The price of gold in Australian dollars rose by 4% in July
2019, closing the month at AUD 2,065 per troy ounce. It has continued to
rally in early August, with the price topping AUD 2,200 per troy ounce
earlier today. So far it has been a very strong year for precious metals,
with the gold price rising by 25% in Australian dollar terms over the past 12
months.
The robust performance has led to a notable uptick in investor demand for
precious metals of late, which is evident across The Perth Mint’s range of
investment solutions.
Over the past few months we’ve seen significant inflows into our ASX-listed
gold product, ticker code PMGOLD, which was launched back in 2003. July 2019
was particularly positive with PMGOLD now holding more than $200 million assets
under management after topping 7% growth last month, the strongest in more
than three years, according to the Australian Securities Exchange (ASX).
This growth aligns with the trends we are seeing in our depository offerings,
which allow online, phone and email based trading for clients who wish to
trade gold, silver and platinum with The Perth Mint directly. We’ve also seen
a significant increase in sales of our minted bars and coins, with demand for
silver products almost trebling in July.
Finally, we’ve seen a huge increase in the number of Australians downloading
our digital app GoldPass®, with the number of registered users and the volume
of gold traded more than doubling since the start of the year.
The growing demand for
precious metals is reflected in the strong rally we’ve seen in the gold price
in recent months.
There are multiple tailwinds driving the uptick in demand for gold, and
the gold price itself, which include:
- The continued plunge in
global bond yields, with 10-year US government bonds now yielding less
than 2%, while 10-year Australian government bonds now yield under 1%.
Globally, the pool of negative yielding debt recently topped USD 15
trillion, according to a Bloomberg
article.
- Volatility in equity
markets, with the ASX 200 dropping from over 6,800 points on 30 July to
below 6,500 points by 6 August.
- Continued concerns
regarding the trajectory of the US-China trade war.The reduction in the
US Federal Reserve funds rate, with expectations that the Fed will
follow up with additional easing before the year is out.
In Australia, precious metal prices have received a
further boost from the decline in the local currency, which was been falling
against the US dollar for most of the past 12 months.
The currency weakness has been driven by the sharper fall in Australian
government bond yields relative to those in the US. We had reductions in the
local cash rate in June and July, with market pricing now suggesting we’ll
see a further two rate cuts by May 2020.
The recent decline in the price of some of our key commodity exports such as
iron ore, which has fallen by approximately 20% in the past month, has put
even more downward pressure on the Australian dollar.
Given the economic and monetary environment investors are facing, we are not
surprised to see gold performing as well as it has been.
Astute investors often allocate up to 10% of their portfolio to gold as
potential protection against the type of volatility we are currently seeing
in financial markets.
Gold’s historical outperformance in low interest rate environments, such as
the one we are in today, is also encouraging investors to move a portion of
their portfolio into the metal. This is a trend that could be reinforced if
central banks continue to ease rates in the coming months.
To find out more about investing in our ASX-listed gold product, ticker code:
PMGOLD, please download the factsheet.
Alternatively, if you would like to speak to our depository team about our
direct investment options, please contact us at depository@perthmint.com or
call on (61 08) 9421 7250.
