Quo Vadis? ABA Gold Seminar Marcus Grubb: Managing Director: Investment & Strategy March 19th 2014 Disclaimer This presentation is provided solely for general information and educational purposes. It is not, and should not be construed as, an offer to buy or sell, or as a solicitation of an offer to buy or sell, gold, any gold related products or any other products, securities or investments. It does not, and should not be construed as acting to, sponsor, advocate, endorse or promote gold, any gold related products or any other products, securities or investments. This presentation does not purport to make any recommendations or provide any investment or other advice with respect to the purchase, sale or other disposition of gold, any gold related products or any other products, securities or investments, including without limitation, any advice to the effect that any gold related transaction is appropriate for any investment objective or financial situation of a prospective investor. A decision to invest in gold, any gold related products or any other products, securities or investments should not be made in reliance on any of the statements in this presentation. Before making any investment decision, prospective investors should seek advice from their financial advisers, take into account their individual financial needs and circumstances and carefully consider the risks associated with such investment decision. While the accuracy of any information communicated herewith has been checked, neither the World Gold Council nor any of its affiliates can guarantee such accuracy. In no event will the World Gold Council or any of its affiliates be liable for any decision made or action taken in reliance on the information in this presentation or for any consequential, special, punitive, incidental, indirect or similar damages arising from, related to or connected with this presentation even if notified of the possibility of such damages. Expressions of opinion are those of the author and are subject to change without notice. World Gold Council | Quo Vadis? | March 2014 2 Key themes 1. History: What happened to gold in 2013? 2. Valuation: Your hedge asset got cheaper 3. Tapering: Fed policy, interest rates and asset prices 4. Commodities: cycles and gold demand 5. Gold demand: India, West to East, China & Central banks 6. Gold supply: Mine production and all-in costs 7. Is the market bottoming?: Futures positioning and ETFs 8. 2014: Investors are ‘risk-on’ - hedge and ‘buy the tails’ 9. Conclusion World Gold Council | Quo Vadis? | March 2014 3 The bull market World Gold Council | Quo Vadis? | March 2014 4 Comex net long and ETF redemptions World Gold Council | Quo Vadis? | March 2014 5 Gold moves West to East.. World Gold Council | Quo Vadis? | March 2014 6 Record consumer demand World Gold Council | Quo Vadis? | March 2014 7 Gold relatively is not expensive World Gold Council | Quo Vadis? | March 2014 8 ‘Yellen’ Fed, easy money and rising asset prices World Gold Council | Quo Vadis? | March 2014 9 Rising nominal and real rates are not gold bearish World Gold Council | Quo Vadis? | March 2014 10 Commodity boom is still in its infancy World Gold Council | Quo Vadis? | March 2014 11 Consumers keen for more gold World Gold Council | Quo Vadis? | March 2014 12 Record consumer demand offset by ETF outflows World Gold Council | Quo Vadis? | March 2014 13 Time line of recent India gold regulations World Gold Council | Quo Vadis? | March 2014 14 Supply squeeze caused elevated premiums in India World Gold Council | Quo Vadis? | March 2014 15 India strong in spite of import curbs +374% +260% +100% + 1 0 5 % +174% +146% +6% +42% +47% +100% World Gold Council | Quo Vadis? | March 2014 Chinese net imports World Gold Council | Quo Vadis? | March 2014 17 China growth shift is gold bullish Source: Barclays “China’s Commodity Intensity. The Dragon’s appetite is changing” World Gold Council | Quo Vadis? | March 2014 18 Long term gold demand drivers intact o o • Asia is getting richer, share of global GDP now 31% from 24% over a decade • Growing middle class according to an E&Y survey in 2013 - China 2010 - 150 million 2020 - 500 million - India o 2010 - 50 million o 2020 - 200 million • A further 500 million in the urban middle class in Chinas and India by 2020 World Gold Council | Quo Vadis? | March 2014 19 Central banks are buyers World Gold Council | Quo Vadis? | March 2014 20 Gold price is at all-in cost, reserve grade declining World Gold Council | Quo Vadis? | March 2014 21 Recycled gold declined, down 14% in 2013 World Gold Council | Quo Vadis? | March 2014 22 Mine production is rising but will flatten World Gold Council | Quo Vadis? | March 2014 23 Significant new discoveries are few 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) Source: Metals Economics Group – Strategies for Gold Reserves Replacement 2012 World Gold Council | Quo Vadis? | March 2014 24 World Gold Council | Gold as an asset class | June 2012 25 Gold price is de-coupling from ETF redemptions World Gold Council | Quo Vadis? | March 2014 26 Futures positioning is improving World Gold Council | Quo Vadis? | March 2014 27 Previous gold retracements – hold on.. World Gold Council | Quo Vadis? | March 2014 28 2014 dollar/€ a factor, we expect weakness World Gold Council | Quo Vadis? | March 2014 29 Analyst sentiment is improving World Gold Council | Quo Vadis? | March 2014 30 Conclusion • 2014 asset allocation, lower likely returns increased risk • Cheaper gold, demand -2%, consumers took the ETF gold • If real rates stay low, lax monetary policy is good for gold • Gold market D/S balance is being restored, deficit • Gold pull backs typically are followed by a 70% recovery • Gold price and the ETFs de-coupling, ETFs stabilizing • Gold likely to have a small up year, could surprise in 2014 • Medium term demand strong, metal will return to deficit • Don’t trade your hedge as you take more risk World Gold Council | Quo Vadis? | March 2014 31 World Gold Council research – simple to access To download or subscribe to our gold investment research studies: www.gold.org/investment/research Or click on the link below: Research app for investors – available on iPad / iPhone Or scan: Ease of navigation, several views available 33
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