� Central Banks: Inactive or Active? . PHILIP KLAPWIJK � Managing Director, Precious Metals Insights Limited BLOOMBERG PRECIOUS METALS FORUM London,18 th May 2016 www.preciousmetalsinsights.com
2 Central Banks: Inactive or Active? • Official sector holds roughly 18% of above-ground gold stock • Shift from net seller to net buyer of gold since 2010 – Gross gold sales have collapsed (especially from Europe / Central Bank Gold Agreement) – China and Russia by far the most important buyers; relatively few other countries have added gold to reserves • Massive reduction in gold loans / swaps by central banks in last 10-plus years – Credit issues with counterparty commercial banks – Collapse in borrowing demand from producer hedging – Slump in gold lease rates
3 TOTAL OFFICIAL SECTOR GOLD RESERVES 45000 40000 35000 Tonnes (end-year) 30000 25000 20000 15000 10000 5000 0 1948 1958 1968 1978 1988 1998 2008 Source: IMF
4 ABOVE-GROUND STOCKS OF GOLD Total Above-Ground Stocks, end 2015 = 186,700t Other Stocks 82% Official Holdings 18% Source: WGC; IMF
5 CHANGES IN ABOVE-GROUND STOCKS BY SECTOR, 2010-15 (NET CUMULATIVE CHANGE) 8000 7000 6000 Tonnes 5000 4000 3000 2000 1000 0 Jewellery Other Fabrication Private Investment Official Sector Source: Metals Focus
6 OFFICIAL SECTOR PURCHASES & SALES (ANNUAL AVERAGE IN TONNES, BY DECADE) 600 Net Purchases 400 200 Tonnes 0 -200 Net Sales -400 -600 1950s 1960s 1970s 1980s 1990s 2000s 2010s Source: IMF; Thomson Reuters GFMS (from Bloomberg); Metals Focus
7 ANNUAL NET CHANGE IN OFFICIAL SECTOR HOLDINGS 800 Net Purchases 700 600 500 400 Annual Net Change in Tonnes 300 200 100 0 -100 -200 -300 -400 -500 -600 Net Sales -700 -800 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016F Source: Thomson Reuters GFMS (from Bloomberg); Metals Focus; Precious Metals Insights
8 TOP 15 GOLD RESERVE HOLDERS % = Gold’s share of central bank’s total reserves at market prices 12000 56% 10000 72% 8000 Tonnes 6000 4000 2% 13% 2000 6% 2% 5% 16% 3% 66% 2% 8% 20% 27% 0 Source: IMF
9 OFFICIAL SECTOR SALES CBGA 700 IMF (On-market Sales) 600 OTHERS (Net Basis) 500 400 Tonnes 300 200 100 0 1999 2001 2003 2005 2007 2009 2011 2013 2015 Source: Thomson Reuters GFMS (from Bloomberg); Metals Focus
10 TOP 15 FOREIGN EXCHANGE HOLDERS % = Gold’s share of central bank’s total reserves at market prices 3500 2% 3000 2500 US$ (Billion) 2000 2% 1500 1000 56% 6% 2% 13% 1% 5% <1% 1% 3% <1% 3% 3% 8% 500 0 Source: IMF
11 OFFICIAL SECTOR PURCHASES China + Russia Others* 700 600 500 400 Tonnes 300 200 100 0 2010 2011 2012 2013 2014 2015 2016F *Gross Purchases Source: Metals Focus; Precious Metals Insights
12 GOVERNMENT BOND YIELD CURVES 2.75 2.50 2.25 2.00 1.75 Interest Rate in % UNITED STATES 1.50 1.25 1.00 0.75 0.50 GERMANY 0.25 0.00 -0.25 JAPAN -0.50 -0.75 -1.00 3-Month 1-Year 2-Year 3-Year 5-Year 10-Year 30-Year Source: Bloomberg
13 OUTSTANDING INVESTMENT GRADE SOVEREIGN BONDS DISTRIBUTION BY YIELD* < 0% 0 - 1% > 1% *As of 21/03/16: Sovereign Debt from Australia, Canada, Denmark, Euro Area, Japan, Sweden, Switzerland, UK, USA Source: WGC
14 REAL TRADE WEIGHTED US DOLLAR INDEX 130 Real Trade Weighted US Dollar Index (Broad) 125 120 115 110 105 100 95 90 85 80 75 1973-01-01 1979-01-01 1985-01-01 1991-01-01 1997-01-01 2003-01-01 2009-01-01 2015-01-01 Source: Federal Reserve Bank of St Louis
15 GOLD PRICE 1,400 1,350 1,300 US$/oz 1,250 1,200 1,150 1,100 1,050 02/01/2014 02/07/2014 02/01/2015 02/07/2015 02/01/2016 Source: LBMA
16 OFFICIAL SECTOR LENDING & PRODUCER HEDGING OFFICIAL SECTOR PRODUCER HEDGE BOOK DEPOSITS + SWAPS (DELTA ADJUSTED) Tonnes (end-year) end-1999 end-2015 end-1999 end-2015 Source: Precious Metals Insights; Metals Focus
17 GOLD LEASING RATES (12-MONTH; ANNUAL AVERAGES) 2.5 12-Month Gold Leasing Rate in % 2.0 1.5 1.0 0.5 0.0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Various
18 EMERGING MARKETS 10-YEAR GOVERNMENT BONDS’ SPREADS OVER US 10-YEAR 1,800 1,600 Emerging Markets 10-Year Spreads in Basis Points 1,400 1,200 1,000 800 600 400 200 0 Argentina Brazil Chile Colombia Egypt Greece India Indonesia Mexico Pakistan Philippines Russia South Africa Turkey Source: Bloomberg
19 GOLD 25-DELTA RISKS REVERSAL* 2.0 Difference in Implied Volatility in % 1.0 0.0 -1.0 -2.0 -3.0 -4.0 02/01/2014 02/07/2014 02/01/2015 02/07/2015 02/01/2016 *Difference in implied volatility between 25-delta call and put options. Illustrates whether interest in the gold options market is skewed to the call side (if positive) or the put side (if negative), as well as the extent of the skew Source: Metals Focus; Bloomberg
20 Central Banks: Inactive or Active? • Net official sector purchases should continue over the next few years at least: – Existing large holders (CBGA, US, IMF) still unlikely sellers – Bias towards purchases rather than sales in Rest-of-World – China and Russia may continue to add gold to reserves • Some countries could use existing gold reserves for swaps: – Outright sales may be too politically or market sensitive – Gold swaps can provide access to hard currency loans at significantly reduced borrowing costs for countries with a low credit rating • Using options to earn a return on ‘idle’ gold reserves or to protect their value makes sense but central bank reserve managers are very conservative
21 DISCLAIMER The information and opinions contained in this presentation have been obtained from sources believed to be reliable, but no representation, guarantee, condition or warranty, express or implied, is made that such information is accurate or complete and it should not be relied upon as such. Accordingly, Precious Metals Insights Limited accepts no liability whatsoever to the people or organizations attending this presentation, or to any third party, in connection with the information contained in, or any opinion set out or inferred or implied in, this presentation. This presentation does not purport to make any recommendation or provide investment advice to the effect that any gold, silver, platinum or palladium 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, silver, platinum or palladium or any gold, silver, platinum or palladium related products. Expressions of opinion are those of Precious Metals Insights Limited only and are subject to change without notice.
Recommend
More recommend
