Market Update: Supporting Australia's #heartofgold

On the surface, it might be hard to imagine that a group of white-collar workers operating out of an air-conditioned office in the middle of the Sydney CBD have jobs directly linked to the men and women working the goldfields of Western Australia, but it’s true.

Bullion dealers like my employer ABC Bullion, who’ve been selling precious metals from our Sydney head office (and our recently opened Perth office) for more than 40 years, are keen to see a healthy and thriving precious metal industry, and it obviously starts with bringing the gold out of the ground.

A healthy bullion industry is particularly important for Australia. Make no mistake about it – physical gold is big business down under. We produce approximately 250 tonnes of gold per annum, worth about $11 billion Australian dollars, which is over half of a percentage point of the nation’s GDP.

Gold is also a major export earner for the country, making up some 5% of our national exports, according to research published by the World Gold Council using statistical data from 2012.

This is particularly relevant today considering net commodity exports have been a significant driver of overall economic growth in Australia these past few years.

It’s for these reasons that I’ve taken a keen interest in the #heartofgold campaign running in Western Australia. It is raising awareness about the importance of the gold mining industry to the Western Australian economy, and the potentially disruptive impact higher royalties could have on the sector.

Whilst it’s obvious to many that drilling companies, engineering contractors, geologists, parts suppliers, and companies providing heavy machinery used on the gold mines would be negatively affected by any disruption to the gold mining industry, the impact wouldn’t just stop there.

It could also be felt amongst

• Logistics companies who make their money securely transporting physical gold

• Jewellery manufacturers and retailers – Approximately 50% of all annual gold production ends up in some kind of jewellery form

• Brokers, analysts, financiers and traders, who arrange much needed capital and hedge risk, or provide research on Australia’s numerous gold mining and exploration companies

• Bullion dealers who trade investment grade products to Australia’s growing gold buying public

• Private vaulting companies who provide storage for investors needing a secure place to store their physical precious metals

• Banks, financial advisers and superannuation companies who provide wealth management and banking services to the people working in the gold mining industry

• Cafes, hotels, airlines, restaurants and other discretionary retailers where those working on the mines, and those working in other industries directly impacted by the health of the gold mining industry, spend their discretionary income

There is no doubt that promoting a healthy gold mining industry is good for the overall Australian economy, and the potential downstream implications highlight why, despite the fact the majority of the gold mined nationally is produced in Western Australia, its importance reaches across the continent.

Indeed nationwide, the gross value add (essentially the contribution to gross domestic product) from the gold industry in this county is estimated to be roughly USD $8.6 billion annually, according to a report titled “The direct economic impact of Gold”, published by the World Gold Council and Price Waterhouse Coopers, back in October 2013.

Note that this is just the direct economic contribution of entities involved in the gold value chain and does not include the indirect or wider economic impacts from having a strong gold industry

Whilst the financial impact is obviously huge, the personal impact is even greater, with over 30,000 Australians directly employed in the gold industry

The mining industry as a whole is already facing a range of challenges, from declining mining investment to falling commodity prices in general. The last thing Australia needs, and WA in particular, is more uncertainty in this sector.

Supporting the #heartofgold campaign is a simple way to voice support for what is a critical industry. I’m doing so, and encourage others to do so too, via the following channels

Facebook: https://www.facebook.com/heartofgoldWA

Petition: http://www.bit.ly/WAheartofgold

Twitter: https://twitter.com/WAheartofgold

Warm Regards