Buying Gold Bullion In Australia From The Perth Mint

The Perth Mint is the major producer of investment (physical) gold bullion in Australia. So if you live in Oceania, one of the world’s most reputable mints is in your region.

Perth Mint

Gold Corporation, the Perth Mint's parent company, is wholly owned by the Government of Western Australia. It is a for-profit entity that competes internationally against other world-class government and private mints.

Both domestic and international investors can buy directly from the Perth Mint. For Australians, prices include the goods and services tax (GST). The mint’s terms also indicate that “international orders are GST free.”

You can buy Australian gold coins that are pure gold with a proof-like quality and carry a legal tender status, or you can save a little money on a per oz. basis by buying gold bullion bars.

The Perth Mint ships its products worldwide.

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Storage Options When Buying Gold Bullion In Australia

You can either take physical possession of your gold bullion coins and bars, or you can store your precious metals with the Perth Mint using one of the following programs:

  • Perth Mint Depository Program (PMDP)
  • Perth Mint Certificate Program (PMCP)

What is the primary difference between the two? PMCP involves the issuance of a certificate as proof of an investor’s holding. PMDP accounts function similarly to bank accounts except credits and debits are recorded in gold troy ounces instead of Australian Dollars (AUD).

Australian Flag

Also, gold certificates (PMCP) are purchased via third-party dealers. Investors with PMDP accounts interact directly with the Perth Mint.

Both PMDP and PMCP are available using unallocated and allocated storage contract terms (see below).

The minimum amount required to open a PMDP account is $5,000 AUD for Australians and New Zealanders and $50,000 USD for international clients. The minimum amount to buy a gold certificate (PMCP) is $10,000 USD.

Unallocated Gold Bullion In Australia

“Unallocated” generally means that individual investors do not directly own specific gold bullion coins or bars. Instead, each investor has a claim to a specific amount of unallocated gold that is owned by the holding agent.

Australian Fractional Gold Coin

The depository enters into promissory agreements with investors to supply gold, within the contracted amount of time, to its clients upon request.

Ownership (title) of specific gold bullion articles transfers to investors who take possession of their gold. However, investors rarely demand delivery so title of the gold generally stays with the holding agent.

The mint declares the gold it buys as an asset on its balance sheet. When unallocated gold is sold, it becomes a mint liability so the mint's promise to supply gold to an investor appears in the balance sheet's liability section.

Perth Mint Gold Bar

Why does this matter? If the holding agent declares bankruptcy, the judge will view the investor with a promissory note as an unsecured creditor.

Unallocated gold investors’ claims are subordinate to the claims of secured creditors. So the latter are first in line when the court determines the dispositions of assets, including unallocated gold bullion.

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Gold unallocated programs can have different terms. For example, some programs may operate on a fractional reserve system obligating the depository to maintain only a fraction of the gold purchased by its clients.

Since investors rarely take possession of the gold bullion, holding agents capitalize on their ownership status by …

  • Selling derivatives like futures, options and swaps (paper gold).
  • Leasing the gold bullion.
  • Making products with the gold and replacing the consumed gold with other gold to maintain the contractual reserve amount.

The Perth Mint unallocated programs do not have a fractional reserve requirement. Instead, the mint is required to maintain a 1:1 ratio (100%) of gold sold vs. gold stored.

Unallocated gold is used by the Perth Mint to manufacture gold bullion products. It does not lease or use the gold to issue derivatives. The gold is exclusively used for internal purposes.

Regarding creditworthiness, the Government of Western Australia (GWA) would have to default before an investor’s unallocated gold claim is at risk of becoming worthless.

I am not informed on GWA’s indebtedness, but sovereign debt failure is possible even if high levels of taxation are employed. Just watch the news and see what's happening in the Euro Zone.

Allocated Gold Bullion In Australia

If you invest in an “allocated” gold program, you own specific Australian gold coins and/or bars that are segregated from other investors’ precious metals.

Your gold bullion does not appear on the depository’s balance sheet so it is unencumbered. If the depository defaults, you can immediately take possession of your gold or transfer it to another vault without seeking the consent of the court.

Sydney Australia

Unallocated vs. Allocated Costs, Gold Bullion In Australia

The price of the gold is the primary cost. However, allocated gold has a couple of additional fees … fabrication and storage.

So two questions one should ask when deciding between these storage programs are:

  • Am I comfortable as a creditor of the Government of Western Australia?
  • If not, am I willing to pay the additional fees, albeit marginal, for allocated storage?

Click here if you would like to be redirected to the Perth Mint in Australia.

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