The owner of Australia’s Perth Mint, Gold Corporation, have reported their second-best ever financial results over the past fiscal year. The oldest Australian mint’s profits climbed from $18.7 million in fiscal year 2009-10 to $28 million in 2010-11. Moreover, the management of the Perth Mint is optimistic that the gold price will increase further in the coming years. The main reason for this assumption is that it will likely take years to overcome the world's debt problems and the global financial crisis, as the company stated in its 2011 annual report.
The gold price has not peaked yet, according to Edward Harbuz – chief of the Perth Mint. Uncertainty in financial markets continues to grow each day – mainly caused by the world's horrendous debt problems, worries about the stability of the global financial system as well as weakening economic growth rates in Europe and China. The markets are hoping for reassurance from German Chancellor Angela Merkel and French President Nicolas Sarkozy at European Council meetings over the next week that the EU is arriving at a plan to address the eurozone’s debt crisis. However, the French idea of leveraging Europe's bailout fund (the EFSF) by up to 2 trillion euros has led to disputes among members of Germany´s coalition government as well as between the government and opposition parties. Markets are hoping for some sort of agreement by next Wednesday.
However, many market participants believe that it will be difficult – to say the very least – to find a way out of the continent's over-indebtedness. Nevertheless, gold and silver prices have fallen in the last few days and were once again under sales pressure yesterday. However, the Perth Mint point out that the current economic environment remains extremely supportive for precious metal prices. Though this is good news for those holding the likes of gold and silver to protect their purchasing power, it is bad new for jewellers. In the United States, the jewellery industry has relied on substituting cheaper metals for gold and platinum, owing to the increased expense of using the latter two metals. Many clients are more reluctant to buy expensive jewellery items, following gold’s six-fold price increase since the year 2000. Platinum has doubled in price, with US wages and salaries dropping by around 7% adjusted for inflation in the same period.
For this reason there is increasing demand from US jewellers for bronze and copper as substitutes for gold. Platinum is increasingly being replaced by its sister metal palladium, which has the same white colour, but costs only 40% of the current platinum price. Above all, American jewellers are always trying to experiment with new alloys to boost their businesses. But not all customers favour this development. Wealthy clients who buy jewellery partly for investment purposes are increasingly sceptical of some of the new jewellery products, since retailers are increasingly trying to cater to lower income audiences. Many wealthy individuals remain happy to pay the extra premium for expensive jewellery containing gold and platinum.
Roman Baudzus
Originally published on Goldmoney.com here
