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Investment
Last month Gold Industry Group member ABC Bullion launched its Gold Saver; a direct debit savings plan linked to physical gold and silver assets.
The ABC Bullion Gold Saver works like a traditional savings account but instead of saving in Australian dollars, funds are invested in gold or silver.
In our last article on gold supply, we mentioned that one needs to be careful applying conventional commodity supply/demand analysis to gold.
Unlike many commodities, the share of industrial uses is very small, less than 10%. Most gold demand is either jewellery or investment of one sort or another.
When looking at any commodity, mine supply is an important factor into the overall supply/demand balance. The cost involved in getting a mine into operation can mean that they will continue to operate and produce their commodity at a consistent rate as long as the market price is above cash costs. The time involved in finding and building a mine can mean that increases in price do not result in new supply immediately coming into the market – often that occurs years later.
When you buy gold you become part of not insignificant community who hold over 6,000 million troy ounces. This is the amount of gold that research firms like Thomson Reuters GFMS estimate exists across the globe – around 187,000 tonnes worth $7.13 trillion dollars.
However, since people are unlikely to truthfully answer a telephone survey about how much gold they have (particularly if they store it at home), how do research firms come up with their estimate?
Most people are familiar with the primary uses of gold; as a currency, in the creation of coins and bars, and as jewellery.
However, gold is also used for medical purposes in the treatment of rheumatoid arthritis and certain cancers; and in modern dentistry and orthodontics. It can be consumed as an indulgence in beverages or as a culinary decoration; and used in electronic devices such as mobile phones, tablets, and televisions, to name a few, as it is a highly efficient conductor that doesn’t corrode, making it extremely reliable.
Concerned consumers, organisations, and governments around the world continue to shine a light on conflict minerals. These tainted commodities are traded by private armed groups for monetary gain to finance civil conflicts and violence which contribute to the violation of human rights. Thus, the quest for ‘responsible’ and ethically sourced minerals is becoming more and more prevalent.
Conflict minerals, which can include gold ore, are smuggled out of countries such as the Democratic Republic of the Congo, and parts of Afghanistan, Columbia, and Zimbabwe, and shipped to smelters around the world for refinement.
The Perth Mint posted record revenue of $4.4 billion and pre-tax profit of $24.9 million for Q1/Q2 of the 2015/16 financial year.
Premier Colin Barnett said the result reflected the significance of the Mint to the State and its future development.
“Gold mining has been at the cornerstone of the State’s advancement for more than a century, and The Perth Mint has always played an integral role in that industry,” Barnett said.
Physical gold and silver have been seen as the ultimate store of wealth for millennia, and have been highly sought after by investors the world over.
Demand remains strong today across the globe, with thousands of tonnes purchased annually from a diverse group of investors that include Indian housewives, central banks, hedge funds and family offices.
ABC Bullion’s Chief Economist Jordan Eliseo provides his insights from the SMSF Association National Conference last week on the growth in physical bullion investment and why trustees are buying bullion.
The SMSF Association National Conference was attended by more than 1,000 financial advisers, accountants, auditors and service providers and is the largest annual gathering for professionals servicing the $600 billion Self-Managed Superannuation Fund market in Australia.
The ASX and The Perth Mint (Gold Corporation) have signed an agreement to develop new precious metals derivatives products that will be quoted and traded on ASX.
The collaboration will enable ASX to grow its suite of commodities products and services, backed by the world-class physical market infrastructure of The Perth Mint.
In the third quarter of 2015, demand for bars and coins sky-rocketed as global investors were eager to grab a bargain whilst metal prices remained low.
This phenomenal surge didn’t go unnoticed at The Perth Mint, with more than 2.7 million of its new Australian Kangaroo 1oz silver bullion coins selling out in record time ahead of its official launch in September.
In contrast to the interest in coins, Exchange Trade Fund (ETF) gold holdings declined during the quarter, reflecting their predominately professional investor ownership. Silver ETF holdings, however, held up, which is a result of their mostly retail ownership.
The Perth Mint has joined us as a major partner to promote the critical role the precious metal sector plays in the Western Australian economy.
Perth Mint Chief Operating Officer David Woodford said The Perth Mint is proud to partner with the Gold Industry Group representing the interests of gold producers, explorers, prospectors and suppliers to the trade.
“We welcome this opportunity to partner with the Gold Industry Group to further the understanding of the broader gold industry, the drivers of demand for physical gold, and the forces shaping the current market.”
ABC Bullion is very passionate about profiling gold as an investment and as an asset class in its own right. A particularly savvy method to invest in physical gold is through a permanent portfolio. ABC Bullion's Chief Economist Jordan Eliseo tells us why.
