22 April 2013

Bringing forward demand

The most interesting thing about this price drop is the reaction of retail clients, who have gone crazy like its 2008. The Perth Mint's bullion website has been having traffic problems and we've had lines at our Perth retail outlet. Depository buying is relatively more subdued, but still the volumes are up.

It is an encouraging sign as usually retail business is only strong when there is a clear upward trend in the gold price. Maybe they have learnt something fom our Asian and Indian friends, who are much more canny buyers.

I was talking to one of our coin dealers a few days ago and he said about a 3rd of business was newbies. At this time my question is whether the price drop has just brought forward

1. New investors who were thinking about buying
2. Existing holders who were looking to top up

But both had not previously acted as the price was going sideways. If we are just sucking demand from the future then this demand will fade. I think this is probable as there has been no change in the underlying fundamentals, no event that would freak people out to buy gold suddenly (Crypus and Boston I don't think would have that effect).

We will need to keep an eye on retail demand to see if it continues. If it does then we should get a repeat of 2008 when coin distributors started to look further afield to overseas mints for coins. Given the Perth Mint's distance and higher quality/higher fabrication price, we should be the last to start to run out of production capacity. If we report these sort of problems then you know the retail demand is serious.


  1. Hi Bron,

    Do you have any feel for what premiums are above spot for large volumes in the wake of the correction?

    I have seen a lot of commentary suggesting that at the retail level premiums are opening up on physical.

    I can't help but think this is people cherry-picking the numbers, or that it is just a retail phenomenon.

    What is happening to the premiums on transactions of size?



  2. They are as strong as they were before the price drop, no radical change. It is a retail phenomenon as coin manufacture involves a lot more work than gold kilo bars.