Gold Survey 2009 Launch Presentation

8/7/2019 Gold Survey 2009 Launch Presentation

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Gold Survey 2009Gold Survey 2009Philip KlapwijkPhilip Klapwijk

London 7London 7ththA ril 2009A ril 2009


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GFMS gratefully acknowledge the generousGFMS gratefully acknowledge the generous

support from the following companies for thissupport from the following companies for this

yearsyears Gold SurveyGold Surveyand its twoand its two UpdatesUpdates

Tanaka Precious Metals Group www.pamp.com

Commerzbank Global

Precious Metals Valcambi sa

Barrick Gold CorporationWorld Gold Council Dubai Multi Commodities

Centre

JPMorgan Chase Bank

ScotiaMocatta www.newmont.comwww.IBKCapital.com www.standardbank.com

Johnson Mattheywww.nyse.com/nyseliffeus www.commodities.sgcib.comwww.ljgold.com

Kinross Gold Corporation www.randrefinery.com INTL Commodities, INC.www.natexiscm.com


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The GFMS Groups Unique Researchapa es rogramme

r x r y u .

Not just desk-based: Over 300 companies and organisations in39 countries visited by our personnel in the last 12 months.

Annual Gold, Silver and Platinum & Palladium Surveys.

Also, weekly, monthly, quarterly & bi-annual reports plusforecasts and a wide ran e of consultanc services across allthe precious and base metals & steel.

. . .or email: [email protected]


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o r ceso r ces upp yupp y


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US Dollar Gold PriceUS Dollar Gold Price

Weekly AveragesWeekly Averages

900

1000DOLLARDOLLAR 20072007 20082008 Q1 2009Q1 2009

AverageAverage 695.39695.39 871.96871.96 908.41908.41

800 IntraIntra--YearYear 30.3%30.3% 2.7%2.7% 4.8%4.8%

YearYear--onon--YearYear 15.2%15.2% 25.4%25.4% --1.8%1.8%

600U

S$/o

US$/oz

400

5002626--week moving averageweek moving average

300

J an- J ul- J an- J ul- J an- J ul- J an- J ul- J an- J ul- J an- J ul- J an-

Source: GFMS; Thomson Reuters EcoWinSource: GFMS; Thomson Reuters EcoWin


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Euro Gold PriceEuro Gold Price

Weekly AveragesWeekly Averages780

EUROEURO 20072007 20082008 Q1 2009Q1 2009

Avera eAvera e 506.80506.80 593.09593.09 698.17698.17

580z

Euro/ozIntraIntra--YearYear 17.7%17.7% 6.9%6.9% 10.0%10.0%

YearYear--onon--YearYear 5.5%5.5% 17.0%17.0% 13.1%13.1%

480Euro/

380 2626--week moving averageweek moving average

280

J an- J ul- J an- J ul- J an- J ul- J an- J ul- J an- J ul- J an- J ul- J an-

Source: GFMS;Source: GFMS; ThomsonThomson Reuters EcoWinReuters EcoWin


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Turkish & Indian Gold PricesTurkish & Indian Gold Prices

170

180

0)

140150

2008=1

110

120

130

nd

Jan

90

100

Index(

70

Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09

Source: GFMSSource: GFMS


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Gold, Silver, Base Metals PricesGold, Silver, Base Metals Prices

and CRB S&P 500 Indicesand CRB S&P 500 Indices

GoldGold

CRB IndexCRB IndexSilverSilver

S&P 500S&P 500

CopperCopperLeadLead

Source:Source: GFMSGFMS


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Real and Nominal Gold PricesReal and Nominal Gold Prices

real US$ rice in constantreal US$ rice in constant 20082008 termsterms1800

New record nominalannual average reached in

1980 average: $1,6071980 average: $1,607

1200z

2008, but in real terms

todays prices are stil l wellshort of historical peaks.

900US$/

Real PriceReal Price

300

600

0

Source: GFMS,Source: GFMS, Thomson ReutersThomson Reuters EcoWinEcoWin


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Su lSu l


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GFMS Mine Supply DatabaseGFMS Mine Supply Database OverOver 100 com anies anal sed on a uarterl basis100 com anies anal sed on a uarterl basis

production/costs/corporate activityproduction/costs/corporate activity

Over 300 mines recorded on a annual basisOver 300 mines recorded on a annual basis

Over 320 projectsOver 320 projects projected production profile, startprojected production profile, start--upup

date,date, capexcapex, reserves, resources, reserves, resources n orma m ne pro uc on measure on a coun ryn orma m ne pro uc on measure on a coun ry-- yy--

country basiscountry basis

Costs measured at 70% of Western World gold productionCosts measured at 70% of Western World gold production

Database used to record detailed quarterly producerDatabase used to record detailed quarterly producerhedging datahedging data

MM


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Gold Mine ProductionGold Mine Production

3000Rest of World 2008 down 62t2008 down 62t

oror 2.5%2.5% oo

2500

. , , ,

1500ton

nes

1000

0


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Major Western World Mines' Cash CostsMajor Western World Mines' Cash Costs(in money(in money--ofof--thethe--day terms)day terms)

900

1000

800

600S

$/oz AustraliaAustralia

400

500

USAUSA

South AfricaSouth Africa

300

CanadaCanada

Q1-04 Q1-05 Q1-06 Q1-07 Q1.08



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Change in Supply from AboveChange in Supply from Above--Ground StocksGround Stocks

300

2008 compared to 2007

200

0tonnes

-200

-100

-300

Official Sector Scrap


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CBGA and Other Gold SalesCBGA and Other Gold Sales

700Other

CBGA

500

200

300tonnes

0

100

-100

1998 2000 2002 2004 2006 2008

CBGA refers to signatories to the Central Bank Gold Agreement

Other refers to all other countries


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Regional Changes in Scrap SupplyRegional Changes in Scrap Supply

160

100

120

60

80tonne

20

40

Middle

East

East Asia Other I ndian SC Europe North

America


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DemandDemand


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World Gold FabricationWorld Gold Fabrication

4500Developing Countries

2008 down2008 down 226t226t

3500

4000 oror 7.3%7.3% yoyyoy

2000

2500

ton

nes

1000

1500

0

500


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JewelleryJewellery Fabrication: Winners and LosersFabrication: Winners and Losers

40

(Figures represent year-on-year change, i.e. 2008 less 2007)

20

-20

es

EastAsiaNorth

America

OtherLatinAmerica

-60

-ton

MiddleEurope

-100

-80

Indian

-120 S-C


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database and thedatabase and the Brady TrinityBrady Trinitysystem.system.

,,

instrument, year of expiry and currency.instrument, year of expiry and currency.

sensitivities are calculated.sensitivities are calculated.

Com rehensive lobal hed e book anal sis is ublishedCom rehensive lobal hed e book anal sis is ublished

once per quarter by GFMS, in association withonce per quarter by GFMS, in association with SocitSocit

Gnrale.Gnrale.


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Net Market Impact of Producer HedgingNet Market Impact of Producer Hedging

150

Su l

50

-150

-

tonnes

-250 Demand

-350

.Q

1

.Q

3

.Q

1

.Q

3

.Q

1

.Q

3

.Q

1

.Q

3

.Q

1

.Q

3

.Q

1

.Q

3

.Q

1

.Q

3

.Q

1

.Q

3

.Q

1

.Q

3

00

00

01

01

0 0 03

03

0 0 05

05

06

06

07

07

08

08


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Total Accelerated Supply from Producer Hedging*Total Accelerated Supply from Producer Hedging*

4

35

40Annual average ofAnnual average of

--

3nd-year

25

30$/oz

2

to

nnes,

20

ta

ngoU

1(1000s)

10co

0

1994 1996 1998 2000 2002 2004 2006 2008

0

* outstanding forward sales, loans and net delta hedge against positions


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Investment in 2008Investment in 2008

The first seven months of the year generally saw net buying byThe first seven months of the year generally saw net buying bywestern investors:western investors:

Growth in investment led to surge above $1,000.Growth in investment led to surge above $1,000.

US dollar decline substantial, due in part to falling short term USUS dollar decline substantial, due in part to falling short term USinterest rates and downturn in US housin .interest rates and downturn in US housin .

Commodities saw large inflows, partly because of rising inflation.Commodities saw large inflows, partly because of rising inflation.

Financial market turmoil led to safe haven buying of gold.Financial market turmoil led to safe haven buying of gold. After midAfter mid--July, however, the gold market experienced a massive sellJuly, however, the gold market experienced a massive sell

off, driven primarily by a major rebound in the dollar and liquidationoff, driven primarily by a major rebound in the dollar and liquidationin the overall commodities complex, particularly crude oil.in the overall commodities complex, particularly crude oil.

From September onwards a huge deleveraging by funds in futuresFrom September onwards a huge deleveraging by funds in futuresand OTC markets took place. In contrast, purchases of physical goldand OTC markets took place. In contrast, purchases of physical goldboth directly and via ETFs grew strongly.both directly and via ETFs grew strongly.


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World InvestmentWorld Investment

25

301200Value of World Investment

20900

US

15600

$Billi

onT

onnes

5

10

300

00



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Gold Exchange Traded FundsGold Exchange Traded Funds

1800 As of 31/12/08, 321t increasefrom 31/12/07

1400

Dubai DGX Julius Baer

Xetra Gold ETF Securit ies

Goldist ZKB Gold

800

1000

to

nnes i Shares COMEX Gold Trus t SPDR Gold Shares

NewGold Gold Deben tu res GBS LSE

400

600GBS ASX Central Gold Trust

Central Fund of Canada

0

200

Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09

Source: Respective issuers


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Investors positions in gold futures volatile in 2008Investors positions in gold futures volatile in 2008(non(non--commercial & noncommercial & non--reportable positions inreportable positions in ComexComex & CBOT futures)& CBOT futures)

950

1050300

Gold PriceAverage size of netAverage size of net investorinvestor long.long.20052005 132k contracts132k contracts

20062006 135k contracts135k contracts

850200,t

housa

nds



750

150US$/oz

ns(contract

550100

Netpositio

45050

3500Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Dec-07 Jul-08 Dec-08


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Price OutlookPrice Outlook


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Supply in 2009Supply in 2009

Mine Production in the current year expected to increaseMine Production in the current year expected to increase

Asia, Australia, and west Africa providing the growth.Asia, Australia, and west Africa providing the growth. Official Sales ex ected to a ain remain weak in 2009Official Sales ex ected to a ain remain weak in 2009

with CBGA sales well below quota and countries outsidewith CBGA sales well below quota and countries outside

the Agreement remaining small scale buyers on a netthe Agreement remaining small scale buyers on a netas s. ny sa es on y expec e n .as s. ny sa es on y expec e n .

Scrap has increased substantially this yearScrap has increased substantially this year--toto--date. Fulldate. Full

in Q1 2009 scrap supply surpassedin Q1 2009 scrap supply surpassed jewelleryjewellery fabricationfabricationvolumes.volumes.


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Demand in 2009Demand in 2009

Historically high prices and increased volatility will have a dramaticHistorically high prices and increased volatility will have a dramatic

im act on lobalim act on lobal ewellereweller demand. Economic downturn alsodemand. Economic downturn also

having a marked impact in many countries. Concentrated buyinghaving a marked impact in many countries. Concentrated buyingexpected on price dips, e.g. on any excursion to $800expected on price dips, e.g. on any excursion to $800--$850.$850.

Other fabrication (excluding coins) to be hit by slowOther fabrication (excluding coins) to be hit by slow--down in globaldown in global

economic rowth.economic rowth.

Prospects for further deProspects for further de--hedging are limited by the now very lowhedging are limited by the now very low

outstandin roduceroutstandin roducer hed ebookhed ebook..

Investor interest in gold is expected to remain strong throughoutInvestor interest in gold is expected to remain strong throughout


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Investment IssuesInvestment Issues The effects of the globalThe effects of the global economic and financial crisis and theeconomic and financial crisis and thefiscal and monetary policy response to this continuefiscal and monetary policy response to this continue to provideto providea strong investment case for gold:a strong investment case for gold:

Heightened risk aversion among investors; capital preservationHeightened risk aversion among investors; capital preservationparamount,paramount,

Short term interest rates close to zero in major currencies andShort term interest rates close to zero in major currencies andnegative in real terms,negative in real terms,

ass ve r se n governmen sca e c s e.g. orecas . r onass ve r se n governmen sca e c s e.g. orecas . r onthis FY in US) that will stretch into mediumthis FY in US) that will stretch into medium--long term,long term,

Mone su l rowth ra id central banks embarkin u onMone su l rowth ra id central banks embarkin u on

quantitative easing and debt monetisation; inflation will requantitative easing and debt monetisation; inflation will re--emerge asemerge asmajor concern,major concern,

o ar par cu ar y vu nera e u o er currenc es a so no v eweo ar par cu ar y vu nera e u o er currenc es a so no v eweas attractive safe havens.as attractive safe havens.


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Price OutlookPrice Outlook Investors willInvestors will remain the principal driver of the expectedremain the principal driver of the expected nextnextleg of the bull marketleg of the bull market to ato a new highnew high above the $1,000 mark withabove the $1,000 mark with$1,100 a real ossibilit .$1,100 a real ossibilit .

In the medium term, prices could retrace from current levels;In the medium term, prices could retrace from current levels;the mid to low $800s are athe mid to low $800s are a possible low over the rest of this year,possible low over the rest of this year,

by bargain hunting and stock replenishment.by bargain hunting and stock replenishment.

Supplys reaction to price rally limited so far: mine productionSupplys reaction to price rally limited so far: mine productionexpected to rise slightly in 2009 while official sector salesexpected to rise slightly in 2009 while official sector sales shouldshouldbe weaker. Surging scrap expected to continuebe weaker. Surging scrap expected to continue materially tomaterially toaffect prices during periods of strength.affect prices during periods of strength.

Imbalances in the market suggest that sooner or later the goldImbalances in the market suggest that sooner or later the goldprice will have to retreat. Nevertheless, this is most unlikely toprice will have to retreat. Nevertheless, this is most unlikely tooccur untiloccur until endend--20092009 and potentially not until well into 2010 givenand potentially not until well into 2010 givencurrent economic conditions, which favour gold investment.current economic conditions, which favour gold investment.


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23 April 2009:23 April 2009: Platinum & Palladium Survey 2009Platinum & Palladium Survey 2009

13 May 2009:13 May 2009: World Silver Survey 2009World Silver Survey 2009

September 2009:September 2009: Gold Survey 2009Gold Survey 2009 Update 1Update 1


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Gold Survey 2009 Launch Presentation

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