While I was in Australia for boots-on-the-ground research, a major story broke.

It shook the gold universe.

Here’s one of the headlines from the Australian Broadcast Corporation:

Perth Mint sold diluted gold to China, got caught, and tried to cover it up

When I heard the news, I knew I had to get straight to the source.

So I visited the Perth Mint to investigate it for you.

In a two-part essay, I’ll dive into this story and show you what it means for your money. I’ll also explain how it relates to The Great Distortion between the financial markets and real economy, a topic I frequently discuss in these pages.

But first, some background on the scandal… and what I discovered when I was in Australia.

The Perth Mint: Backed by a Government Guarantee

The Perth Mint is the official bullion mint of Australia.

The Mint (as it’s called by locals) manufactures and sells gold, silver, and platinum collector coins; gold and silver bullion bars and coins; and jewelry.

It also happens to be the biggest processor of new mined gold on the planet. It’s the oldest of Australia’s only two mints that produce non-circulating coins. These can be used as legal tender.

Meaning, people can use them as currency by redeeming them at banks or the central bank of Australia (called the Reserve Bank of Australia, or RBA).

And the Mint is wholly owned by the Government of Western Australia. This makes it the only mint in the world with a government guarantee. For instance, the precious metals sold by the Mint are protected by a government act.

Nomi visits the Perth Mint of Western Australia

Nomi browses different bullion at the coin room

While there, I visited the coin room. It faces the entrance to the Perth Mint, and it displays (and sells) all the latest gold and silver coins.

The best part is, anyone can walk in and buy bullion bars or coins there.

I know for a fact this is true.

Because that’s exactly what I did while I was there getting the on-the-ground scoop.

I’ll explain what I did at the Mint shortly. But first, let’s get back to the gold doping scandal…

The Gold “Doping” Scandal

Gold doping is when gold producers mix pure gold with other metals, like silver or copper. That lowers the gold content of say, a bar of gold, by whatever amount those metals take up. And it makes the production of that bar a bit cheaper.

According to a national news story that broke on March 7, the West Australian government and the Perth Mint’s management team knew that diluted gold was sold to China.

The story claimed that they also knew a year before the scandal went public.

Then, it went on to say that the Perth Mint sold 100 tonnes of gold to the Shanghai Gold Exchange (SGE). Apparently, this gold fell short of China’s gold purity standards. That standard is a 99.99 percent gold ratio.

The Perth Mint denied the allegations immediately.

At the press conference that followed, Perth Mint CEO Jason Waters noted that a small amount of silver was indeed added to the gold sold to China.

He admitted this additional silver in the mix lowered the purity gold ratio to 99.992 percent from 99.996 percent.

But that still falls within SGE standards.

Waters stressed that since the Perth Mint had initiated new and stricter measuring procedures following a 2021 review of its refining practices, its gold is now up to the SGE standards.

Still, the flag of scandal was raised.

That’s why on March 9, the London Bullion Market Association (LBMA) launched a review into the accusations.

The LBMA is the world’s top accreditor of gold refiners. The Perth Mint is a member of the LBMA.

But there’s more to the story…

Don’t Believe the Headlines

First of all, these incident review processes (IRP) are standard protocol. They don’t necessarily validate the accusations.

Second, the Perth Mint is still on the LBMA’s “Good Delivery List.”

That means its gold bars still meet global gold trade standards, including China’s.

Third, the SGE itself confirmed the Perth Mint’s statements and affirmed the quality of the bars in question.

So here’s where the plot thickens.

I spoke to two of my close contacts in Melbourne about the Mint scandal. They are gold experts with nearly four decades of gold experience combined.

As one of them put it to me, the irony is that the quality of Perth Mint gold has historically been considered “too pure” for places like the Shanghai vault.

Still, in order to be more economical and still comply with global gold quality standards, the Perth Mint added a small amount of silver. This brought the Mint’s pure gold ratio down from 99.996 to 99.992 percent.

To put this in perspective, no mint has a 100 percent pure gold ratio. And we are talking tiny fractions of a percentage of difference here.

That practice was supposed to save the Mint about $620,000 per year.

And as my contact added:

Even 99.992 is still better than other places. You’re not getting copper in the mix, for instance. You’re getting extra silver, and that brings the cost down for the grade of Perth’s gold, as they are paying for 99.992 versus running their ratios at 99.996.

Now, the controversy is still ongoing, and there may be additional investigations into the matter. But that doesn’t mean the scandal has affected the gold sold at the Mint…

Why the Perth Mint Scandal Shouldn’t Stop You From Buying Gold

While I was at the Perth Mint, I asked some of the officials if there was any truth to the rumors started by the March 7 story.

One of them told me that they were not allowed to comment specifically, but “that these sorts of rumors always pop up then go away.”

And that they hadn’t impacted gold sales.

Last year, the Perth Mint sold more than $20 billion worth of gold.

And this year, sources there told me, it’s on track to sell more.

Plus, the Perth Mint officials said demand for gold has shot through the roof this year compared to last year, especially amongst retail investors.

Demand especially increased in the weeks after the bank crises in the U.S. and Europe proved the financial system to be unreliable.

When the Fed jumped in to save the banks, just like in 2008, people’s trust in the system started breaking down. (For more details on how the Fed bailed out the big banks, go here.)

In contrast, gold and other precious metals have proven to be stable preserving mechanisms during various crises. They’re better for long-term wealth accumulation purposes.

Gold will never blow-out like Silicon Valley Bank did. It won’t go bankrupt like my former employers Bear Stearns and Lehman Brothers did, either.

And the Fed can’t print gold like it can print money.

That’s why tomorrow, I’ll go into why the Perth Mint scandal is not as overblown as it seems to be… and the best ways to buy and hold gold bullion.

Stay tuned for more…



Nomi Prins
Editor, Inside Wall Street with Nomi Prins