The Australian, Wealth – Gold report
THERE are many ways to buy gold and unless you want some complicated financial instrument the Perth Mint pretty much offers all of them, despite the fact that it owns very little gold itself.
“We don’t own any gold, or virtually none at all,” says Perth Mint treasurer Nigel Moffatt.
The reason it doesn’t own much gold is that it either borrows at an interest rate of about 15 basis points, holds it on behalf of investors and buys it on the spot market as it sells stock.
Founded in 1899 after the discovery of gold in Coolgardie and Kalgoorlie, Perth Mint is the last surviving of Australia’s three other mints – the other two being Melbourne and Sydney.
It was owned by the British government until July 1, 1970, when ownership transferred to the state government of Western Australia, which guarantees all its products.
And it was in 1986 that it started to mint and market modern gold in addition to silver and platinum coins.
Since then is has made more than 17.6 million coins using nearly 700 tonnes of precious metals.
It minted 162,585 bullion coins and bars weighing 107,400.087 troy ounces (nearly 3.34 tonnes) in the year to February 29, 2008.
During that period, it minted 91,710 collectable coins weighing 12,288.416 troy oz (over 3.82 tonnes). And about 80 per cent of sales go abroad.
Perth’s gold is the purest that can be bought, known as 9999, meaning it is 99 per cent pure.
“It’s absolutely fine gold,” Perth Mint sales and marketing director Ron Currie says.
“The purity and the quality are guaranteed because we are a West Australian government-owned business.”
In contrast, the South African krugerrand is 91.67 per cent pure. The coin still contains 1 troy oz of gold. But it weighs an additional 2.9 grams because of impurities.
Most of the mint’s gold holdings, which are not lent out, are held on behalf of investors. Moffatt says about $1 billion is held this way.
The minimum investment in the Perth Mint Certificate Program (PMCP), which is marketed by approved dealers, is $US10,000 for overseas investors and $5000 for locals, increasing in increments of either $US5000 or $5000.
Only the mint markets the Perth Mint Depositary Services (PMDS), in which investors can buy gold in larger quantities.
For overseas investors, the entry level is $US250,000, and locals, $50,000.
Entry fees for both the PMCP and PMD are 2 per cent of the total value. The exit fees are 1 per cent.
The Perth Mint Gold Quoted Product is a right to buy gold on the Australian Stock Exchange.
It is structured as a call warrant, each one giving the right to acquire 1/100th oz of gold.
Of physical gold, bullion coins are the biggest sellers, available in the popular Australian Kangaroo and Australian Lunar series.
Kangaroo coins are available in eight weights from 1/20 oz up to 1kg. The 1kg, 10oz and 2oz Australian Kangaroo coins are available in an unlimited mintage. But the smaller coins are available in quantities of 100,000 to 350,000.
The Lunar gold bullion series comes in nine sizes, from 1/20th oz up to 10kg.
The 10kg coin has a run limited to 100 and the 1oz is limited to 30,000.
The margin charged depends on the weight of the coin. According to Tony Richardson of coin dealer Monetarium, the cheapest way to buy gold coins is in the 1kg form.
“A kilo coin you can buy between 2 and 3 per cent above the spot price of gold,” he says.
Richardson says that a 10oz coin costs 3-4 per cent above the spot price of gold, about $10,800. A 2oz coin will cost 4-5 per cent above spot.
“The 1oz coin, which is probably the most popular because it is in that price category, you would pay between 5 and 6 per cent above spot,” he says.
Collectable coins are sold at a much higher margin than bullion.
Currie says: “Some people love to collect particular types of coins so they are collectors of that coin and look to the numismatic value. Some people are just trading in the metal and therefore looking to just the metal value.”
Currently the mint is selling a commemorative coin for World Youth Day, with an image of the Pope on it.
“We have got Vatican approval for it and we are the licence holder for World Youth Day,” Currie says.
“A lot of people will buy that because it has a picture of the Pope on it, not so much because of the metal value.”
At $1950, the proof 1oz World Youth Day coin sells for almost twice the spot price of gold and is produced in a limited run of 1000.
Other collectables include the Discover Australia collectable series, a limited release of 1000 for each of the coins, the 1/2oz costing $925.
The Fauna series is a three-year series, with a dolphin motif this year. Mintage for the 1/2oz is 1,000 pieces, 1/10oz 2500 pieces and 1/25th is 25,000.
Currie says: “We are very conscious that investment is a word that is very difficult. You have to be an investment adviser to advise people what to invest in. So we actually don’t do that.
“We tell you its a limited edition and you have to work out the investment potential yourself. Although gold at the moment has done very well.”