Commerzbank Global Precious Metals. Tanaka Precious Metals Group Valcambi sa. Dubai Multi Commodities Centre. Barrick Gold Corporation

Transcription

1 Gold Survey 2010 Philip Klapwijk Executive Chairman, GFMS Ltd. Denver Gold Group European Gold Forum 2010 Zurich, 15 th April 2010

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3 GFMS gratefully acknowledge the generous support from the following companies for this year s Gold Survey and its two Updates Commerzbank Global Precious Metals Tanaka Precious Metals Group Valcambi sa World Gold Council Dubai Multi Commodities Centre Barrick Gold Corporation JPMorgan Chase Bank ScotiaMocatta Johnson Matthey Kinross Gold Corporation INTL Commodities, INC.

4 The GFMS Group s Unique Research Capabilities & Programme Large and experienced team of 25 Analysts + Consultants. Not just desk-based: Over 300 companies and organisations in 36 countries visited dby our personnel in the last 12 months. Annual Gold, Silver, Platinum & Palladium and Copper Surveys. Also, weekly, monthly, quarterly & bi-annual reports plus forecasts and a wide range of consultancy services across all the precious and base metals & steel. For more information visit: www gfms co uk For more information visit: or charles.demeester@gfms.co.uk

5 Presentation Outline Gold Prices Supply Demand Outlook

6 US$/oz US Dollar Gold Price Weekly Averages DOLLAR Q Average , Intra-Year 2.7% 24.4% -0.5% Year-on-Year 25.4% 11.5% 22.1% US$/oz week moving average 300 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Source: GFMS; Thomson Reuters

7 Euro Gold Price Weekly Averages EURO Q Average Intra-Year 6.9% 21.5% 6.1% Year-on-Year 17.0% 17.5% 15.0% Euro/oz Euro/oz week moving average 250 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Source: GFMS; Thomson Reuters

8 2009=100 0) Index (4th Jan Gold Prices in Different Currencies Indexed Daily Series US$/oz Rupee 10g/g Euro/kg 90 Rand/kg 80 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 Source: GFMS; Thomson Reuters

9 US$/o oz Real and Nominal Gold Prices (real US$ price in constant 2009 terms) 1980 average: $1,600 Real Price New record nominal annual average reached in 2009, but in real terms today s prices are still well short of historical peaks Nominal Price 0 Source: GFMS, Thomson Reuters

10 Supply

11 GFMS Mine Supply Database Over 100 companies analysed on a quarterly basis production/costs/corporate activity Over 300 mines recorded on an annual basis production/costs/reserves/grade Over 320 projects projected production profile, start-up date, capex, reserves, resources Informal mine production measured on a country-by- country basis Costs measured at 70% of Western World gold production Bottom-up cost analysis methodology to assess $/tonne mining, ore processing and on-site administration costs, plus benchmarking of fuel, power, labour productivity and other key inputs Global l analysis and forecasting of mine supply, breakdown of industry cost structures and trends, benchmarking

12 Gold Mine Production Latin America Other 2009 up 163t North America China 3000 South Africa Australia or 6.8% yoy ton nnes Source: GFMS (Gold Survey 2010)

13 to onnes Mine Production: Winners and Losers (Figures represent year-on-year change, i.e less 2008) Indonesia China Russia Argentina Ghana Mongolia -20 South United Source: GFMS (Gold Survey 2010) Africa States

14 Major Western World Mines' Cash Costs 800 (in money-of of-the the-day terms) Australia US$/oz South Africa Other North America Latin America 100 Q1-05 Q1-06 Q1-07 Q1-08 Q1-09 Source: GFMS (Gold Survey 2010)

15 Year-on-Year Changes to Cash Costs Total Cash Costs (U US$/oz) vs 2008 Source: GFMS (Gold Survey 2010)

16 Mine Production 163 tonne increase equal to 6.8% y-o-y y in 2009; the first annual increase for three years. Strong growth from a suite of new projects and operating mines. Major country gains in Indonesia, China, Russia, Argentina, Brazil and Mexico. All regions posted growth, except for North America. Two largest falls at the mine level were seen in the United States. US dollar denominated total cash costs increased by an average 3%, or $14/oz, to $478/oz in GFMS proprietary All-In Costs measure increased by 3.9% to $717/oz.

17 Above-Ground Stocks of Gold, end-2009 Gold is not consumed like most commodities; stocks can be available at the right price Above-ground Stocks, end 2009 = 166,000t Jewellery 52% Lost & Unaccounted 2% Official Holdings 16% Other Fabrication 12% Private Investment 18% Source: GFMS (Gold Survey 2010)

18 Supply from Scrap, Hedging & Official Sales Tonnes Net Official Sector Sales Hedging Supply Scrap Secular increase in supply Flat trend since 2000? Source: GFMS

19 Change in Supply from Above-Ground Stocks compared to 2008 tonnes Official Sector Scrap Source: GFMS (Gold Survey 2010)

20 Regional Changes in Scrap Supply compared to 2008 tonnes Middle East Asia Other Indian Europe North Latin East SC America America Source: GFMS (Gold Survey 2010)

21 Jewellery Fabrication & Scrap Supply Jewellery Fabrication Tonnes Scrap Supply 04.H1 05.H1 06.H1 07.H1 08.H1 09.H1 Source: GFMS (Gold Survey 2010)

22 Above-Ground Jewellery Stocks by Region, end-2009 Indian Sub- Continent 16% Europe 20% North America 17% Other 9% Middle East 12% East Asia 25% Source: GFMS (Gold Survey 2010)

23 CBGA and Other Gold Sales Other CBGA 500 tonnes CBGA refers to signatories to the Central Bank Gold Agreement Other refers to all other countries Source: GFMS (Gold Survey 2010)

24 Demand

25 World Gold Fabrication tonnes 4500 Developing Countries 4000 Industrialised Countries down 472t or 16% yoy Source: GFMS (Gold Survey 2010)

26 Jewellery Fabrication: Winners and Losers (Figures represent year-on-year change, i.e less 2008) 0 to onnes Europe Latin America North America Other Indian S-C East Asia Middle East Source: GFMS (Gold Survey 2010)

27 Fabrication Demand in 2009 A sharp decline in jewellery demand was the principal driver of the 16% or 472t fall in fabrication demand to 2,417 t. Full year jewellery fabrication dropped by 20% or 434 tonnes, with higher gold prices and the economic downturn the primary reasons for the fall. Other fabrication fell by just 5.4% y-o-y y to 658 tonnes in However, with all coins excluded, the drop reaches 15%. Electronics demand dropped by 16%, largely due to the economic crisis, particularly in the first half.

28 GFMS Hedging Analysis GFMS enter all hedging transactions into our hedging database and the Brady Trinity system. Trades are input on a quarterly basis by company, instrument, year of expiry and currency. Using detailed market data, accurate deltas and other sensitivities are calculated. Comprehensive global hedge book analysis is published once per quarter by GFMS, in association with Société Générale.

29 Net Market Impact of Producer Hedging Supply tonnes Demand Q1 01.Q1 02.Q1 03.Q1 04.Q1 05.Q1 06.Q1 07.Q1 08.Q1 09.Q1 Source: GFMS (Gold Survey 2010)

30 Total Accelerated Supply from Producer Hedging* 4 end-year 3 Outstanding hedge book just 236 tonnes at end-2009 (1000s) tonnes, * outstanding forward sales, loans and net delta hedge against positions Source: GFMS (Gold Survey 2010)

31 Investment in 2009 World Investment (which includes the implied figure, bar hoarding and all coins) nearly doubled in 2009 to over 1,900 tonnes and reached an approximate value of $60 billion. The first few months of 2009 saw a record level of investment demand. Fears about financial stability and economic depression triggered a wave of safe haven buying, particularly in the forms of gold ETFs and physical bullion products. After a summer lull, investor activity, especially in the OTC and futures markets, picked up strongly from September onwards, primarily driven by a weaker dollar, higher price expectations and growing concerns regarding future trends in inflation. This surge in investment demand drove prices above $1,200, before a loss of momentum and some profit taking brought about a price correction in the final weeks of 2009.

32 World Investment* Value of World Investment t Tonnes US S$ Billions *World Investment is the sum of Implied Net (Dis)Investment, Bar Hoarding and all Coins & Medals. Source: GFMS (Gold Survey 2010)

33 Gold Exchange Traded Funds 2000 Claymore Swiss Gold (SGBS) ETFS NYSE Dubai b i DGX Julius Baer Xetra Gold ETF Securities Goldist ZKB Gold ishares COMEX Gold Trust 1200 SPDR Gold Trust NewGold Gold Debentures GBS LSE GBS ASX Central Gold Trust Central Fund of Canada tonnes At 31/12/2009, 617t rise from 31/12/ Jan-03 Jan-04 Jan-05 Source: Respective issuers Jan-06 Jan-07 Jan-08 Jan-09 Jan-10

34 Net positions s (contrac cts, thous sands) Investors positions in gold futures in 2009 (non-commercial & non-reportable positions in Comex & CBOT futures) Average size of net investor long k contracts k contracts k contracts k contracts Gold Price d ollars/o oz 0 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Non-commercial & non-reportable net positions in futures taken as proxy for investors positions. Source: CFTC 250

35 tonnes European & North American Europe Retail Investment North America Source: GFMS (Gold Survey 2010)

36 Price Outlook

37 Gold Supply F2010F Official Sector Scrap Mine Production 3500 tonnes Source: GFMS F

38 Supply in 2010 Mine Production forecast to increase this year but at a slower pace, just over 2%, compared to the nearly 7% year-on-year growth seen in Official Sales expected to recover in 2010, mainly driven by 191 tonnes on-market sales by the IMF. Disposals from current CBGA members to be subdued while other countries to be small scale net buyers. Scrap forecast to be lower year-on-year in first half but higher h in second half, with full year total little l changed. Overall supply growth in 2010 to slow to perhaps around 5% compared to 2009 s rapid 8% pace.

39 5,000 4,500 4,000 3,500 Gold Demand F 2010F Producer De-Hedging Other Fabrication Ton nnes 3,000 2,500 2,000 1,500 1,000 World Investment* 500 Jewellery F *World Investment is sum of Implied Net Investment, Bar Hoarding and all Coins & Medals Source: GFMS

40 Demand in 2010 In spite of a reasonable first quarter, for full year 2010 jewellery demand will recover only modestly, due to higher prices and constrained budgets, especially in light of continued economic weakness in many countries. Concentrated buying expected on price dips. Other fabrication set to recover in 2010, due to growth in the electronics sector. Prospects for further de-hedging are limited by the now very low outstanding producer hedgebook. Investor interest in gold is expected to remain strong throughout this year and potentially well into 2011.

41 Investment in 2010? Backdrop for investment in 2010 will remain positive as long as: Zero to negative real short term interest rates continue in all major currencies. Concerns over sovereign debt increase and crisis spreads from Europe to United States. t Inflation expectations grow, especially in the US with its expected $1.6 trillion FY 2010 deficit and probable debt monetization. Notwithstanding the above, risk may be growing of short-term term and temporary sell-off by investors if fears of double-dip dip trigger liquidations across all risky assets. Longer-term, gold price vulnerability is rising due to investment s exceptionally high h share of demand d and the increasing i size of investors near-market bullion stocks.

42 World Investment* & Fabrication (excluding all coins) Fabrication 3000 ( F) Tonnes World Investment *World Investment is the the sum of implied investment, bar hoarding and all coins & medals Source: GFMS

43 Price Outlook Investors will remain the principal driver of prices this year, with a breach of $1,300 in the second half still a possibility, although probability has fallen. In the short term, prices could retrace from current levels; the mid $1,000s are a possible low over the next three months, with prices in that region most likely to be eventually pushed up again by bargain hunting and stock replenishment. Supply expected to rise fairly strongly in 2010, with growth in mine production, and, from a very low base, official sector sales, the latter also expected to be concentrated in the second half. Scrap supply has fallen year-to-date but should recover in the latter part of 2010 basis higher price conditions. These will also mean that there is only a moderate recovery in fabrication demand for the calendar year as a whole. Imbalances in the market suggest that at some point the gold price will Imbalances in the market suggest that at some point the gold price will have to retreat. Nevertheless, this is most unlikely to occur on a secular basis in 2010 and potentially not until well into 2011 given current economic conditions, which in an underlying sense still favour gold investment.

44 GFMS Gold Price Forecast for rages) US$/oz (w weekly ave Forecast Average: $1, Forecast Range: $1,050-$1, Source: GFMS Jan-07 Jan-08 Jan-09 Jan-10

45 GFMS Forthcoming Events 22 April 2010: Platinum & Palladium Survey May 2010: World Silver Survey 2010 September 2010: Gold Survey 2010 Update 1

46 Disclaimer The information and opinions contained in this presentation have been obtained from sources believed to be reliable, but no representation or warranty, express or implied, is made that such information is accurate or complete and it should not be relied upon as such. This presentation does not purport to make any recommendation or provide investment advice to the effect that any ygold related transaction is appropriate p for all investment objectives, financial situations or particular needs. Prior to making any investment decisions investors should seek advice from their advisers on whether any part of this presentation is appropriate to their specific circumstances. This presentation is not, and should not be construed as, an offer or solicitation to buy or sell gold or any gold related products. Expressions of opinion are those of GFMS Ltd only and are subject to change without notice.