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Lost decades and half-centuries: gold turns 50

“I have directed Secretary Connally to suspend temporarily the convertibility of the dollar into gold or other reserve assets, except in amounts and conditions determined to be in the interest of monetary stability and in the best interests of the United States.”

– US President Richard Nixon – 15 August 1971

Executive Summary

    • It is 50 years since the United States severed the link between the US dollar and gold.

    • Gold has performed strongly as an investment asset over this entire time period, and has outperformed stocks, bonds and cash since the turn of the century.

     • While gold has lagged risk assets in the last decade, a range of metrics suggest the precious metal may fare much better in the years ahead. 

Full article

Despite the challenging path that US dollar gold investors have had to tread in the last decade, the 50-year anniversary of the closure of the ‘gold window’ represents a perfect time to take stock of the precious metal and its attributes as an investment.

On Sunday 15 August, we marked five decades to the day since then US President Richard Nixon made the above statement in a televised address to the nation on a Sunday night while markets were closed.

Many market historians would argue Nixon had little choice but to follow this course of action. Rising inflation throughout the 1960s had seen foreign governments line up to exchange their US dollar denominated assets for physical gold, with total US gold reserves dropping from over 20,000 tonnes in the mid-1950s to less than 10,000 tonnes by the end of 1970.

Irrespective of one’s view as to why this change was enacted, five decades later it’s clear that the suspension of the convertibility of the US dollar into gold has proved anything but temporary.

Since that day, the price of the precious metal has risen from below USD 40 to more than USD 1,750 per troy ounce at the time of writing. This works out to be as an annualised increase of just over 8%, with the return on gold and a range of traditional asset classes over multiple time periods to the end of 2020 highlighted in the table below.

Asset class returns (% per annum)

Despite the strong gold rally in the past five years, the market leading returns since the turn of the century, and a macro environment that many would expect to be favourable, it’s been a somewhat unhappy 50th birthday for the precious metal, with gold prices having fallen more than 5% in US Dollar terms this year.

This includes a dramatic sell off on Monday 9 August, which saw an almost USD 100 per troy ounce drop in a matter of minutes as more than 17,500 gold futures contracts (worth approximately USD 3 billion) were dumped into thinly traded markets, rattling the confidence of some gold market bulls.

In this article we’ll explore:

  • Why gold has fallen in 2021 and why it hasn’t responded to higher inflation.
  • Why gold has experienced a ’lost decade‘ in US dollar terms.
  • What 50 years of price action tells us about the role of gold in a portfolio.
  • Why the coming decade may be far more rewarding for bullion investors.

Why isn’t gold responding to the recent spike in inflation?

Between August of 2020 and July 2021, the Consumer Price Index (CPI) in the United States rose from 1.31% to 5.4% annualised. Despite the sharp increase, gold, which many expect to prosper when inflation is rising, has fallen by approximately 15%.

There are a multitude of factors which help explain this decline, from rising economic optimism as COVID-19 vaccines have been rolled out across most (though clearly not all) of the developed world, to an increase in the value of the US dollar, and a stabilisation/increase in real yields at the medium to longer end of the curve.    

Perhaps more important than any of the above factors though are the following three:

Momentum exhaustion

It’s important to remember the gold price was trading below USD 1,200 per troy ounce in September 2018. In the two years that followed, the precious metal rallied more than 70%, culminating in the all-time high above USD 2,050 per troy ounce in August 2020.

With the exception of the super spikes in gold seen in the middle and at the end of the 1970s, the rally in the aftermath of the Global Financial Crisis (GFC) and the run up to the 2011 price peak, that 70% rally was one of the largest two year price moves seen in gold across the past five decades.

Irrespective of the asset class and the direction it’s heading in, momentum eventually kills itself. One could also argue part of gold’s rally in the first half of 2020 represented the market pricing in some of the expected increase in inflation, before it began to show up in official CPI readings.

Equity market strength

Despite the continued threat posed by COVID-19 and the uneven nature of the economic recovery, Wall Street is partying like a bachelor in Las Vegas, with the S&P 500 only a couple of percentage points away from doubling off the March 2020 low.

Strong earnings, a supportive (to say the least) monetary environment, and a lack of real yield in traditional defensive assets, has seen a veritable wall of money flow into risk assets, with research from Bank of America suggesting USD 580 billion was allocated to global equity strategies in the first half of 2021.

That’s more money than flowed in across the entirety of the 2008 to 2020 period. If this pace of inflows is sustained across all of H2 2021, they will exceed total inflows seen since the turn of the century.

Given this level of exuberance, it’s little wonder a safe haven asset like gold has lost favour, for now at least.

Market expectations that the recent inflation spike is transitory

The other major reason gold hasn’t responded more positively to the recent spike in headline inflation is the market’s belief (rightly or wrongly) that it will prove transitory. Investors seem convinced overall levels of annual headline CPI growth will head back towards a 2-3% range in the coming year, in line with current median CPI and 16% trimmed-mean CPI figures published by the Federal Reserve Bank of Cleveland.

Further evidence of the markets belief that the current inflation spike will prove transitory can be seen clearly in the table below, which highlights actual CPI levels at the end of July 2021, as well as market expectations for average inflation over the next 10 years, and the gap between these readings.

Annual change in CPI and 10-year breakeven inflation rate (%)

Source: St Louis Federal Reserve, 10-year breakeven inflation rate taken as at August 11

This gap is almost unprecedented. Indeed, you’d need to go all the way back to the end of August 2008 to see such a large divergence between actual CPI levels and market expectations for average inflation over the next 10 years, as the chart below (which also shows the US dollar gold price) highlights.

Annual CPI minus 10-year breakeven inflation rate (%) and USD gold price

Source: The Perth Mint, St Louis Federal Reserve, World Gold Council

Equities fared horribly in the period that followed the inflation differential seen in Q3 2008, falling by 40% in the next six months.

Gold, on the other hand, went from strength to strength, rallying by more than 100% in the three years that followed, with an ultimate peak just below USD 1,900 per troy ounce on 5 and 6 September 2011.

A lost decade for gold

It is now almost exactly 10 years since gold peaked in its last cycle, with the price still below the levels seen for that short period in Q3 2011.

It is, of course, worth noting that:

• All the pain felt by gold bulls across the past decade was concentrated in the time period from late 2011 to the end of 2015, with gold falling 45% to bottom out at approximately USD 1,050 per troy ounce. Since then, the gold price is up more than 60% in US dollar terms, even allowing for the current pullback.

• Average prices across the last 10 calendar years (which arguably give a fairer perspective for all investors, rather than intra year highs and lows), show a much more modest pullback in gold of just 30% from peak to trough. They also suggest that gold, which has so far averaged just over USD 1,800 per troy ounce in 2021, is trading 15% above the average price seen in 2011.

• The lost decade is almost exclusively a US dollar-based observation, with gold performing more strongly in a range of other currencies over the period. This can be seen in the table below, which highlights gold’s price move in major developed market and consumer nation currencies, including Australian dollars, between 5 September 2011 and 6 August 2021.

Gold prices and performance (%) in multiple currencies

Source: World Gold Council

Despite the above caveats, it can’t be denied that it has been a tough 10 years for precious metal bulls investing in US Dollars. Several factors explain this lost decade, including:

Extreme outperformance leading into 2011

In the 10 years to end August 2011, the gold price in US dollar terms rose by more than 550%, while the S&P 500 price index was essentially flat. There were of course multiple contributors to this, from gold’s extremely low price relative to equities at the turn of the century, to the subprime crisis which ultimately led to the GFC, to the US Federal Reserve’s implementation of ZIRP and QE, more than a decade ago. 

From a pure return perspective, outside of the huge gold market rally seen at the end of the 1970s, the precious metal had never had a longer, or stronger run relative to equities.

Long periods of outperformance are often followed by long periods of underperformance, no matter what asset class we are referring too.

Excess froth

By the start of the last decade, the macro case for gold was obvious.

Volatile markets, an uncertain economic outlook, a blow out in budget deficits and fears over higher inflation as the US Federal Reserve crossed the Rubicon into money printing (or not, depending on which version of Ben Bernanke you listened to) meant that gold had returned to the mainstream.

There are multiple indicators from that period that highlight this, including the fact that at one stage in 2011, GLD was not only the largest gold ETF on the market, but the largest of all ETFs in the United States. Granted, ETFs were not as popular a vehicle for investment 10 years ago as they are today, but GLD’s market leading position back in 2011 is still a sign of how popular gold was back then.

Meanwhile, a Gallup poll from August 2011 found 34% of American’s thought gold was the best long-term investment. Less than 20% of people voted for stocks and real estate at the time.

Investing in what is popular always feels safe. It doesn’t always turn out to be profitable, especially in the short to medium-term. 

Low inflation

As it turns out, the market was right to expect very low levels of inflation in the period that followed the GFC, with CPI increases averaging barely 2% per annum in the 10 years to the end of 2020, the lowest figure for any decade going back 70 years.

Whether the low inflation seen in the last 10 years ’should‘ have happened given the monetary environment we have been in is beside the point. It did, and it’s been a key factor holding gold back. 

Commodity bear market

As we highlighted in an early 2021 research report for institutional investors, the past decade has been particularly unkind for commodity markets as a whole, with the Bloomberg Commodity Index dropping more than 60% between April 2011 and April 2020.

This can be seen in the chart below, which tracks movements in this index since the early 1990s.

Source: Bloomberg

While gold has historically offered a range of portfolio benefits that a broader basket of commodities can’t replicate, a profound bear market in commodities still represents a headwind for the precious metal.

The rise of Bitcoin

While we think it’s impact on the gold market is heavily overstated by cryptocurrency advocates, especially those who (incorrectly in our view) claim Bitcoin is gold 2.0, it’s fair to say the rise of this nascent asset class has taken some of the attention, and quite likely some of the investment dollars, that might otherwise have found their way into the precious metal over the last 10 years.

What 50 years of market activity has taught us about gold

Despite the lost decade, gold can still play a valuable role in investment portfolios, with studies of market data over the entirety of the last 50-years demonstrating that the precious metal can provide:

Long-term growth

As highlighted earlier, gold has delivered capital gains of approximately 8% per annum over 50 years. It doesn’t deliver an income stream (not ideal, but a ‘known known’ as Donald Rumsfeld might have said), but there is no rule that says an investment can’t deliver all of its gains on the capital side of the ledger.

Despite the lack of yield, the total return delivered by gold has exceeded cash held in the bank, most segments of the fixed income universe, and the capital (if not total) return on equities.

An effective equity market hedge

As we have highlighted in previous research reports, gold can provide protection and growth for a portfolio, as it’s negatively correlated to equities when they fall, yet is positively correlated when they rise.

For Australian investors this is perhaps best visualised through the following table, which looks at 50 years of Australian equity market and gold price (unhedged in Australian dollars) return data. The table highlights the average return for both equities and gold in the calendar years equities rise, and in the years they fall.

Average annual equity market and gold price returns (%) in rising and falling equity market environments

Source: The Perth Mint, Reuters

If history is any guide, and assuming low cash rates remain a feature of the investment landscape for some time to come, then gold is likely to be a much more effective defensive asset compared to cash going forward. 

An asset that can prosper in high inflation or low inflation environments

While gold tends to do best in sustained periods of higher inflation, with average returns above 15% in years CPI rises by 3% of more, it has also historically delivered positive returns in low inflation environments. In the years CPI has risen by 3% or less, gold has still on average delivered gains of just over 5%.

Taken as a whole, 50 years of data tells us gold is a hedge against monetary turbulence irrespective of whether that turbulence expresses itself as sustained periods of higher inflation, or via a series of deflationary shocks.

Efficiency, given the gold market is large, liquid and low cost

Gold turns over more than USD 150 billion per day, making it more liquid than most equity markets (let alone individual stocks) and most bond markets. At more than USD 11 trillion in market value, the gold market is also larger than most equity and fixed income markets.

It’s for this reason gold can be one of the lower cost investments an investor can allocate too, evidenced through the fact that trading spreads and management fees for gold ETFs, including Perth Mint Gold (ASX:PMGOLD), are amongst the lowest of any ETF an investor can buy.

Ultimate stability, given its continued status as a reserve asset

Gold also clearly remains an important reserve asset for central banks, who collectively hold more than 35,000 tonnes of the precious metal, worth almost USD 2 trillion at today’s prices.

Its importance in this regard is only growing, particularly for emerging markets, with central banks as a whole having increased their holdings by approximately 20% (5,000 tonnes) since the GFC hit just over a decade ago.

The road ahead

While there are no guarantees, a solid case can be made that the coming decade will be far more favourable for gold and that the precious metal will remain a very useful asset to include in a portfolio.

Factors supporting this conclusion include:

Sentiment toward gold has shifted

In a complete reversal of the situation gold found itself in as it was heading towards USD 1,900 per troy ounce in 2011, gold is now largely unloved by investors, who are far more convinced that stocks and real estate are the safer long-term bet. This can be seen in the table below, which is drawn from Gallup poll data from 2011 to 2021

Which asset do Americans think is the best long-term investment (%)?

Source: Gallup polls

Indeed, on a relative basis, gold is as unloved as it has ever been relative to real estate, while it is still far less popular than equities are today.

Data like this doesn’t prove anything per se, but these are the kind of signals one would expect to see when a market is close to bottoming. By way of reference, gold today is essentially as popular as equities were back in 2011. The S&P 500 has rallied by more than 230% since then.

Extreme equity market outperformance

The relative performance of equities vs. gold is the complete opposite today as compared to Q3 2011, when gold’s lost decade began. Back then, gold had outperformed the S&P 500 by more than 500% on a 10-year basis.

By the end of last month, gold was underperforming by more than 225%, with the rolling 10-year performance differential between gold and equities seen in the chart below.

Rolling 10-year performance – S&P 500 (price index) minus US dollar gold

Source: The Perth Mint, World Gold Council

Good things happen to cheap assets, as the saying goes. Relative to equities, gold is about as cheap as it’s ever been on a rolling 10-year basis.

Traditional asset returns are likely to be constrained in the decade ahead

The next decade is unlikely to be anywhere near as rewarding for investors with portfolios concentrated in equities and fixed income assets.

This is something that institutional asset managers have openly acknowledged. The table below, which highlights a range of US financial market and economic indicators, illustrates how different the situation is today relative to Q3 2011, when gold’s lost decade began.

Note that some data is taken from the date closest to Q3 in either 2011 or 2021 - for example federal debt to GDP ratios are from end 2011 and the forecast for end 2021 from the Office of Management and Budget.

US financial market and economic indicators

Source: US Office of Management and Budget, US Federal Reserve, Yardeni Research, Robert Shiller Online Data, Standard and Poor’s, United States Treasury.

The table makes it clear that investors are now paying almost double the amount of money to purchase a dollar of company earnings and almost triple the amount of money to purchase a dollar of company sales relative to a decade ago. Meanwhile, zero credit risk US Treasury bonds are now guaranteed wealth destroyers if held to maturity.

At a macro level, debt to GDP ratios are now far higher, as indeed they are all over the developed world, while the Federal Reserve balance sheet, both in dollar terms and as a share of the economy, has doubled relative to a decade ago.

The response to the pandemic has undoubtedly exacerbated these trends, but it is not their only cause, with the global economy already slowing down well before the vast majority of us had ever heard of COVID-19.

Given these factors, we wouldn’t be surprised to see gold outperform, or at the very least match the return delivered by equities in the decade to come, despite the fact sentiment toward the precious metal remains lukewarm at best today.

Any opinions expressed in this article are subject to change without notice. The information in this article and the links provided are for general information only and do not contain all information that may be material to you making an investment decision. The Perth Mint is not a financial adviser and nothing in this article constitutes financial, investment, legal, tax or other advice. Before making an investment decision you should consider whether it is suitable for you in light of your investment profile, objectives, financial circumstances and the merits and risks involved. 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 have not been independently verified by The Perth Mint and we do not guarantee their accuracy or completeness. The Perth Mint does not accept any liability, including without limitation any liability due to any fault, negligence, default or lack of care on the part of The Perth Mint, for any loss arising from the use of, reliance on, or otherwise in connection with the information contained in this article.

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Gold rallies as Delta fears grow

Gold prices rose by almost 4% during July as fears over the spread of the COVID-19 Delta variant helped push bond yields lower. Despite the rally, the precious metal remains range bound around USD 1,800 per troy ounce, with the market awaiting a decisive catalyst to determine whether we see more short-term weakness, or a move back to all-time highs later in the year.

Summary of market moves:

Gold prices rallied by 3.6% in US dollar terms during July, with the precious metal ending the month trading back above USD 1,820 per troy ounce.
The strength in gold did not translate to silver, which fell by 1.1% across the month.
Continued weakness in the Australian dollar, which fell 1.8% to USD 0.738, helped push the local gold price up by 5.5% for the month.
Stock markets continued to climb higher, with the S&P 500 up another 2.3% during July. It has now almost doubled since the lows seen in March 2020.
Yields fell sharply during July, with US 10-year Treasuries ending the month yielding just 1.24% (-1.17% real), down from 1.45% (-0.87%. real) at the end of June.
Cryptocurrency markets rallied with the price of Bitcoin rising by 14% in July to end the month back above USD 40,000 per coin.

Full report - July 2021

Gold prices rallied by almost 4% in US dollar terms during July, with the precious metal finishing the month trading at USD 1,825 per troy ounce.

A decline in both nominal and real yields, combined with rising fears about the spread of the Delta variant of COVID-19, supported gold during the month, though it did not translate to higher prices across the entire precious metal complex, with silver (-1.1%), platinum (-1.4%) and palladium (-1.8%) all falling in US dollar terms.

Australian dollar investors fared better than their US counterparts, with gold ending the month trading back above AUD 2,450 per troy ounce, up more than 5% during July and now positive on a calendar year to date basis.

Despite the bounce, gold remains range bound, with the market looking for a catalyst to move it decisively in either direction. On the positive side, higher rates of inflation, falling bond yields, central bank buying, and pandemic related threats are expected to provide support.

On the negative side, the market’s apparent belief that inflationary pressures are likely to prove transitory, and continued strength in equity markets, are holding back safe haven demand.

We explore some of these factors in more detail below.

Why isn’t gold higher?

Despite the bounce in July, some commentators argue that gold is underperforming at present, with higher than expected inflation and declining real yields failing to propel the precious metal back toward USD 2,000 per troy ounce as yet.

The below table, which shows the gold price and real yields on the day gold hit all-time highs in August 2020, at its lowest point in 2021 and again at the end of July, illustrates their point.

US dollar gold price and real yields on US Treasuries

Source: LBMA, United States Treasury

The table highlights the fact that real yields rose (though remained negative out to 20-year bonds) between August last year and March 2021, which in part explained the almost 20% decline in the gold price over that time period.

Since the end of March though, real yields for bonds of all maturities have again fallen and are now lower for 5- and 10-year bonds compared to where they were back in late August.

Despite this, gold currently remains more than USD 200 per troy ounce below the August 2020 high.

Two primary factors are responsible for this. The first centres around the belief widely held in the market today that currently high rates of consumer price inflation will prove transitory. (US CPI was +4.2% in April, +5.0% in May, and +5.4% in June.)

This theory is supported by belief that much of the inflationary pressure evident in the market is driven by a combination of:

base effects - for example energy prices, which had cratered in the first half of 2020, up 25% in the year to end June.
supply chain disruption - with COVID-19 related shutdowns creating bottlenecks in the global economy that have led to short-term price spikes that will ease over time.

As evidence of the supposedly transitory nature of the current surge in inflation, commentators are pointing to the fact that median CPI has increased by just 2.2% in the last year.

This means that the difference between overall CPI and median CPI is now over 3%, the largest gap in the last 20 years, with the annual changes in both inflation measurements seen in the chart below. 

Annual change (%) in overall CPI and median CPI

Source: Federal Reserve Bank of Cleveland

Irrespective of whether one personally agrees with the above argument, there is little doubt that it is the predominant narrative in the market today.

As the market doesn’t perceive inflation to be a sustained threat, it helps explain why gold, which is typically highly sought after as an inflation hedge, is yet to move higher.

The second, and arguably more important factor holding gold back right now is momentum, particularly the relative momentum between gold and equities.

While some investors may scratch their heads at how, or why, equity markets continue to push higher, the fact is that they are. Indeed, so powerful is the momentum in equity markets that the S&P 500 is only a couple of percentage points away from doubling since the lows seen in March last year.

As this article highlights, should the market reach that milestone in the coming weeks, it will be by some margin the fastest doubling of stock market lows on record, easily beating the time it took for markets to recover from the crash caused by the Global Financial Crisis just over a decade ago.

On a rolling 12-month basis, the S&P 500 was up 34% in the year to end July, with the past few months seeing some of the best year on year performance for equities on record, something we highlighted in chart form in last month’s report.

We’ve included that chart again below, though this time we have expanded it to include a line (gold coloured on the chart) which shows the price performance of the S&P 500 minus price movements in gold. When the number is above zero it means the S&P 500 is outperforming gold, and when it is below zero it is underperforming gold, on a rolling 12-month basis.

The chart highlights that relative to gold’s rolling 12-month performance, the S&P 500 is outperforming at an almost record pace.

Indeed, the only other times equities have outperformed so significantly was in late 2013 (after gold had crashed in US dollar terms), the late 90s (towards the end of gold’s two decade bear market and a very strong period for stocks), the start of the 1980s (end of the last great bull market in gold), and the mid-1970s (mid-cycle correction for gold).

Rolling annual performance for the S&P 500 and S&P 500 minus gold performance

Source:  The Perth Mint, LBMA, Bloomberg

Given the overwhelming momentum that is evident in risk assets, it should be no surprise gold has not yet reclaimed the USD 2,000 per troy ounce level, even if real yields across part of the maturity spectrum are in line or even lower than they were back in August last year.

It simply doesn’t have momentum on its side right now.  

This is a point that Charlie Morris, the Editor of the Fleet Street Letter and a highly respected precious metal (and crypto) commentator, covered in a 28 July article titled "Why is gold so cheap?".

Charlie’s article included the below chart, which highlights the US dollar gold price and total holdings in gold ETFs plus the net long position amongst speculative gold traders.

Source: Charlie Morris, Bloomberg

The correlation between the two is very clear, with the chart telling us the appetite for gold amongst developed market investors has waned since August last year, and that this is a key factor holding prices back at present.

Despite this soft patch, there are analysts and investment managers who remain positive on gold’s price trajectory moving forward. These include fund manager Diego Parrilla, who oversees USD 250 million in assets, who recently stated that he thinks “the drivers for gold strength not only remain but actually have been strengthened.”

According to this article, Parrilla holds the opinion that gold may well trade somewhere between USD 3,000 and USD 5,000 per troy ounce in the next three to five years. 

Gold demand trends

The World Gold Council (WGC) just released its latest quarterly Gold Demand Trends report, which looked at developments in precious metal markets up until the end of June. Key findings included:

• A 56% year on year increase in bar and coin investment, with strong demand continuing in Western markets.
• A 60% year on year increase in jewellery demand, though this is from the extremely depressed levels seen in Q2 2020, with demand from this segment still 17% lower than the average demand seen between 2015 and 2019 (i.e. pre COVID).
• 200 tonnes of net purchases by central banks, with Thailand, Hungary and Brazil the main buyers. Over the first six months of the year, net purchases have totalled 333 tonnes, the third highest H1 figure in the last decade.
• Modest inflows into gold ETFs, with holdings increasing by just over 40 tonnes across the quarter. While this is positive, it represents a 90% decline relative to the more than 400 tonnes of inflows seen during Q2 2020, with this decline a perfect illustration of the more subdued environment gold finds itself in right now.

Interestingly, the WGC report pointed out that the US dollar gold price averaged 1,816.50 per troy ounce in Q2 2021, which was 6% higher than the average price seen a year ago.

This statistic provides important perspective. While sentiment towards gold is lukewarm at best right now, and the price is currently trading close to 10% below the all-time high seen last August, the fact that the average gold price in Q2 2021 is 6% higher than a year ago illustrates that we are still in a positive environment for the precious metal.

In due course, this is likely to encourage more investors to increase their allocations to gold, especially given the multiple challenges they face today, including:

• Inflationary pressures which continue to build.
• Yields on defensive assets that remain low or negative across the maturity spectrum.
• Risk assets trading at or near all-time highs.

Sentiment will inevitably shift, even if the timing remains unclear. When it does, those with strategic allocations to gold and other precious metals are likely to be rewarded.


Any opinions expressed in this article are subject to change without notice.The information in this article and the links provided are for general information only and do not contain all information that may be material to you making an investment decision.The Perth Mint is not a financial adviser and nothing in this article constitutes financial, investment, legal, tax or other advice. Before making an investment decision, you should consider whether it is suitable for you in light of your investment profile, objectives, financial circumstances and the merits and risks involved. 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 have not been independently verified by The Perth Mint and we do not guarantee their accuracy or completeness. Perth Mint does not accept any liability, including withoutlimitation any liability due to any fault, negligence, default or lack of care on the part of The Perth Mint, for any loss arising from the use of, reliance on, or otherwise in connection with the information contained in this article.

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14 Precious Metal Terms All Bullion Coin Buyers Should Know

Topics [ buy gold online buy silver online silver bullion coins gold bullion coins ]


Bullion Coins – legal tender issues struck from precious metal designed to be kept as a store of value or an investment (opposed to circulating coinage used day-to-day or proof collectables)

Junk Silver – older coins that derive most of their value from their silver content

Troy Ounce (oz t) – traditional unit of measure used for precious metals where 1 troy ounce = 1.097 avoirdupois ounce (or 31.103g)

Fineness / Purity – the amount (by weight) of pure gold or silver in the coin eg 9999 parts per thousand = 99.99 per cent pure

Gross Weight – the coin’s total weight as registered by a scale

Fine Weight – the coin’s gross weight multiplied by its percentage purity

Spot Price – the price at which physical gold or silver of specific fineness is traded at a particular place and time

Premium – the amount charged by the coin manufacturer over and above the spot price of metal to cover the cost of fabrication and other overheads

Face Value – the nominal or symbolic value printed on the face of a bullion coin

Intrinsic Value – the value of the coin’s precious metal content (aka Melt Value). Calculation: gross weight x purity x metal spot price

Numismatic Value – the amount over the intrinsic value the market is prepared to pay for rarity or some other factor that makes the coin collectable

Ask Price – the price of metal plus the coin premium – in other words the selling price

Bid Price – The price at which a mint or gold dealer will buy-back a bullion coin   

Spread – The difference between the selling price (Ask) and the buy-back price (Bid) – useful for determining how much the coin must increase in value before a profit can be realised

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Perth Mint Depository holdings top AUD 6 billion


• The Perth Mint sold 70,658 troy ounces of gold and 1,302,723 troy ounces of silver in minted product form during July.

• The Perth Mint Depository saw minor inflows into gold products during July, with the value of total precious metal holdings exceeding AUD 6 billion.

• The Perth Mint’s ASX listed ETF, ASX:PMGOLD, saw holdings decline modestly, falling by almost 1% for the month.

Manager, Listed Products and Investment Research, Jordan Eliseo said: “Gold prices rebounded during July, finishing the month trading back above USD 1,800 per troy ounce. Growing fears over the spread of the Delta strain of COVID-19, coupled with a decline in both nominal and real yields, both helped gold rally."

“Given the environment, it was no surprise investors turned to precious metals, even if the pace of investment was more subdued relative to the levels seen during 2020 when gold was making all-time highs in US dollars.”

Minted Products

The Perth Mint sold 70,658 troy ounces of gold and 1,302,723 troy ounces of silver in minted product form during July.

The table below highlights how these numbers compare to sales seen one month, three months and one year ago, and against monthly average sales dating back to mid-2012.

Current month sales of gold and silver sold as coins and minted bars
Change relative to prior periods

table of sales of precious metals

While sales fell relative to the very high volumes seen in the first few months of 2021, they remained well above long-term averages, demonstrating the ongoing investment demand for precious metals through July.

Troy ounces of gold and silver sold as coins and minted bars
December 2018 to July 2021

General Manager Minted Products, Neil Vance reported that while demand for gold minted products had stabilised in line with June’s result, the dip in silver coin sales was a result of capacity issues. “Wholesale demand stayed stronger than our July figures suggest after we took several presses offline for maintenance,” he said.

The Perth Mint manufactures and markets the Australian Precious Metal Coin and Minted Bar program. Trusted worldwide for their purity and weight, the coins include annual releases of the renowned Australian Kangaroo, Kookaburra, Koala and Lunar series. For more product information visit perthmintbullion.com.

The Perth Mint Depository

Total gold holdings in The Perth Mint Depository recorded another minor increase in July, rising by 1% to more than 1.9 million troy ounces. Holdings of silver and other precious metals remained static.

The total value of precious metal holdings increased during July, topping AUD 6 billion, driven by an increase in the gold price and continued weakness in the value of the Australian dollar.

Over the 12 months to end July, total holdings of gold and silver increased by 3% and 4% respectively, with the majority of the inflows taking place in the lead up to the all-time highs seen in the US dollar gold price in August 2020.

Total troy ounces of gold and silver held by clients in The Perth Mint Depository
June 2018 to July 2021

The Perth Mint Depository enables clients to invest in gold, silver and platinum, with The Perth Mint storing this metal in its central bank grade vaults. Operated via a secure online portal, a Depository Online Account allows investors to buy, store and sell their metal 24/7. For further information visit perthmint.com/storage.

Perth Mint Gold (ASX:PMGOLD)

Total holdings in Perth Mint Gold (ASX:PMGOLD) fell by almost 1,000 troy ounces in July, the first time since March this year that monthly holdings have declined. These outflows saw investors end the month with 235,597 troy ounces (7.33 tonnes) of gold backing their holdings.

The minor outflows seen in PMGOLD reflected broader trends in the gold ETF space, with estimates suggesting total holdings in global gold ETFs were essentially flat over the month.

Monthly change in troy ounces held by clients in Perth Mint Gold (ASX:PMGOLD)
January 2015 to July 2021

Source: The Perth Mint, ASX, LBMA

Despite the minor decrease in holdings, the value of PMGOLD holdings rose during July, driven by the more than 5% increase in the Australian dollar gold price. PMGOLD ended the month with a market value just above AUD 580 million.

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

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