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Neil Meader

Above-ground Gold Stocks:A Growing Menace or a

Phantom Menace?

LBMA/LPPM Precious Metals Conference, Vienna20th October 2015

Introduction

Coverage:

• Jewellery

• Other fabricated products

• Retail investment

• Institutional investment

The scale of above-ground gold stocks

The quality of above-ground gold stocks

Location detail: jewellery & retail investor stocks

Vienna, October 2015

Other Fabricated Products

Coverage:• electronics applications• decorative & other industrial end-uses• dentistry




Dentistry:• potential scrap already included• remaining stocks largely inaccessible





Decorative & other industrial end-uses:• dispersion means potential for scrap limited





Decorative & other industrial end-uses:• dispersion means potential for scrap limited

Electronics applications:• scrap already included• historic fabrication increasingly inaccessible• price may not drive volumes


The Scale of Jewellery Stocks

Reasons why stocks may be understated

• conversion from bar & coin





Reasons why stocks may be overstated

• production losses






• production losses

Conclusion

• true figure closer to 83,000 tonnes

• grey areas significant

• range of 78-88,000 tonnes plausible

• always a large multiple of annual mine production


The Quality of Jewellery Stocks

Far-from-market stocks:

• artefacts & modern high end pieces





Mass market stickiness – return rates low






Jewellery demand almost always a “net” positive


“Net” Jewellery Consumption

Vienna, October 2015Source: Metallis Consulting, Consolidated Gold Fields Ltd & GFMS Thomson Reuters





Jewellery demand almost always a “net” positive

Consumption & scrap price dependence

• negative demand only with high investment & prices


The Location of Jewellery Stocks

Vienna, October 2015Source: Metallis Consulting

The Scale of Investor Stocks


• institutional “allowance” too small






• conversion to jewellery






• conversion to jewellery

Conclusion

• true figure a little under 36,000 tonnes

• grey areas significant

• range of 34-39,000 tonnes plausible

• again, a high multiple of annual mine production


Retail Investment

Vienna, October 2015Source: Metallis Consulting, Metals Focus & GFMS Thomson Reuters

The Location of Retail Investor Stocks

Vienna, October 2015Source: Metallis Consulting

Institutional Stock Possibilities

Volumes before the bull run: a few hundred tonnes?




Increase 2001-12 (basis market balance): c. 4,000 tonnes

Implied end-2012 total stock: c. 4,500 tonnes






Feasibility of total:

• change 2012-2014: drop of at least 500 tonnes

• contribution from ETFs and Comex means change in other institutional stocks (basis market balance):

o 2001-2012: increase of < 1,000 tonnes

o 2012-2014: growth of a few hundred tonnes

• complication of lending being unwound






Feasibility of total:

• change 2012-2014: drop of at least 500 tonnes

• contribution from ETFs and Comex means change in other institutional stocks (basis market balance):

o 2001-2012: increase of < 1,000 tonnes

o 2012-2014: growth of a few hundred tonnes

• complication of lending being unwound

Any threat from these stocks?


© Metallis Consulting Limited, October 2015

Disclaimer:

Although every effort has been made to undertake this work with care and diligence, Metallis Consulting Ltd cannot guarantee the accuracy of any information, forecasts or assumptions. Nothing contained in this presentation constitutes an offer to buy or sell securities or commodities and nor does it constitute advice in relation to the buying or selling of investments. It is published only for informational purposes. Metallis Consulting Ltd does not accept responsibility for any losses or damages arising directly or indirectly from the use of this presentation.

For information about our products and services contact Neil Meader on:

[email protected]

Tel: +44 (0)7949 005 404

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