The Perfect Gold Storm. Presented by Pierre Lassonde Tuesday October 23 rd, 2012 Grant s Interest Rate Observer Conference, New York

Transcription

1 The Perfect Gold Storm Presented by Pierre Lassonde Tuesday October 23 rd, 2012 Grant s Interest Rate Observer Conference, New York

2 A gold bull market brings a production response... 2

3 OOPS! Not this time 0.8 TSX Gold Index / Gold ($USD) TSX GOLD/GOLD(US$) 13 week moving avg 52 week moving avg 0 3

4 New finds are proving increasingly elusive... Represents 189 gold deposits discovered since 1990, each with at least 2m oz of gold in total reserves, resources and past production (or at least 1m oz in reserves) Data sources: Metals Economics Group Strategies for Gold Reserves Replacement

5 It s all about grade...or lack of it 5

6 Resource nationalism is polarising production... 6

7 New finds are taking longer to bring to market... Data sources: Metals Economics Group Strategies for Gold Reserves Replacement

8 Analysts: Perfectly wrong forecasts Oil price: Costs proxy Gold price: Revenue proxy 8

9 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 9

10 Yearly gold supply 2001 &

11 All the gold in the world! 171,300 tonnes Private Investment 19% Central Banks 17% Tech 12% Unaccounted 2% 68 Jewellery 50% $1,700/oz =US$ 9.3 Trillion ~0.78 oz/person on the planet (assuming 7 B people) ~1 part/billion in earth s crust 11

12 Demand continues to expand and broaden... 12

13 Central banks return as net buyers after 20 years... 13

14 and are not done yet... 14

15 Investment growing steadily, but gold is significantly under-owned... 15

16 Gold s share of global allocations, Includes: global equity, global marketable gov't debt, global private investment stocks of gold Excludes: corp/agency debt, money markets, commodities, real estate, hedge funds, private equity If gold s share doubled, it would amount to c.66,000 tonnes, equivalent to 23 years of production at current levels. 16

17 China and India account for a lion s share of growth... 17

18 With rising incomes driving demand in India... 18

19 and China... 19

20 Commodity super-cycle 20

21 Global Debt Crisis Bottom Line: most countries have excessive debts Government Gross Debt % of GDP PIIGS Over 90% spells trouble! Source: IMF Fiscal Monitor, April 2012 and IMF World Economic Outlook, April 2012; DundeeWealth 21

22 Europe s pension liabilities are massive %GDP Austria Bulgaria Czech Rep Germany Spain Finland France Greece Hungary Italy Lithuania Latvia Malta Netherlands Poland Portugal Sweden Slovakia UK 100% of GDP Source: Research Center for Generational Contracts, January 2009 NB Future contributions are not taken into account 22 22

23 Before euro: PIIGS regularly devalued 100 Log Scale PIIGS EXCHANGE RATES January 1957 to December 1998 Units per Deutschemark: Jan 1957=100 Index Value When Euro starts Source: DundeeWealth

24 Gold rises and falls with FX liquidity % % % Global Liquidity: FX Reserves Gold Correlation:.62 Last month: August 2012 Liquidity estimated Global Liquidity: FX Reserves + US MBase Source: IMF, Federal Reserve 24

25 Printing of money drives gold Global Liquidity FX Reserves (trillion$) Gold (US$) Last month: August 2012 Liquidity estimated

26 Dow / Gold ratio: The Ultimate Test 26

27 Thank you The Perfect Gold Storm Presented by Pierre Lassonde Tuesday October 23 rd, 2012 Grant s Interest Rate Observer Conference, New York