would not surprise, it appears as if there are now multiple headwinds conspiring to push it lower following a multi-year bull market that saw it gain more than 35%. 

Should a prolonged period of USD weakness eventuate, it will be another element of support for precious metal prices. 

Real yields continue to fall

Whilst the fall in the USD gained lots of attention in July, the continued decline in real yields on US treasuries was arguably an even bigger driver of the gold price. 

As a non-yielding asset, it should be no surprise that, all other things being equal, gold would tend to perform best when real yields on other assets fall, as it lowers the opportunity cost of investing in gold. 

The following chart plots the price of gold in USD and the real yield on the US 10-year treasury bond (which is inverted on the chart). It highlights how important real yields are to the gold price, with a very strong correlation over the past 15 plus years. 

Source: The Perth Mint, US Treasury, Reuters

Ending July 2020 at -1%, the real yield on US 10-year treasuries has never been lower, falling from +0.91% in September 2018. Since then, the price of gold has increased by almost 65% in USD terms. 

Gold ETF holdings continue to grow

At the time of writing end of month figures for July were not yet available, however data to the 24 July highlighted continued inflows into gold ETFs globally, with holdings increasing by more than 130 tonnes for the month so far. 

Australian investors remain a key driver of these inflows, with Perth Mint Gold (ASX:PMGOLD) seeing total holdings rise by more than 5% in July. 

Portfolio allocations to gold remain modest

Despite the surging price, and increase in demand for gold seen in 2020, investor allocations to the precious metal remain modest. 

This is a theme we explored in a detailed Livewire Markets article last month, where we presented ETF data that suggests portfolios have a less than 0.50% allocation to gold at present. 

Gold to silver ratio plunging 

Silver’s rise in July saw the gold to silver ratio (GSR) decline to just above 80:1 by the end of the month. July also saw silver ETFs record some of their biggest inflows in more than five years as investors increased their exposure to the metal.

Whilst a one month move of more than 30% is unusual, it needs to be looked at in the context of the violent sell-off seen in silver during March 2020. During that month, silver prices fell toward USD 12.00 per troy ounce, a decline of over 25%, which saw the GSR peak at more than 120:1.

This can be seen in the chart below, which plots the GSR on a monthly basis from the end of December 1999 to end July 2020, as well as the average GSR over this same period. It also shows the average GSR from 1970 to 2020.
 
Source: The Perth Mint, Reuters

Although we wouldn’t be surprised to see silver spend some time consolidating recent gains, a current GSR of more than 80 suggests that, relative to historical levels, it remains cheap compared to gold, even after the huge move seen last month. 

Retail demand weak

Whilst investment demand for gold in ETF form is running at all-time highs, other areas of the market are weak. The most notable is gold jewellery demand, which in H1 2020 totalled just 572 tonnes, down 46% relative to the figures seen a year ago. 

This is no surprise given the impact that COVID-19 has had in Asia, with higher gold prices and a reduction in disposable income understandably impacting demand. 

Total bar and coin demand also softened, coming in just below 400 tonnes in H1 2020, down almost 20% relative to the prior year. This was largely driven by very large falls in demand from Asia and the Middle East (off more than 50% in some countries in Q2 2020) with Europe and North America actually seeing rising demand. 

What’s next – caution in the short term

Whilst no one can be certain how markets will play out in the years to come, we doubt this will be the last time price spikes of 20-30% in a month for silver are seen, or the last time gold moves up by more than 30% in barely six months. 

Nevertheless, it’s also important to realise that no market moves in a straight line. 

To that end, whilst gold and silver’s incredible price strength and rising popularity as investments should be celebrated, investors should not expect gains like this to be repeated month in, month out. 

Indeed, with gold now having had an almost two-year run without any meaningful correction, and with investor bullishness soaring in light of the overnight move in gold above USD 2,000 per troy ounce, caution is warranted in the short term. 

A period of consolidation in which the metals potentially give back some of their recent gains is not unexpected. Should this occur, it would actually be a healthy thing for the market, helping shake out some of the froth that has built up in the past few months. 

Over the medium- to long-term the outlook for gold and precious metals demand remains positive, with the investment case to include gold in a well-balanced portfolio as strong as ever. 

Jordan Eliseo
Manager – Listed Products and Investment Research 
The Perth Mint
5 August 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: Monthly holdings report – July 2020

Topics [ Perth Mint Gold ]

Holdings of Perth Mint Gold (ASX:PMGOLD) continued to rise in July 2020, increasing by more than 11,000 ounces. The product ended the month with holdings of 216,783 ounces (6.74 tonnes). 

Monthly flows into PMGOLD can be seen in the chart below, which highlights that holdings have increased by more than 60% in the first seven months of 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 almost 150% over this this period.

The value of PMGOLD holdings also continued to rise in July, ending the month with a market value of AUD 594.6 million, based on a last traded price of 27.43 per unit (AUD 2,743 per ounce) on the ASX on 30 July 2020. 

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



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