Commodity Management BlogInnovative Ideas and Thought Leadership for Volatile Commodity Marketplace
I recently had the opportunity to sit down with New Zealand Mint’s Michael O’Kane to discuss his thoughts on the precious metals market, what keeps him up at night and how Triple Point has helped them expand their product offering.
Q: How does precious metals volatility today compare to the last few years?
Michael: During the financial crisis in 2008 we saw the price for gold jump by over $50 in an hour, which is generally unheard of. A comparison to this would be during the oil crisis in 1980 when the price of gold increased by several hundred dollars over a period of a few days. Currently we’re seeing movements of up to $30 per day as the market reacts to different events and announcements.
Q: Gold and silver have recently hit record highs. What are the drivers and will they continue?
Michael: You’ve got historical drivers of supply and demand and reaction to inflation, as historically, gold is anti-inflationary. This is only part of what’s driving the price of gold and silver today— everything that’s been put in place for quantitative easing is, in the long-term, inflationary. Another driver is supply. Gold demand has recently increased by thousands of tons a year. Retail demand in China alone has increased by 70% from 2009 to 2010. With an average of 10 years for a goldmine to come on line, we’re still years away from supply increasing to meet that demand. All of these factors lead to a huge boom in the precious metals industry.
Q: What issues keep you up at night?
Michael: Security — from electronic to physical. We’re dealing with hundreds of millions of dollars of products per day. Triple Point’s precious metals solution enables New Zealand Mint to maintain our electronic security in trading positions: what we hold in inventory; where it is and who’s doing what with it; and physical security: where and what volumes of coins and ingots we have. Another factor is mitigating exposure to supply shortage. During the 2008 financial crisis, most major suppliers in the world from the US Mint all the way to New Zealand Mint and other secondary suppliers ran out of physical stock.
Q: Do you view Triple Point as a strategic partner?
Michael: Definitely. Triple Point provides us with the ability to manage security and grow our offerings — including Minting, manufacturing, and day-to-day trading with both suppliers and clients — on one system. Triple Point is helping us increase our global presence.
Q: What were the major business drivers in moving to the Triple Point solution?
Michael: Prior to Triple Point, we had five different products to handle our lines of business and security. At the end of the day, that becomes very cumbersome. Having Triple Point’s system, almost out of the box, cover all of our business requirements and do it elegantly is very difficult to argue against.
Q: What are some of the tangible benefits New Zealand Mint has gained with the Triple Point solution?
Michael: Before Triple Point, it took an hour or two to get a hard figure on our exposure because we were using several systems to map it. Now we don’t need three people calculating what our cash or metal position is. It takes one person about two seconds. Triple Point also provides the functionality to handle un-allocated trading locally. In effect, Triple Point is helping to expand our product offering so we can conduct business in all corners of the planet.