Gold Sales to Europe Jump on Crisis, Perth Mint Says

From Bloomberg:

Gold Sales to Europe Jump on Crisis, Perth Mint Says

By Jason Scott

June 4 (Bloomberg) — Gold sales to Europe from the Perth Mint surged in May as the Greek sovereign-debt crisis triggered a flight to haven investments, draining stockpiles at the producer of 6 percent of the world’s bullion.

Buyers from the continent accounted for 69 percent of gold- coin purchases last month compared with 51 percent a year ago, said Ron Currie, sales and marketing director. Individual German investors also bought silver, seeking to protect their wealth with “poor man’s gold,” Currie said from Western Australia.

Greece’s fiscal crisis roiled financial markets worldwide, driving the euro lower. Gold reached a record in May as sovereign-debt risks escalated. The mint is working at full capacity with 20 percent more staff than a year ago, Currie said.

“As soon as it was announced the European Commission was bailing out Greece, the German population decided they’d better hedge their euros by buying precious metals,” Currie said in an interview yesterday. “We had stock before this blip in the market, then it all went.”

Spot gold traded at $1,205.94 an ounce at 9:54 a.m. in Singapore today compared with last month’s record of $1,249.40 and $1,096.95 at the end of last year. The precious metal has gained for nine straight years. Silver, which peaked this year at $19.8275 an ounce on May 13, traded today at $17.9425.

‘Safety of Gold’

“Anyone throughout Europe who understands how the euro is being debased is seeking the safety of gold,” said James Turk, founder of GoldMoney.com, an online gold-buying and storage service that has passed $1 billion of customer assets. The metal may advance further next week, a Bloomberg survey showed.

European leaders have proposed an almost $1 trillion loan package to contain the region’s fiscal crisis, including funds from the International Monetary Fund. The euro has declined against all 16 major counterparts in the past three months, dropping the most against the dollar, with a 12 percent fall.

“The gold market in Europe, and particularly in Germany, has just taken off,” Currie said from the 111-year-old mint, which was founded on the back of a gold rush in the state that accounts for 62 percent of the nation’s mineral production.

“People in Germany are buying silver, which leads me to believe it’s the moms and pops stocking up on ‘poor man’s gold’,” said Currie. “They could be storing it in their homes or burying it in their gardens.”

The mint, controlled by the Western Australian government, has 300 staff and doubled capacity in the past 18 months, Currie said, declining to give a total output figure for coins and bars, or the value of the bullion stored on behalf of buyers. Investors can opt to buy and store gold at the mint, or buy coins to hold themselves.

‘Greeks Changed Everything’

“We came off the highs of the global crisis, we were rolling along at a steady pace for a while and the Greeks changed everything,” said Currie. Standard & Poor’s cut Greece’s rating to junk status on April 27.

The rush for bullion in May at the Perth Mint was matched overseas. The U.S. Mint sold 190,000 ounces of American Eagle gold coins last month, the most since December. Rand Refinery Ltd., the world’s largest gold-smelting facility, has raised weekly production of Krugerrand coins to a 25-year high, Treasurer Debra Thomson said yesterday.

CME Group Inc., the world’s largest futures market, said gold-futures trading rose to a record in May. Gold trading on the Comex unit was 4.82 million contracts, exceeding the 4.57 million record set in January, the Chicago-based CME said June 2.

‘Financial Crisis’

“Sales have come off the highs of the global financial crisis, but they haven’t fallen anywhere near to where they were before the crisis,” Currie said. In the 12 months to June 30, sales of the mint’s 1-ounce Kangaroo and other gold coins may fall by about 16 percent to about 350,000 ounces from the year before, Currie said. Silver will match that drop even as sales of that metal spiked in the past two months, he said.

“It’s a volatile market and you can’t pick what’s going to happen from day to day,” Currie said. “The Indian market isn’t what it was, jewelry sales are down, but the ETFS are up and the overall gold price is still high. Our assumption is that volatility will continue.”

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, rose to 1,289.84 tons yesterday. India’s gold imports may reach a 12-month low of 15 tons to 17 tons in May as rising prices slowed imports, the Business Standard reported yesterday, citing Suresh Hundia, president of the Bombay Bullion Association.

Western Australia produces 6 percent of the world’s gold, valued at A$5 billion in the year to June 30, 2009, according to state government figures. The mint processes all the gold mined in Australia as well as imports of scrap from overseas, Currie said.

–With assistance from Claudia Carpenter in London. Editors: Jake Lloyd-Smith, Richard Dobson

To contact the reporter on this story: Jason Scott in Perth at jscott14@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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One response to “Gold Sales to Europe Jump on Crisis, Perth Mint Says

  1. And, on top of this report, you have to read the following, which indicates that South African production of gold in falling:

    http://www.miningmx.com/news/gold_and_silver/South-African-gold-output-falls-hard.htm

    What do you suppose this will do to the price of gold?