gold survey 2010 - the silver mountain · full year jewellery fabrication dropped by 20% or 434...
TRANSCRIPT
Gold Survey 2010
Philip KlapwijkExecutive Chairman, GFMS Ltd.
London, 14th April 2010
GFMS gratefully acknowledge the generous support from the following companies for this
year’s Gold Survey and its two Updates
ScotiaMocatta
Tanaka Precious Metals Group
Kinross Gold Corporation www.randrefinery.com
Barrick Gold Corporation
www.newmont.comwww.IBKCapital.com
Johnson Matthey
World Gold Council
www.nyse.com/nyseliffeus
INTL Commodities, INC.www.natexiscm.com
www.pamp.com
Dubai Multi Commodities
Centre
www.commodities.sgcib.com
Commerzbank Global Precious Metals Valcambi sa
JPMorgan Chase Bank
www.ljgold.com
www.standardbank.com
Large and experienced team of 25 Analysts + Consultants.
Not just desk-based: Over 300 companies and organisations in 36 countries visited by 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.ukor email: [email protected]
The GFMS Group’s Unique Research Capabilities & Programme
Presentation Outline
• Gold Prices
• Supply
• Demand
• Outlook
US Dollar Gold Price Weekly Averages
26-week moving average
US$/oz
DOLLAR 2008 2009 Q1 2010
Average 871.96 972.35 1,109.12
Intra-Year 2.7% 24.4% -0.5%
Year-on-Year 25.4% 11.5% 22.1%
Source: GFMS; Thomson Reuters
Euro Gold PriceWeekly Averages
Euro/oz
26-week moving average
EURO 2008 2009 Q1 2010
Average 593.09 696.94 802.51
Intra-Year 6.9% 21.5% 6.1%
Year-on-Year 17.0% 17.5% 15.0%
Source: GFMS; Thomson Reuters
Euro/kg
US$/oz
Rupee 10g/g
Gold Prices in Different CurrenciesIndexed Daily Series
Source: GFMS; Thomson Reuters
Real and Nominal Gold Prices(real US$ price in constant 2009 terms)
Nominal Price
Real Price
Source: GFMS, Thomson Reuters
New record nominal annual average reached in
2009, but in real terms today’s prices are still well short of historical peaks.
1980 average: $1,600
Supply
Gold Supply in 2009
2008 2009 y-o-y
Mine production 2,409 2,572 6.8%
Official sector sales 232 41 -82.2%
Old scrap supply 1,316 1,674 27.2%
TOTAL SUPPLY 3,957 4,287 8.3%
Source: GFMS (Gold Survey 2010)
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 analysis and forecasting of mine supply, breakdown of industry cost structures and trends, benchmarking
Gold Mine Production
Australia
2009 up 163t
or 6.8% yoy
Source: GFMS (Gold Survey 2010)
North America
Latin America
South Africa
China
Other
Argentina
Ghana
Mine Production: Winners and Losers(Figures represent year-on-year change, i.e. 2009 less 2008)
Indonesia
United
States
China
South
AfricaSource: GFMS
Russia
Mongolia
Latin
America
North
America
South Africa
Other
Major Western World Mines' Cash Costs(in money-of-the-day terms)
Source: GFMS (Gold Survey 2010)
Australia
Year-on-Year Changes to Cash Costs
Source: GFMS (Gold Survey 2010)
464 478
+21
+10
+12
+6+5
+5+3
-4
-12
-33
2009 vs 2008
Mine Production
163 tonne increase equal to 6.8% y-o-y in 2009; the first annual increase for three years.
Strong increases from a suite of new projects and operating mines. Strong 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 2009.
GFMS’ proprietary ‘All-In’ Costs measure increased by 3.9% to $717/oz.
Above-Ground Stocks of Gold, end-2009
Above-ground Stocks, end 2009 = 166,000t
Gold is not “consumed” like most commodities; stocks can be
available at the right price…
Source: GFMS (Gold Survey 2010)
Supply from Scrap, Hedging & Official Sales
Hedging Supply
Scrap
Net Official Sector Sales
Secular increase in supply 1987-99
Flat trend since 2000?
Source: GFMS
Change in Supply from Above-Ground Stocks2009 compared to 2008
Source: GFMS (Gold Survey 2010)
Regional Changes in Scrap Supply2009 compared to 2008
Source: GFMS (Gold Survey 2010)
Jewellery Fabrication & Scrap Supply
Source: GFMS (Gold Survey 2010)
Jewellery Fabrication
Scrap Supply
Above-Ground Jewellery Stocks by Region, end-2009
Source: GFMS (Gold Survey 2010)
CBGA and Other Gold Sales
Other
CBGA
“CBGA” refers to signatories to the Central Bank Gold Agreement“Other” refers to all other countries
Source: GFMS (Gold Survey 2010)
Demand
Gold Demand in 2009
2008 2009 y-o-y
Fabrication
Jewellery 2,193 1,759 -19.8%
Other 696 658 -5.4%
Total Fabrication 2,889 2,417 -16.3%
Bar hoarding 386 187 -51.6%
Net producer de-hedging 352 254 -27.8%
Implied net investment 330 1,429 332.9%
TOTAL DEMAND 3,957 4,287 8.3%
Source: GFMS (Gold Survey 2010)
World Gold Fabrication
Developing Countries
Industrialised Countries2009 down 472t
or 16% yoy
Source: GFMS (Gold Survey 2010)
Indian
S-C
Middle
East
Europe
Jewellery Fabrication: Winners and Losers(Figures represent year-on-year change, i.e. 2009 less 2008)
East
Asia
North
AmericaOther
Latin
America
Source: GFMS (Gold Survey 2010)
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 to 658 tonnes in
2009. However, with all coins excluded, the drop reaches
15%.
• Electronics demand dropped by16%, largely due to the
economic crisis, particularly in the first half.
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.
Net Market Impact of Producer Hedging
Supply
Demand
Source: GFMS (Gold Survey 2010)
* outstanding forward sales, loans and net delta hedge against positions
Outstanding hedge book just
236 tonnes at end-2009
Total Accelerated Supply from Producer Hedging*
Source: GFMS (Gold Survey 2010)
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.
World Investment*
Value of World
Investment
*World Investment is the sum of Implied net investment, bar hoarding and all coins & medals
Source: GFMS (Gold Survey 2010)
Gold Exchange Traded Funds
Source: Respective issuers
At 31/12/2009, 617t rise
from 31/12/08
Non-commercial & non-reportable net positions in futures taken as proxy for investors‟ positions.Source: CFTC
Investors‟ positions in gold futures in 2009 (non-commercial & non-reportable positions in Comex & CBOT futures)
Gold Price2006 135k contracts
2007 157k contracts
2008 177k contracts
2009 219k contracts
Average size of net “investor” long.
European & North American
Retail Investment
Europe
North America
Source: GFMS (Gold Survey 2010)
Price Outlook
Gold Supply 2008-2010F
Mine Production
Scrap
Official Sector
Source: GFMS
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 2009.
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 in second half, with full year total little changed.
Overall supply growth in 2010 to slow to perhaps
around 5% compared to 2009’s rapid 8% pace.
Gold Demand 2008-2010F
Other Fabrication
Producer De-Hedging
*World Investment is sum of Implied Net Investment, Bar Hoarding and all Coins & Medals
Source: GFMS (Gold Survey 2010)
• Jewellery
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.
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.
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 and
temporary sell-off by investors if fears of „double-dip‟ trigger
liquidations across all „risky assets‟.
Longer-term, gold price vulnerability is rising due to investment‟s
exceptionally high share of demand and the increasing size of
investors‟ near-market bullion stocks.
World Investment* & Fabrication (excluding all coins)(1980-2010F)
Fabrication
World Investment
*World Investment = the sum of implied investment, bar hoarding and all coins
Source: GFMS (Gold Survey 2010)
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 perhaps no longer a strong probability.
• 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 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.
GFMS Gold Price Forecast for 2010
Source: GFMS
Forecast Average: $1,170
Forecast Range: $1,050-$1,300
GFMS Forthcoming Events
• 22 April 2010: Platinum & Palladium Survey 2010
• 27 May 2010: World Silver Survey 2010
• September 2010: Gold Survey 2010 – Update 1
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 gold related transaction is appropriate 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.
Producer Hedging in 2009
• Producer de-hedging generated 254 tonnes of demand in 2009.
Net supply from the mining industry increased 13% to a four-
year high.
• The delta-adjusted hedge book, at end-2009, stood at just 236
tonnes, equivalent to one month of annual mine supply.
• Major de-hedging undertaken by several key participants:
Dominated by Barrick in the second half of 2009, though well
supported by AngloGold Ashanti.
• Outlook: Given the now very limited volume (historically) of the
producer book, and its concentration among few producers,
GFMS expect a further slowing of the rate of de-hedging in 2010.
World
Investment
Jewellery Fabrication
(excluding scrap supply)
Jewellery Fabrication and World Investment Demand
(Excluding Scrap, Quarterly)
Source: GFMS; *the sum of implied, investment, bar hoarding, all coins