The world’s largest gold exchange has announced an investigation into the Perth Mint, one of Australia’s oldest and most respected gold refineries, after news broke about an alleged gold doping program. International attention was turned onto the mint after it was announced that they may be responsible for a $9 billion recall of gold bars sold to China that did not meet acceptable purity standards.
While both the Shanghai Gold Exchange and The Perth Mint have reportedly denied the claims, the scandal has caused considerable damage to the reputation of The Perth Mint and may even have some impact on investor sentiment toward gold as an asset class. So how will the Perth Mint gold doping scandal impact global gold markets? Keep reading to find out.
What Is Gold Doping?
Despite sounding inherently negative, gold doping is actually a common practice used by mints and refineries when creating bullion. It involves adding other metals to gold to bring down its purity while remaining above the globally accepted standard of 99.99%, also known as “four nines gold.”
This process, also known as “alloying,” allows mints and refineries to improve their margins while maintaining a high purity level. However, these institutions need to ensure that they’re transparent about their doping practices and adhere to ethical sourcing regimes to maintain the trust of their customers and the wider industry.
What Is The Perth Mint Being Accused Of?
While gold doping may be an accepted practice as long as all involved parties are aware it has taken place, it is a “scandal of the highest level,” according to one Perth Mint insider who declined to be named for fear of criminal prosecution.
According to a leaked internal report, the national bullion mint sold up to $9 billion worth of “doped” gold to the SGE, potentially not complying with Chinese purity standards. What’s worse, documents have been uncovered that show Perth Mint leadership actively withheld evidence and attempted to cover up its doping activities.
While details are still unfolding, if all of this turns out to be true, the scandal could rock the Australian gold industry and even have far-reaching implications for the Perth Mint’s future.
So How Does A Scandal Like This Happen?
When you buy gold bars, they will never be 100% pure gold. However, the precious metals industry aims to keep bullion as close to pure as possible, setting the accepted standard at 99.99% gold, with the remaining 0.01% made of other alloys. To put this in terms of weight, a 1kg gold bar will contain .1g of alloy materials.
The Perth Mint was producing gold bars that were 99.996% pure, which essentially meant that investors were getting an extra 0.06 grams of gold for free. To rectify this issue, in 2018, the mint added slightly higher amounts of silver to reduce the percentage.
The mint determined that by bringing the purity of their gold down from 99.996% to 99.992% that they would save more than $600,000 per year. These short-term savings would turn out to be an extremely short-sighted decision, putting the mint at the center of what may be one of the biggest gold scandals in Australian history.
How Does The Perth Mint Gold Doping Scandal Impact Investors?
In 2021, the Shanghai Gold Exchange (SGE) told the Mint that two of the bars it had received contained too much silver and not enough gold. While the gold remained above the 99.99% requirement, it exceeded Shanghai’s strict purity standards, which require no more than 0.005% of each bullion to be silver.
Four Corners, ABC’s investigative journalism program, claims that when the mint received a complaint about two bullion sent to SGE, it conducted an internal investigation. It found that between 2018-2021, about 100 tons of gold sent to the exchange could potentially be below Shanghai’s purity standards – about $8.7 billion at today’s prices.
When it got caught for some of its gold dipping below Shanghai Gold Exchange standards, it kept it quiet. The mint then panicked, fearing negative public statements about the business.
What’s Been Done To Solve The Issue
When several of the allegations occurred, Premier McGowan, the minister overseeing Gold Corporation, told the ABC that there had been senior management changes at the Mint and a compliance audit was being undertaken.
The leaked internal report suggests that the Mint covered up the quality issues to protect its reputation. The Mint immediately stopped the gold doping program but kept the quality issues under wraps. It replaced one of the bars but left the Chinese firm to prove that the other bars were similarly tainted.
Unfortunately, if the SGE does find that those 100 tons don’t meet the purity standards, and the Perth Mint has to buy back that bullion, taxpayers may be on the hook to help cover the hefty multibillion-dollar bill.
What’s At Stake For The Global Gold Market
This scandal has significant implications for the global gold market, as it raises questions about the integrity of gold bullion and the trustworthiness of major players in the industry.
The scandal has led to calls for a Royal Commission into the Perth Mint’s operations, with some experts suggesting that the mint’s management may have been aware of the doping and cover-up but chose to ignore it. For those unaware, the Royal Commission is a formal investigation independent of the government.
It’s raised questions about the integrity of the Australian gold industry as a whole, with some investors now questioning whether they can trust the Perth Mint and other Australian gold refiners.
The Perth Mint states it has responded to the allegations, confirming a customer complaint about a small number of gold bars and stating that it’s improved its refining methods and is now committed to much higher purity requirements. However, the damage has already been done, and the scandal will likely have lasting effects on the Perth Mint’s reputation and the Australian gold industry.
This scandal highlights the importance of transparency and accountability in the gold industry. Investors need to trust that the gold they purchase is of high quality and purity and that the companies producing and selling it operate with integrity. The Perth Mint scandal reminds investors to do their due diligence when investing in gold and only purchase from reputable, trustworthy sources.
How Will This Impact The Price Of Gold
The Perth Mint’s actions will likely impact investors’ confidence in Australian gold, and that skepticism could extend to other parts of the gold industry. However, incidents such as these typically act as a catalyst for improved rules and regulations at an industry level.
Gold has been a trusted store of value for centuries, and while it has its ups and downs, investors like it because, unlike fiat currencies, its value is determined by factors like scarcity and demand, not confidence alone. If there are any impacts on the price of gold, they will likely be short-term.
Make A Long Term Investment In Gold With A Gold IRA
While all of the facts are still coming to light, the Perth Mint scandal still highlights the need for greater oversight in the production of precious metals throughout the world. While anyone might be wary of the gold being sold on eBay or a local flea market, investors expect everything to be 100% above board when purchasing from refineries and dealers.
One way to ensure the precious metals you purchase are produced by a reputable refinery is by purchasing IRA-approved gold. Not all gold bullion and coins are approved for purchase in a gold IRA, and the ones that are have passed a thorough review process by the IRS. All IRA-approved gold must meet the following standards:
- The gold must be at least 99.5% pure.
- All Proof coins must be encapsulated in the complete, original packaging, remain in excellent condition, and include the certificate of authenticity.
- IRA-approved gold must be produced by a refiner, assayer, or manufacturer that is accredited/certified by COMEX, NYMEX, NYSE/Liffe, LBMA, LME, LPPM, TOCOM, ISO 9000, or national government mint and meeting minimum fineness requirements.
- Small bullion bars must be manufactured to exact weight specifications. Exceptions to this rule are 400-ounce gold bars and 100-ounce gold bars.
- Non-proof (bullion) coins must be in brilliant uncirculated condition and have no damage.
If you’re interested in learning more about investing in a gold and silver IRA, call Noble Gold Investments today at (877) 646-5347. Our team is standing by to answer any questions that you have about saving for retirement with precious metals.
