GOLDGROUP 1: Charles, Farah, Joanne, Pamela, Raymond, Xi

Topics• Introduction• Gold Price Movement• Gold vs. US Dollar• Gold vs. Inflation• Gold vs. Stock• QE (Quantitative Easing)• Investment Strategies• The Future of Gold Price

Introduction• Usages of Gold• Demand• Gold Production

Demand• Individual Demand

• Worldwide Central Banks Demand

- The U.S. interest rate is near zero.- Investors prefer holding and purchasing more GOLD.- i.e. Chinese citizens stocking up

- i.e. Chinese Central Banks

Three Major Purposes• Jewelry Market• Investment Purpose• Industrial Use

Worldwide Jewelry • Jewelry accounted for 54% of gold

demand, which totaled 3812 tonnes, in 2010.• Jewelry Market• India, China, & the US are the largest

consumers of gold for jewelry.

Industrial Use • Manufacturing of electronic & medical

devices.• Electronic:

• Medical devices

Electronic components made with gold are highly reliable.

i.e. Dentistry

Gold ProductionChina, South Africa, the US., Australia, the Russian Federation and Peru.

2011- China, 355 tons;- Australia: 270 tons- United States: 237 tons- Total (World): 2710 tonnes

Gold Price Movement

What factors drive the gold price?

• Current Events; Breaking News.• Devaluate USD• Others

i.e. Higher Cost of Gold Mining

Gold Price Movement

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Gold Price

Gold Price % change

2012 Jan Feb Mar Apr May Jun Jul Aug Sep Oct

Gold Price (in $) 1656.12 1742.62 1673.77 1650.07 1585.5 1596.7 1593.91 1626.03 1744.45 1757.11Gold Price %

change 0.23% 5.22% -3.95% -1.42% -3.91% 0.71% -0.17% 2.02 7.28 0.73%

Why???• August 31st, US Fed hinted that more money stimulus to

come. Mr. Bernanke defended his monetary policy.• September 6th, Mr. Draghi in Europe confirmed earlier

rumors that the ECB would buy bonds of several European countries that are in trouble.

• September 7th, the unemployment figures in the US showed worse than expected results. 

RESULT

Gold closed the trading session on September 7th with a solid gain of  2.7%.

How Gold Price Moved on Sept. 7th, 2012

Gold Price vs. US Dollar• The price of gold is generally inversely

related to the value of the US dollar.• Why?

Long Term 1970 - 2011

Recent 2011 – 2012

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US Dollar vs. Interest Rate• Real Interest Rate is positively related to

USD demand. (r = n – i; r = 0.5 in 2011)• US Federal Reserve to keep interest rates

near zero until 2014.• Interest Rate Forecast

Prediction • Predictions (Obama vs. Romney)

1. Obama Win: r keeps low; USD continues devaluating.

2. Romney Win: Ben Bernanke will be replaced. r may increase, and USD may appreciate.

• In a recent interview on GoldSilverWorlds.com, Grant Williams stated that: “The current gold price breakout looks like it has some legs at the moment. If we get QE3 during the Fed meeting next week, I expect gold to make a further run.”

Gold Price vs. Inflation• Inflation• Definition: The general rise in the price

level (rather than an increase in the money supply) and use changes in the Consumer Price Index as the measure of monthly inflation.

Gold Price vs. Inflation

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Gold Price and Stock Relationship

Inverse Growth Relationship

When stock goes up, investors turn to stock market which enables them to make more profits in a short time rather than a long-term investment in gold. So I assume that they are more likely to sell their gold rather than keeping it. This drives the growth of gold price down.

Monthly Growth

QE, Stock, Gold Relationship

• QE-------Stock• Stock------Gold Price• QE indirectly affect the Gold Price

QE----Quantitative Easing• Definition:BASICALLY: Printing $$

QE, Stock & Gold Price??

Hypothesis: Printing more money, as the investor gain more money, they will invest in stock as short term investment. Since they make more profit in shorter time, investors tend to sell their long term investment such as gold. The growth of gold price goes down because more people are selling gold.

Current Investment Strategies• $$ $$ • Gold and Silver

• Long term• Gold mining stocks, exchange traded fund, gold mutual fund. • Jewelry

• Catalyze the economy• Construction, resources• Mining stocks• Short-term: after QE3• Long-term: after economic recovery

• Oil, Oil-related product stocks• Housing

The Future of Gold PriceAs we are expecting inflation in 2013, the gold price will continuous to go up

Jim Rogers: “I am not selling my gold and silver … gold and silver will both go much, much higher over the course of the bull market.”

(The above quote was attributed to Jim Rogers in an October 2012 interview. Rogers has been an advocate of physical assets and commodities, including gold, throughout his investing career.)

Referencehttp://www.guardian.co.uk/business/2012/jan/25/federal-reserve-interest-rates-near-zero

http://www.forbes.com/sites/billconerly/2012/05/02/interest-rate-forecast-2012-2013/

http://goldsilverworlds.com/gold-silver-price-news/gold-price-breakout-continuing-on-september-7th-2012/

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