Gold and silver – the ultimate FX tradesby David Morrison

CD08UK.025.051111

Disclaimer

This presentation should not be relied on as a substitute for extensive independent research before making your investment decisions. Global Forex Trading is merely providing this for your general information. The views of this author are not necessarily those of Global Forex Trading, its owners, officers, agents or other employees. In addition, any projections or views of the market provided by this author may not prove to be accurate. Global Forex Trading and the currency research team will not be responsible for any losses incurred on investments as a result of any information contained in this presentation. Global Forex Trading and the currency research team do not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought.

Products and services offered by GFT are provided for general purposes only. Any information provided through use of these products and services should be independently evaluated before any trades are placed.

Trading forex, CFDs, and spread bets is risky and not suitable for everyone. All of these products (excluding Binary CFDs and Binary Spread Bets) are leveraged, and you can lose more than your initial deposit. Don’t trade more than you can afford to lose. GFT Global Markets UK Ltd. is authorised and regulated by the Financial Services Authority (FSA) for forex, CFDs, and Spread Bets. The FSA does not regulate Binary CFDs and Binary Spread Bets. © 2012 Global Futures and Forex, Ltd. All rights reserved.

Agenda

• Gold’s ascent against individual currencies

• Gold – bulls versus bears

• Silver – poised to outperform?

• The role of central banks

Gold in USD

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.

Source: Bloomberg

Gold in euros

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.

Source: Bloomberg

Gold in Japanese yen

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.

Source: Bloomberg

Gold in British pounds

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.

Source: Bloomberg

Gold in Brazilian reals

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.

Source: Bloomberg

Gold in Australian dollars

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.

Source: Bloomberg

Gold in Indian rupees

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.

Source: Bloomberg

In percentage terms:

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.

Source: DealBook® 360

Over the last 12 years, gold has risen:

• 217% versus AUD• 319% versus EUR• 334% versus JPY• 415% versus GBP• 513% versus BRL• 560% versus USD• 650% versus IDR

Gold

The case against:

• A “Barbarous Relic”

• Doesn’t earn interest

• Doesn’t pay a dividend

• Storage cost

• It is hoarded

• Rally has lasted over 10 years

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.

Gold

The bull argument:

• Safe haven

• Store of value

• Medium of exchange

• Alternative to fiat currencies

• No one else’s liability

• Still under-owned

• Inflation-adjusted – to match 1980s highs: $2,500 for gold; $140 for silver

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.

Safe asset shortage?

“In the future, there will be rising demand for safe assets, but fewer of them will be available, increasing the price for safety in global markets”

IMF Global Financial Stability Report April 2012

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.

Safe asset shortage?

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.

Gold – weekly chart

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.

Source: DealBook® 360

Gold – Daily chart

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.

Source: DealBook® 360

Silver

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.

Source: DealBook® 360

• More volatile than gold

• Industrial metal with “inelastic” demand

• “Consumed” – low recycling rates

• Investment metal with “elastic” demand -dependent on economic environment

• Like gold - a tangible asset without counterparty risk

Silver – weekly chart

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.

Source: DealBook® 360

Silver – Daily chart

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.

Source: DealBook® 360

Gold:silver ratio

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.

Source: DealBook® 360

• Natural abundance roughly 1:10 - the ratio apparent in antiquity

• Current production: around 6 times more silver than gold produced annually

• Unlike gold, above-ground silver stocks drawn down and used up

• 1:100 in 1990s – precious metals bear market

• Currently 1:50/55

• Historical average 1:16

Chart of Gold : Silver Ratio (Source goldprice.org)

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.

Source: DealBook® 360

Central banks

• In 2011, central banks net buyers for second successive year

• Prior to 2009 – CBs net sellers for over 20 years

• Purchased 439.7 tonnes in 2011 (up from 77 tonnes in 2010 - WGC)

• Largest amount since end of Bretton Woods in 1971

• India/China/Russia and other emerging economies

• Hong Kong exports to China in February up 20% month-on-month

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.

Central banks - Intervention

• US Federal Reserve - QE1, QE lite, QE2, Operation Twist

• Nov 2011 – Fed-backed dollar swaps; Bank of Japan intervention

• Dec 2011 – ECB €489 billion LTRO – 523 banks

• Feb 2012 – Bank of England – APF raised by £50 billion to £325 billion

• Feb 2012 – BoJ $129 billion QE. Running total: $825 billion

• Feb 2012 – FOMC – rates on hold 2014?

• Feb 2012 - €529 billion LTRO – 800 banks

• QE3, LTRO3, BoE, BoJ?

Currency debasement

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.

Central bank balance sheets

Global money supply

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.

Disclaimer

This presentation should not be relied on as a substitute for extensive independent research before making your investment decisions. Global Forex Trading is merely providing this for your general information. The views of this author are not necessarily those of Global Forex Trading, its owners, officers, agents or other employees. In addition, any projections or views of the market provided by this author may not prove to be accurate. Global Forex Trading and the currency research team will not be responsible for any losses incurred on investments as a result of any information contained in this presentation. Global Forex Trading and the currency research team do not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought.

Products and services offered by GFT are provided for general purposes only. Any information provided through use of these products and services should be independently evaluated before any trades are placed.

Trading forex, CFDs, and spread bets is risky and not suitable for everyone. All of these products (excluding Binary CFDs and Binary Spread Bets) are leveraged, and you can lose more than your initial deposit. Don’t trade more than you can afford to lose. GFT Global Markets UK Ltd. is authorised and regulated by the Financial Services Authority (FSA) for forex, CFDs, and Spread Bets. The FSA does not regulate Binary CFDs and Binary Spread Bets. © 2012 Global Futures and Forex, Ltd. All rights reserved.