March 8, 2013 | By Tekoa Da Silva
I had the great opportunity this week to connect with Bron Suchecki, head of analysis and strategy at The Perth Mint Australia. It was a fascinating interview, as The Perth Mint refines 10% of world gold production and stores over $3.5 billion dollars worth of vaulted precious metals on behalf of clients.
Starting out with a little history on the Perth, Bron explained that,“The British Government needed a branch in Perth, because there was so much gold coming out of the Western Australian gold fields, [and] it was just impractical to ship the raw dore from the mines over to the royal mint in the UK. [So] that’s how we started, and refining gold and making coins is a core thing that we’ve done our entire existence.”
In speaking to the sheer volume of the Perth’s business flow, Bron said, “We refine all of Australia’s gold production, and in addition, we [handle] local countries’ production, and a fair bit of scrap as well. That’s give us around 300 tonnes a year of physical gold flow to our business…[and] we hold around $3.5B [of vaulted metals]…mostly in gold and silver.”
One of the more fascinating items Bron commented on, was the amazing perspective the Perth has, in terms of being in the “Asian corridor”, and being able to literally watch order flow coming into the mint from India and China.
In terms of what those Asian buyers are doing right now, Bron said, “The interesting thing about the Indian market particularly, is that they are very canny buyers. They will desert the market if prices move up, [but] will come back in when the prices correct…When they feel the gold price has formed a new base…they’ll see that as the new bottom, they’ll buy that bottom, and they’ll demand returns. [That's when] we have bullion banks calling us up desperate to get kilo bars.”
He further explained that with Asian buyers, “When the price spikes, the demand dries up quite quickly…that contrasts a lot with what we see as a retail client mentality—which is when the price is going up they buy, because they like to go with the trend and need to feel confident that the trend is in their favor, and when the price starts to fall—they sell…[So] the Indian and Asian buyers are more canny, and really operate in reverse.”
When asked about the current concerns of clients representing over $3.5B worth of vaulted metals, Bron said, “On the depository side of the business…across the board we’re not seeing any rush to buy with the price dropping down into the $1500 range—but nor are we seeing any selling. I think that’s quite positive. It tells me that [they're] very much strong hands, and are not selling on this price weakness. They’re not fazed by it…[so] from our clients we’re not seeing any fear or selling action.”
Bron also explained that while central banks fully comprehend the strategic importance of gold—they will never speak about it overtly: “I think that people underestimate that central bankers actually understand why they hold gold…no matter what they may say publicly—when Ron Paul asked Ben Bernanke, ‘Why do you hold gold?” and he said, ‘It’s tradition’…that was laughable. He couldn’t say why he really held it. He didn’t want to say, ‘This is the last asset, that in the case of war when nobody will accept our fiat currency, I can use this gold to buy xyz.’ He wasn’t going to say that, because he didn’t want to give gold that credibility…So I really don’t believe that a central bank or a government would be silly enough…to [sell or] encumber their metal.”
This was a fascinating interview with a top expert at one of the world’s leading gold organizations. It is an absolute “must-listen” for precious metals investors and students of monetary matters.
To listen to the interview, left click the following link and/or right click and “save target as” or “save link as” to your desktop:
To learn more about The Perth Mint visit: PerthMint.com.au
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Tekoa Da Silva
Bull Market Thinking