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Understanding Australian attitudes towards gold investment

Australians just don’t seem to like gold as an investment—or rather, they don’t seem to like investing in the metal like investors in India, China, the US, and many other countries do.

Considering we are one of the biggest gold producers in the world—top 3, in fact, and sometimes Number 1—this aversion to owning gold directly seems like an anomaly.

However, those countries don’t have such a range of gold miners and wannabes to chase, nor do they have companies chasing other metals such as nickel, copper, rare earths, and other precious metals.

They also don’t have an obsession with property or franked dividends for tax-free income, or generous tax treatment for many investments—especially shares and property. And few have our huge domestic superannuation/pension system and its $3.5 trillion in assets.

There are 178 listed gold and silver miners on the ASX, and dozens more that mine something else and produce gold as a byproduct. For instance, BHP and Rio Tinto produce gold as a byproduct from their copper mining operations here or in countries like the US or Chile.

There are about 75 operating gold mines, but again, there are also copper mines with significant gold production—BHP’s Olympic Dam is a prime example, as is the Ernest Henry mine of Evolution Mining in northern Queensland and the same company’s huge Cowal and Northparkes mines in central NSW.

Newmont/Newcrest’s Cadia mine in central NSW (in the same area as Cowal) is a major gold/copper mine as well—one of the largest in the country, while Newmont produces copper as a byproduct from its Boddington mine in WA.

Directly or indirectly, Australians have considerable access to gold investments via these companies and our super funds—that’s if they want, though the weak value of the Aussie dollar does make it look relatively expensive.

That’s perhaps why there seems to be something that makes the average Australian investor reluctant to buy and sell gold directly, and that has shown up in the latest demand and supply data from the World Gold Council (WGC).

The WGC says that in the March quarter, Australia recorded its lowest quarter on record for gold consumption, which at 4.3 tonnes was down 37% from the first quarter of 2023.

“This includes a halving in demand for bars and coins and a 15% drop in jewellery consumption over that time,” the council said, though that is probably as much to do with the rising gold price in the first quarter, which was amplified by the weaker value of the Aussie dollar…

Shaokai Fan, Head of Asia-Pacific (ex-China) and Global Head of Central Banks at the World Gold Council, agreed.

“Australians, like most western investors, proved price-sensitive and did not buy into the recent gold rally, which saw the A$ price of gold jump 11.9% over the quarter, ending at A$3,397/oz. Continued momentum has since seen gold rise 6.3% in Q2 to A$3597.9/oz, contributing to a total 2024 YTD rise of 18.2%.

“The decline in demand for gold ETFs was more modest as Australian investors held their gold ETFs relatively steady in Q1. The regional gold ETF holdings reached 40.5t in March, a mild 0.4t loss in the quarter and a 0.8t decline y/y,” he wrote in the report.

By way of contrast, China bought 603 tonnes. I know they have more people, but there is still a strong culture of using gold as a mobile store of value for tough or volatile times which is still ingrained in that country, as well as India, elsewhere in Asia, the Middle East, and much of Europe.

Central banks and technology companies bought more gold globally in the first quarter—our Reserve Bank doesn’t buy gold these days for the country’s reserves. Consumers in China and India bought metal in the quarter—both for social reasons (weddings, etc.) and investment with a ‘safe haven’ tinge thanks to the Middle East fighting and Russia’s continuing attacks on Ukraine.