Gold Survey 2011 Presentation London

8/7/2019 Gold Survey 2011 Presentation London

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Executive Chairman, GFMS Ltd.Executive Chairman, GFMS Ltd.

London, 13 London, 13 th th April 2011 April 2011



G ol d S u r v e y2 0 1 1

GF M S L i mi t e d

Gold Survey 2011



GFMS gratefully acknowledge the generousGFMS gratefully acknowledge the generous

year’syear’s Gold Survey Gold Survey and its twoand its two Updates Updates

Tanaka Precious Metalswww.pamp.com Paulson & Co. Inc. www.valcambi.com

Barr ick Gold Cor orat ionCommerzbank Global JPMor an Chase Bank . .

Precious Metals

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

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

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

www.natexiscm.com



The GFMS Group’s Unique Research

Capabilities & Programme

Large and experienced team of 24 Analysts + Consultants.

Not just desk-based: Over 300 companies and organisations in41 countries visited by our personnel in the last 12 months.

Annual Gold, Silver, Platinum & Palladium and Copper Surveys.

Also, weekly, monthly, quarterly & bi-annual reports plusforecasts and a wide range of consultancy services across all

.

For more information visit: www.gfms.co.uk

or email: [email protected]



•• Gold PricesGold Prices•• SupplySupply

•• DemandDemand

•• OutlookOutlook



US Dollar Gold PriceUS Dollar Gold Price

DOLLARDOLLAR 20092009 20102010 Q1 2011Q1 2011

AverageAverage 972.35972.35 1,224.52 1,386.27

Intra-Year 24.4% 25.3% 3.6%

Year-on-Year 11.5% 25.9% 25.0%

US$/oz

2626--week moving averageweek moving average

Source: GFMS; ThomsonSource: GFMS; Thomson ReutersReuters



Euro Gold PriceEuro Gold Price

EUROEURO 20092009 20102010 Q1Q1 20112011

AverageAverage 700.19700.19 924.99924.99 1,012.321,012.32

IntraIntra--YearYear 22.3%22.3% 36.2%36.2% --3.7%3.7%

Euro/ozYearYear--onon--YearYear 18.0%18.0% 32.1%32.1% 26.2%26.2%

2626--week movin avera eweek movin avera e

Source: GFMS;Source: GFMS; ThomsonThomson ReutersReuters



Gold Prices in Different CurrenciesGold Prices in Different CurrenciesIndexed Daily SeriesIndexed Daily Series

Euro/kg US$/oz

Rupee 1 g g




Gold and Other Assets & MetalsGold and Other Assets & Metals

Silver

Indexed Daily SeriesIndexed Daily Series

Gold

CRB

US 10-yr DJIA Bon




Real and Nominal Gold PricesReal and Nominal Gold Prices

1980 average: $1,6261980 average: $1,626

’ ’ equals to over $2,248equals to over $2,248in real 2010 termsin real 2010 terms

RealReal

annual averagereached in 2010, but inreal terms today’s

PricePricepr ces are s e ow

historical peaks.

Nominal PriceNominal Price

Source: GFMS,Source: GFMS, Thomson ReutersThomson Reuters



GFMS’ Mine Su l DatabaseGFMS’ Mine Su l Database•• OverOver 100 companies analysed on a quarterly basis100 companies analysed on a quarterly basis – –

roduction costs cor orate activitroduction costs cor orate activit

•• Over 300 mines recorded on an annual basisOver 300 mines recorded on an annual basis – –

production/costs/reserves/gradeproduction/costs/reserves/grade•• Over 320 projectsOver 320 projects – – projected production profile, startprojected production profile, start--upup

date, capex, reserves, resourcesdate, capex, reserves, resources

•• -- --country basiscountry basis

••

•• BottomBottom--up cost analysis methodology to assess $/tonneup cost analysis methodology to assess $/tonne

mining, ore processing and onmining, ore processing and on--site administration costs,site administration costs,plus benchmarking of fuel, power, labour productivity andplus benchmarking of fuel, power, labour productivity andother key inputsother key inputs

,,

of industry cost structures and trends, benchmarkingof industry cost structures and trends, benchmarking



Gold Mine ProductionGold Mine Production

2010 up 99t2010 up 99t ororLatin America Other

Australia 3.8%3.8% yoyyoy

South Africa

Source: GFMS (Source: GFMS (Gold Survey Gold Survey 2011) 2011)



Mine Production: Winners and LosersMine Production: Winners and Losers(Figures represent year-on-year change, i.e. 2010 less 2009)

Australia

BurkinaFaso

China

n eStates

South

AfricaSource:Source: GFMS (GFMS (Gold Survey 2011Gold Survey 2011))

Peru



Major Western World Mines' Cash CostsMajor Western World Mines' Cash Costs

n moneyn money--oo -- ee-- ay ermsay erms

South AfricaSouth Africa

AustraliaAustralia

NorthNorthAmericaAmerica

OtherOther

LatinLatin




YearYear--onon--Year Changes to Cash CostsYear Changes to Cash Costs

+15+15+10+10

+7+7

--22

--99

+24+24 --2525

478478 5575572010 vs 20092010 vs 2009




Supply from Scrap, Hedging & OfficialSupply from Scrap, Hedging & Official SalesSales

Hedging Supply

Net Official Sector SalesFlat trend since 2000?

Scrap

Secular increase in su l 1987Secular increase in su l 1987--9999

Source: GFMSSource: GFMS



Chan e in Su l from AboveChan e in Su l from Above--Ground StocksGround Stocks2010 compared to 2009




Regional Changes in Scrap SupplyRegional Changes in Scrap Supply




Jewellery Fabrication & Scrap SupplyJewellery Fabrication & Scrap Supply

Jewellery FabricationJewellery Fabrication

Scrap SupplyScrap Supply

Source:Source: GFMS (GFMS (Gold Survey 2011Gold Survey 2011))



CBGA and Other Gold SalesCBGA and Other Gold SalesIMF on-market sales

CBGA

“ ”“Other” refers to all other countries




World Gold FabricationWorld Gold Fabrication

Developing Countries

Industrialised Countriesupup oror

10.7%10.7% yoyyoy




Jewellery Fabrication: Winners and LosersJewellery Fabrication: Winners and Losers

gures represen year-on-year c ange, .e. ess




Fabrication Demand in 2010Fabrication Demand in 2010

Total fabrication demand rebounded by 10.7% to 2,779Total fabrication demand rebounded by 10.7% to 2,779

tonnes, led by a recovery in jewellery demand.tonnes, led by a recovery in jewellery demand.

,,

11%. Most of this increase was due to India. Excluding the11%. Most of this increase was due to India. Excluding the

, ., .

Other fabrication was 9% higher yoy in 2010. With all coinsOther fabrication was 9% higher yoy in 2010. With all coins

excluded, other fabrication’s rise was a more robust 14%.excluded, other fabrication’s rise was a more robust 14%.

•• Electronics demand accounted for the bulk of gains in nonElectronics demand accounted for the bulk of gains in non-- jewellery fabrication, with demand up by 19% to a new jewellery fabrication, with demand up by 19% to a newrecord high, thanks to an improving world economy.record high, thanks to an improving world economy.



•• GFMS enter all hedging transactions into our hedgingGFMS enter all hedging transactions into our hedging

database and thedatabase and the Brad Trinit Brad Trinit s stem.s stem.

•• Trades are input on a quarterly basis by company,Trades are input on a quarterly basis by company,

•• Using detailed market data, accurate deltas and otherUsing detailed market data, accurate deltas and other

..

•• Comprehensive global hedge book analysis is publishedComprehensive global hedge book analysis is published

,,

Générale.Générale.



Net Market Im act of Producer Hed inNet Market Im act of Producer Hed in

upp y

Demand




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

Outstanding hedge book justOutstanding hedge book just

151 tonnes at end151 tonnes at end--20102010

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


I i 2010I i 2010



Investment in 2010Investment in 2010

•• World Investment (which includes the implied figure, physicalWorld Investment (which includes the implied figure, physical

, ., .

approximate value terms, however, it rose to a new record of approximate value terms, however, it rose to a new record of

66 billion.66 billion.•• After a relatively quiet start to 2010, investment accelerated in After a relatively quiet start to 2010, investment accelerated in

the second quarter. Following a summer lull, renewedthe second quarter. Following a summer lull, renewed

interest drove the gold price to successive record nominalinterest drove the gold price to successive record nominalhighs in the final quarter of the year.highs in the final quarter of the year.

•• o s sa e aven appea was ooste y t e act t at ma oro s sa e aven appea was ooste y t e act t at ma or

currencies found themselves undermined by several factors,currencies found themselves undermined by several factors,

,, --

low interest rates and quantitative easing, most notably in thelow interest rates and quantitative easing, most notably in the



WorldWorld Investment*Investment*

Value of World

*World Investment is the sum of Implied Net (Dis)Investment, Bar Investment and all Coins & Medals.*World Investment is the sum of Implied Net (Dis)Investment, Bar Investment and all Coins & Medals.SourceSource: GFMS (: GFMS (Gold Survey Gold Survey 2011) 2011)

G ld E h T d d F dG ld E h T d d F d



Gold Exchange Traded FundsGold Exchange Traded Funds

338t increase in 2010.

Source: Respective issuers



Investors’ Positions in Gold FuturesInvestors’ Positions in Gold Futures-- --

Average size of netAverage size of net “investor”“investor” long.long.

Gold Price

20092009 219k contracts219k contracts

20102010 263k contracts263k contracts

2011.Q12011.Q1 225k contracts225k contracts

Non-commercial & non-reportable net positions in futures taken as proxy for investors’ positions.Source: CFTC

Ph i l B I t tPh i l B I t t



Physical Bar InvestmentPhysical Bar Investment

Source: GFMS (Gold Survey 2011)

R t il I t tR t il I t t



Retail InvestmentRetail Investment

Europe

North America

Source: GFMS (Gold Survey 2011)



Gold Supply 2009Gold Supply 2009 2011F2011F



Gold Supply 2009Gold Supply 2009--2011F2011F

Official Sector

•Scrap

• Mine Production

Source: GFMS



Su l in 2011Su l in 2011

Mine Production forecast to increase b a similarMine Production forecast to increase b a similaramount this year, 4%, with a number of largeamount this year, 4%, with a number of large

ro ect startro ect start--u s ex ected to contribute si nificantu s ex ected to contribute si nificantquantities of gold during the year.quantities of gold during the year.

,,

forecast to post a fair increase for the full year,forecast to post a fair increase for the full year,..

Overall supply growth in 2011 currently forecast atOverall supply growth in 2011 currently forecast atcompare wit just .4 in 1 .compare wit just .4 in 1 .

Gold Demand 2009Gold Demand 2009 2011F2011F



Gold Demand 2009Gold Demand 2009--2011F2011F

Official SectorProducer De-Hedging Other Fabrication

Jeweller

*World Investment is sum of Implied Net Investment, Physical Bar Investment and all Coins & Medals

Source: GFMS

D d i 2011D d i 2011



Demand in 2011Demand in 2011

•• Jewellery demand is likely to slip back this year due toJewellery demand is likely to slip back this year due to,,

very limited.very limited.

•• er a r ca on se o con nue grow ng s year, ueer a r ca on se o con nue grow ng s year, ueto gains in the electronics sector.to gains in the electronics sector.

•• Prospects for further deProspects for further de--hedging are limited by the nowhedging are limited by the nowvery low outstanding producer hedgebook.very low outstanding producer hedgebook.

•• Net official sector purchases are likely to rise strongly,Net official sector purchases are likely to rise strongly,

following the ending of the IMF gold sales programme.following the ending of the IMF gold sales programme.•• Investment demand for gold is expected to remainInvestment demand for gold is expected to remain

Investment in 2011?Investment in 2011?



Investment in 2011?Investment in 2011?Economic backdrop for investment will remain favourable in 2011:Economic backdrop for investment will remain favourable in 2011:

Any increase in interest rates (e.g. inAny increase in interest rates (e.g. in EurozoneEurozone) will be a slow and gradual) will be a slow and gradualprocess.process.

rates to turn positive for local savers or to impact severely GDP growth.rates to turn positive for local savers or to impact severely GDP growth.

Inflation expectations to grow, particularly in light of central banks’Inflation expectations to grow, particularly in light of central banks’reluctance to raise interest rates, loose fiscal policies and high commodityreluctance to raise interest rates, loose fiscal policies and high commodity

prices.prices.

On oin soverei n debt crisis in Euro e and its s readin eventuall to theOn oin soverei n debt crisis in Euro e and its s readin eventuall to theUnited States and Japan will further undermine faith in government paper.United States and Japan will further undermine faith in government paper.

Sustainability of investment demand an issue for the longer term:Sustainability of investment demand an issue for the longer term:

Investment’s share of overall gold demand is exceptionally high byInvestment’s share of overall gold demand is exceptionally high byhistorical standards.historical standards.

Increasin size of investors’ nearIncreasin size of investors’ near--market bullion stocks rovides otentialmarket bullion stocks rovides otential for major sellfor major sell--off if/when economic backdrop for investment turns negative.off if/when economic backdrop for investment turns negative.

W ld I t tW ld I t t* &* & F b i tiF b i ti ( l di ll i )( l di ll i )



World InvestmentWorld Investment* &* & FabricationFabrication (excluding all coins)(excluding all coins)

((19801980--2011F)2011F)

FabricationFabrication

*World Investment*World Investment is theis the the sum of implied investment, bar hoarding and allthe sum of implied investment, bar hoarding and all coins & medalscoins & medalsSource:Source: GFMSGFMS

Price OutlookPrice Outlook



Price OutlookPrice Outlook• Investors will remain the principal driver of prices this year, with abreach of $1,600 in the second half still a strong possibility.

• In the short term, prices could retrace from current levels; the high$1,300s are a possible low over the next three months, with prices in that

re ion most likel to be ver well su orted b bar ain huntin and stockreplenishment.

• Supply expected to rise fairly strongly this year, with continued growth in- -.

but should recover in the latter part of 2011 basis higher price conditions.• Fabrication demand likely to fall somewhat but losses to be limited bysurges n ewe ery re ate uy ng on pr ce ps an un er y ng growt nelectronics fabrication.

• Market imbalances su est that at some oint the old rice will have to retreat. Nevertheless, this is most unlikely to occur on a secular basis in2011and potentially not until well into 2012, especially if current economicconditions, which still favour gold investment, are largely maintained.

GFMS Gold Price Forecast for 2011GFMS Gold Price Forecast for 2011



GFMS Gold Price Forecast for 2011GFMS Gold Price Forecast for 2011

Average 04/01/10 to 11/04/10: $1,111

Average 04/01/11 to 11/04/11: $1,393

Full Year 2011 Average Forecast: $1,455

Full Year 2011 Range: $1,319-$1,620

Source:Source: GFMSGFMS



obtained from sources believed to be reliable, but no representation,guarantee, condition or warranty, express or implied, is made that such

information is accurate or com lete and it should not be relied u on as such. Accordingly, GFMS Ltd accepts no liability whatsoever to the people ororganisations attending this presentation, or to any third party, in connectionwith the information contained in, or an o inion set out or inferred or im liedin, this presentation. This presentation does not purport to make any

recommendation or provide investment advice to the effect that any goldrelated transaction is appropriate for all investment objectives, financialsituations or particular needs. Prior to making any investment decisionsinvestors should seek advice from their advisers on whether any part of thispresentation is appropriate to their specific circumstances. This presentationis not, and should not be construed as, an offer or solicitation to buy or sellgold or any gold related products. Expressions of opinion are those of GFMSLtd only and are subject to change without notice.

Gold Survey 2011 Presentation London

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