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Gold Investing in Australia
Interested in investing in gold in Australia? This guide covers multiple ways to enter the market, from physical metal to ETFs to stocks.
Even though the price of gold has performed with volatility so far this year, investors are looking at ways to enter the market.
Australian investors may want to turn their attention to their own backyard. Australia is currently the second largest gold-producing country in the world, and its western region is a jurisdiction that is increasingly being sought out by exploration and mining companies.
Read on for a breakdown of the Australian gold market, as well as how and why to invest in the area.
Where is gold mined in Australia?
As mentioned, Australia is currently the second largest gold-producing country. Gold output in the country reached 330 tonnes in 2021, up slightly from 328 tonnes the previous year.
"There's three countries that combine the rule of law with significant gold production: Canada, the US and Australia. Outside of these three, there's not much gold, or there's not much protection for individual investors and companies," said Kevin McElligott, managing director for Australia at Franco-Nevada (TSX:FNV,NYSE:FNV).
"Australia is very similar to Canada in many obvious ways. Large country, small population, western liberal democracy, high standard of living, high international trade, etc.," he added.
McElligott continued, "The difference for Australia is that gold is 12 percent of exports, versus 2 percent for Canada. So the gold producers are more important to the Australian economy, to maintain that high standard of living. There's higher political and social support for gold mining here."
One of the more prolific gold-mining areas of Australia is Western Australia, which accounted for about 59 percent of the country's total gold output in 2021. In fact, gold mining is the third largest commodity sector in the state, behind iron ore, crude oil and liquefied natural gas, with a value of approximately AU$17 billion.
The Fraser Institute recently named Western Australia the best mining jurisdiction in the world, after it came in fourth on the list in 2020 after Nevada, Arizona and Saskatchewan. The more than half million square kilometre area has attracted major miners such as Rio Tinto (ASX:RIO,LSE:RIO,NYSE:RIO) and BHP (ASX:BHP,NYSE:BHP,LSE:BLT).
Recent exploration activity in the Pilbara region of Western Australia has renewed interest and helped increase the country's consistent gold output. The area is currently in the midst of increased gold exploration thanks to a major discovery in 2017 by Novo Resources (TSXV:NVO,OTCQX:NSRPF) and Artemis Resources (ASX:ARV,OTCQB:ARTTF). There was a similar discovery made by De Grey Mining (ASX:DEG,OTC Pink:DGMLF) more recently in 2020.
Some geologists have compared the geology of the Pilbara craton with South Africa's Kaapvaal craton and Witwatersrand basin. The similarities are significant considering Witwatersrand is home to the Earth's largest-known gold reserves and is estimated to be responsible for over 40 percent of worldwide gold production.
Both the Pilbara and Witwatersrand are similar in age and composition, sitting on top of the Archean granite-greenstone basement. The Pilbara area hosts numerous small mesothermal gold deposits containing conglomerate gold — mineralization known to hold large, high-grade gold nuggets.
Following Novo and Artemis's discovery, a number of gold exploration companies have moved into the Pilbara area, including the aforementioned De Grey Mining, Kairos Minerals (ASX:KAI,OTC Pink:MPJFF), Pacton Gold (TSXV:PAC,OTC Pink:PACXF) and Monterey Minerals (CSE:MREY).
How to invest in physical gold in Australia?
Australians looking to invest in the gold space may want to look first at physical gold, which experts often suggest as a secure starting point for entering the market.
In terms of Australian physical gold, investors are able to buy and sell as much as they want, as the government does not place a minimum or maximum on the amount of the yellow metal in one's possession.
However, it's worth noting that some banks do not technically permit the storage of bullion; this is listed in the terms and agreements that customers must sign when they register. Private investors who reside in Australia should also keep in mind that physical gold can't be insured.
Below are examples of the types of Australian physical gold available for investors at the Perth Mint:
- Bullion coins — The mint offers the Australian Kangaroo, a gold coin containing 1 ounce of 99.99 percent pure gold.
- Minted bars — The Perth Mint also gives investors the option to buy minted bars in eight different sizes ranging from 1 gram to 10 ounces. The minted bars are 99.99 percent pure gold.
- Cast bars — The mint describes cast bars as "one of the most cost effective and convenient ways to buy precious metals." These 99.99 percent pure gold bars range in size from half an ounce to 50 ounces.
Investors who don't want to buy physical gold directly from the Perth Mint can also buy from dealers; Australians may also want to consider reputable products like the American Gold Eagle and the Canadian Maple Leaf.
How to invest in gold ETFs in Australia?
Exchange-traded funds, better known as ETFs, are another popular way of getting exposure to the gold space. They trade like stocks on an exchange, which makes them easily accessible, and they tend to be less risky.
The ASX is home to a number of gold-focused ETFs; read on to learn about a few of the choices available:
- Global X ETFs Australia (ASX:GOLD) — Previously ETFS Metal Securities Australia, this ETF has been listed on the ASX since 2003, with a management fee of 0.4 percent. With this ETF, one share represents about a tenth of the spot gold price. For example, if the physical gold spot price is trading at AU$1,593.10 an ounce, one share, or unit, of this ETF will be roughly AU$153.
- Perth Mint Gold ETF (ASX:PMGOLD) — The Perth Mint Gold ETF also launched in 2003, but has a much lower management fee of 0.15 percent. This is because its structure allows for lower storage costs. This ETF tracks the gold spot price, but the gold is held by the Perth Mint on the behalf of investors. It also doesn't have the same level of liquidity as Global X ETFs as it trades at about a fifth of its size.
- BetaShares Gold Bullion ETF (ASX:QAU) — The BetaShares Gold Bullion ETF is unique from the two ETFs listed above as it tracks the US gold spot price, providing "purer" exposure to the US spot gold price. BetaShares units are equal to one-hundredth of the US spot gold price. That means that a movement of a dollar in the US spot gold price is equal to a movement of a cent in BetaShares. The ETF has a management fee of 0.5 percent.
- Van Eck Vectors Gold Miners ETF (ASX:GDX) — Launched in 2015, this ETF provides diversified exposure to gold-mining companies. While only 12.4 percent of its holdings are ASX-listed stocks, its top 10 constituents include two Australian companies, Newcrest Mining (ASX:NCM,TSX:NCM,OTC Pink:NCMGF) and Northern Star Resources (ASX:AST,OTC Pink:NESRF). The management fee is 0.53 percent.
How to invest in gold stocks in Australia?
Finally, those interested in investing in gold in Australia may want to look at gold-mining and exploration companies listed on the ASX. An easy place to begin is with the biggest gold companies listed on the ASX:
The biggest gainers are another solid point to start from:
Finally, those more interested in particular jurisdictions may want to check out these state-by-state overviews of ASX-listed gold companies:
- Gold in South Australia
- Gold in Western Australia
- Gold in Queensland
- Gold in New South Wales
- Gold in Victoria
As with any investment, the key to investing in ASX gold stocks is to keep due diligence front and centre.
This is an updated version of an article first published by the Investing News Network in 2019.
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Securities Disclosure: I, Matthew Flood, currently hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
Matthew Flood is a writer and editor from Montreal, Canada. He's been writing professionally for four years on a wide array of topics ranging from investments and real estate to cookware and home improvement. Matt also enjoys creative writing and has written two novels and a novella.
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