The Perfect Gold Storm

7/30/2019 The Perfect Gold Storm

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The Perfect Gold Storm

Presented by Pierre Lassonde| Tuesday October 23rd, 2012

Grants Interest Rate Observer Conference, New York


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A gold bull market brings a production response...

2Pierre Lassonde | The Perfect Gold Storm | 23 October, 2012


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OOPS! Not this t ime

3

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

TSX Gold Index / Gold ($USD)

TSX GOLD/GOLD(US$)

13 week moving avg

52 week moving avg

Pierre Lassonde | The Perfect Gold Storm | 23 October, 2012


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New finds are proving increasingly elusive...

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Represents 189 gold deposits discovered since 1990, each with at least 2m oz of gold in total reserves, resourcesand past production (or at least 1m oz in reserves)

Data sources: Metals Economics Group Strategies for Gold Reserves Replacement 2012



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Its all about grade...or lack of it



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Resource nationalism is polarising production...



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New finds are taking longer to bring to market...

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Data sources: Metals Economics Group Strategies for Gold Reserves Replacement 2012



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Analysts: Perfectly wrong forecasts


Oil price: Costs proxy Gold price: Revenue proxy


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Dead cat bounce or ninth life


Cut-off grades reaching limits of current technologies

Energy (25%) & labor (40%) could provide stability

Capex still a wild card (location, labor productivity)

Consensus price forecast reality


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Yearly gold supply 2001 & 2011



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All the gold in the world! 171,300 tonnes

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Jewellery 50%

Private

Investment

19%

Central

Banks

17%

Tech

12%

Unaccounted

2%

Value @ $1,700/oz =US$ 9.3 Trillion

~0.78 oz/person on the planet (assuming 7 B people)

~1 part/billion in earths crust


68


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Demand continues to expand and broaden...



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Central banks return as net buyers after 20 years...



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and are not done yet...



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Investment growing steadily, but gold is significantly

under-owned...



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Golds share of global allocations, 1980-2011

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Includes: global equity, global marketable gov't debt, global private investment stocks of goldExcludes: corp/agency debt, money markets, commodities, real estate, hedge funds, private equity

If golds share doubled, it would amount to c.66,000 tonnes, equivalent to 23 years of production atcurrent levels.



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China and India account for a lions share of growth...



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With rising incomes driving demand in India...



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and China...



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Commodity super-cycle



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Global Debt Crisis

Bottom Line: most countries have excessive debts

Pierre Lassonde | The Perfect Gold Storm | 23 October, 2012 21

Source: IMF Fiscal Monit or, April 2012 and IMF World Economic Outlo ok, April 2012; DundeeWealth

Government Gross Debt% of GDP

PIIGS

Over

90%spells

trouble!


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Europes pension liabilit ies are massive


Source: Research Center fo r Generational Cont racts, January 2009NB Futu re contributions are not taken into account

Aust ria

BulgariaCzech Rep

GermanySpain

FinlandFranceGreece

HungaryItaly

LithuaniaLatviaMalta

Netherlands

PolandPortugalSwedenSlovakia

UK

%GDP

100% of GDP


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Before euro: PIIGS regularly devalued


PIIGS EXCHANGE RATESJanuary 1957 to December 1998Units per Deutschemark: Jan 1957=100

100

10

21.1

15.0

10.9

6.7

4.3

Log Scale

Index ValueWhen Eurostarts - 1999

24.8

Source: DundeeWealth


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Gold rises and falls with FX liquidity

24

%

-36

-24

-12

0

12

24

36

48

60

82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12

-14

-7

0

7

14

21

28

35

42

Global Liquid ity:FX Reserves

Gold

Global Liqu idi ty: FX Reserves + US MBaseSource: IMF, Federal Reserve

Correlation: .62

Last month: August 2012Liquidity estimated

% %



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Printing of money drives gold


200

350

500

650

800

950

1100

1250

1400

1550

1700

1850

82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12

0.0

1.5

3.0

4.5

6.0

7.5

9.0

10.5

12.0

13.5

15.0

16.5

Global Liquidity

FX Reserves (trillion$)

Gold (US$)

Last month: August 2012Liquidity estimated


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Dow / Gold ratio: The Ultimate Test



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The Perfect Gold Storm

Presented by Pierre Lassonde| Tuesday October 23rd, 2012

Grants Interest Rate Observer Conference, New York

Thank you

The Perfect Gold Storm

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