The gold price Demand and Supply Where to and when? Ren Hochreiter - - PowerPoint PPT Presentation

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The gold price Demand and Supply Where to and when? Ren Hochreiter - - PowerPoint PPT Presentation

Nov 01, 2022 34 likes •306 views

The gold price Demand and Supply Where to and when? Ren Hochreiter April 2011 Private and Confidential The supply of gold 2010 The supply of gold 2010 By Country (2654 tons) Australia 259 USA 234 China 344 South Africa 206 Russia 199

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SLIDE 1

The gold price

Demand and Supply Where to and when?

René Hochreiter April 2011

Private and Confidential

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SLIDE 2

The supply of gold 2010 The supply of gold 2010

By Country (2654 tons)

China 344 Australia 259 USA 234 South Africa 206 Russia 199 Peru 162 Indonesia 132 Canada 93 Ghana 92 Other 933

2

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SLIDE 3

The demand for gold in 2010 The demand for gold in 2010

By Sector (%) By Region (2654 tons)

Investment 35%

N America 218 Oceania 13 Latin America 60 Africa 38 Middl E

By Sector (%) By Region (2654 tons)

Technology 11%

Europe 301 218 Middle East 328 Other 216 East Asia 810 CIS 85

Jewellery 54%

India 886 3

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SLIDE 4

Historical Gold Price – the last 220 years Historical Gold Price the last 220 years

4

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SLIDE 5

Historical Gold Price – 36 years (US$/oz) Historical Gold Price 36 years (US$/oz)

US i US recessions

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SLIDE 6

Historical Gold Price – 20 years (US$/oz) Historical Gold Price 20 years (US$/oz)

Very controlled and professional market since 2001

Recession 6

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SLIDE 7

Cash Cost of 332 Global Gold Miners (US$/t) Cash Cost of 332 Global Gold Miners (US$/t)

400 250 300 350 100 150 200

85 are in feasibility and pre-production stage

50 a Rica Ballarat monie) Certej Dragon e State Haile Julietta Lindero rcedes Nzema t Steyn Alaska) maque mapari Zara hanate radura hapada arigold u Hijau Dolores Piaba) Boroo Siguiri Pioneer swood Sauzal h Lanut Coipa ranium alsaka t Rand cupine Nevada Reefs St Ives fontein d Bell) Syama malina l Rand Jundee Kittila wbank Lekoa Peak hepong

  • rnkop

Pajingo Joel auTona rberton Kupol shikari amorra Agu B mp Caiman (Harm Eastern D Free J L Mer N President Rock Creek (A Sigma-Lam Tucano-Am El Ch La Her Ch Ma Batu D Aurizona ( P Raven El S North La Cooke-Rand Ur K East Porc Newmont N Union S Buffelsf Williams & Davi S Tur Centra J Meadow Tau Tsh Doo P Ta Bar Hi La Ca Cam Hemlo (W 7

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SLIDE 8

The Cost of Producing Gold (US$/oz) The Cost of Producing Gold (US$/oz)

3000 2500 1500 2000 Current Gold Price 1000 500

  • 500

202 Global Gold Miners

8

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SLIDE 9

Today’s M+I+I Resources Today s M I I Resources

Grade (g/t) Resources (million ounces) P d 3 0 2 269 Producers 3.0 2,269 Explorers 1,84 390

Source: RBC, Allan Hochreiter 9

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SLIDE 10

Junior Gold Explorers in Detail Junior Gold Explorers in Detail

Gold Resources ‘000oz

60 000 70 000

Total Resources 390moz

Gold Resources – ‘000oz

30 000 40 000 50 000

Total Resources 390moz

10 000 20 000

PMI Gold avo Ventures Lydian hern freegold ne resources Canarc Cassidy nnacle mines Premier Gold e Resources Amarillo Gold Rolling Rock Luna Gold nston Mining Alhambra Extorre

  • lden Goose

d Resources an resources Brazauro Klondex Vior inc. wthorne Gold Tyhee ena Minerals ng resources Andean Inter-Citic Rye Patch ediment Gold

  • untain Gold

Linear Gold en resources Orezone Coral Gold Keegan S Gold Corp Kiska Metals Comaplex Axmin Romarco Midway Gold na Goldfields Rainy River entral African nasty Metals Anatolia tt Resources Victoria gold pathian Gold

  • Resources

Osisko Andina Banro ntl Tower Hill Gabriel Greystar er Resources apeake Gold Wits gold Detour gold NovaGold Seabridge Bra North Goldston Pin P Riverstone A R Queen Go Grayd Mediterranea Haw Vere Sandsprin Pe Spanish Mo Gleiche US K M Guyan Ce Dyn Bret V Carp Medoro In Exete Chesa

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SLIDE 11

Junior Gold Explorers in Detail Junior Gold Explorers in Detail

Gold Grade g/t

12 00 14.00 16.00

Gold Grade – g/t

8.00 10.00 12.00 2.00 4.00 6.00

Average 1.84 g/t

0.00

Rye Patch Andina Coral Gold apeake Gold er Resources wthorne Gold Kiska Metals pathian Gold

  • untain Gold

tt Resources Seabridge ntl Tower Hill hern freegold ng resources

  • Resources

ediment Gold Alhambra ena Minerals Orezone Lydian an resources e Resources ne resources Greystar Osisko Midway Gold Detour gold Victoria gold S Gold Corp Brazauro Rainy River Luna Gold Romarco Gabriel d Resources Amarillo Gold Vior inc. NovaGold nnacle mines Keegan Premier Gold Cassidy Linear Gold entral African Anatolia Banro avo Ventures Axmin PMI Gold en resources Inter-Citic Extorre Tyhee na Goldfields Rolling Rock Wits gold

  • lden Goose

nston Mining Comaplex Andean Klondex nasty Metals Canarc Chesa Exete Haw K Carp Spanish Mo Bret In North Sandsprin Medoro Pe Vere Mediterranea Riverstone Goldston M V US Grayd A Pin P Ce Bra Gleiche Guyan R Go Queen Dyn

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Fundamental Drivers and Risks Fundamental Drivers and Risks

Fundamental Drivers Risks (downside)

Central banks to maintain loose monetary policy; liquidity creation and negative real Deterioration of investor sentiment

Fundamental Drivers Risks (downside)

p y; q y g rates are positive for metals. Investors will likely remain net gold buyers R di ifi ti i t ld i t t Gold could take a backseat in asset allocation if the global economy continues to expand at a steady pace Reserve diversification into gold is set to continue, for instance by central banks Gold demand from countries like High gold prices deter buyers of physical gold Gold demand from countries like China Increased scrap supply

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SLIDE 13

What drives the gold price? What drives the gold price?

In order of importance: The strength (or lack of it) of the US economy

In other words

A weak US$ rate and high rates of inflation = strong investment demand Hence the rise in popularity of the exchange traded fund (ETF)

Jewellery demand

  • Entrenched in the Indian and South East Asian markets
  • Fairly price inelastic
  • Fairly price inelastic

New Supply

  • Is only half of total demand
  • Is only half of total demand
  • Above surface stocks remain at 30 000 tons of gold

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Gold and the US$ Gold and the US$

Short Term Long Term Short Term Long Term

Source: Citigroup Global Markets Source: Citigroup Global Markets

Very good correlation especially in the short term Hence the strength of the dollar is the main driver of the gold price in recent years

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Gold and US Inflation Gold and US Inflation

1970 – 1982 1995 – 2010 1970 1982

Source: Citigroup Global Markets Source: Citigroup Global Markets

Higher correlation in the long term but still not as good as the correlation to the US$ Inflation not highly correlated to gold in recent years

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Outlook for the US and other economies Outlook for the US and other economies

10.00 6 00 8.00 4.00 6.00 0.00 2.00

  • 4.00
  • 2.00

2009 2010 2011 2012 2013 2014 US GDP Growth Forecast EM GDP Growth Forecast

Source: Citi Investment Research Allan Hochreiter 16 Source: Citi Investment Research, Allan Hochreiter

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SLIDE 17

ETF Holdings ETF Holdings

Source: Citigroup Global Markets Source: Citigroup Global Markets

ETF demand has increase dramatically with rising gold prices Also safe-haven investment due to global economic problems

17

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Gold Supply Gold Supply

2006 2007 2008 2009 2010e 2011e 2012e 2015e 2020e Total Supply Tonnes 3,569 3,476 3,522 4,020 4,313 4,850 5,321 5,650 5,900 Of which: Of which: Mine production Tonnes 2,485 2,478 2,416 2,575 2,652 2,644 2,700 2,850 3,000 Growth % 0.0%

  • 0.3%
  • 2.5%

6.6% 2.4% 0.3% 2.1%

  • Producer hedging

Tonnes

  • 410
  • 444
  • 358
  • 257
  • 92

50 100

  • Official sector sales

Tonnes 365 484 246 30

  • 25
  • 100
  • Secondary supply,

scrap Tonnes 1,129 958 1,218 1,672 1,753 2,181 2,621 2,800 2,900

Source: Deutsche Bank / Allan Hochreiter 18

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SLIDE 19

Gold Demand Gold Demand

2006 2007 2008 2009 2010e 2011e 2012e 2015e 2020e T t l D d T 3 569 3 476 3 522 4 020 4 313 4 850 5 321 5 800 6 850 Total Demand Tonnes 3,569 3,476 3,522 4,020 4,313 4,850 5,321 5,800 6,850 Of which: Jewellery Tonnes 2,288 2,404 2,159 1,758 1,834 1,618 1,378 1,600 2,000 Growth %

  • 15.6%

5.1%

  • 10.2%
  • 18.6%

3.5%

  • 11.1%
  • 14.8%
  • Industrial, other

Tonnes 648 671 691 650 650 650 650 700 750 Total fabrication Tonnes 2 936 3 075 2 850 2 408 2 469 2 268 2 028 2 300 2 750 demand Tonnes 2,936 3,075 2,850 2,408 2,469 2,268 2,028 2,300 2,750 Bar hoarding Tonnes 235 236 384 212 340 450 500 500 600 Coins, medallions etc Tonnes 188 210 256 400 450 500 500 500 600 medallions, etc Other, retail, dishoarding, etc. Tonnes

  • 50
  • 298
  • 289

337 239 532 593 500 400 ETF and similar Tonnes 260 253 321 663 800 1,100 1,700 2,000 2,500 Total investment demand Tonnes 633 401 672 1,612 1,829 2,582 3,293 3,500 4,100 Gold bullion price US$/oz 604 695 872 974 1,225 1,600 2,000 2,200 2,000

19 Source: Deutsche Bank / Allan Hochreiter

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SLIDE 20

Mine supply and fabrication demand Mine supply and fabrication demand

Mine Supply (tons) Gold Fabrication Demand (tons) pp y ( ) ( )

Source: Citigroup Global Markets

Mine supply declining in recent years as exploration activity decreased late last century Declining jewellery demand due to price and competing metals

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SLIDE 21

Major sources of demand for gold Major sources of demand for gold

Jewellery fabrication

  • jewellery industry is the largest source of demand. In recent years demand in this

industry has exceeded Western mine production and the shortfall has been bridged by supplies from reclaimed jewellery and other industrial scrap, as well as release of

  • fficial sector reserves

Industrial applications

  • besides jewellery, gold has many applications in a variety of industries including

aerospace, medicine, electronics (manufacture of computers, telephones, televisions, and other equipment) and dentistry

Governments and central banks buy gold to increase their reserves Private investors who make the price on the margin and are the most important p g p drivers of the gold price

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World gold production World gold production

Great depression Recent recessions

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World gold production World gold production

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Consensus forecast of 10 Analysts Consensus forecast of 10 Analysts

2011 2012 2013 2014 Platinum ($/oz) 1 810 1 937 1 815 1 774 Platinum ($/oz) 1,810 1,937 1,815 1,774 Palladium ($/oz) 685 771 706 711 Rhodium ($/oz) 2,733 3,519 3,587 3863 Gold ($/oz) 1,379 1,356 1,194 1,071 Rand/Dollar 7.1 7.42 7.59 7.80

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SLIDE 25

Outlook for the Gold Price (US$/oz) Outlook for the Gold Price (US$/oz)

2200 1600 1800 2000 1000 1200 1400 400 600 800

US weakness, Japanese quake US weakness, 2012 syndrome US weakness, Indian demand Indian demand Indian demand, US recovery Indian demand,

200 400 2010 2011 2012 2013 2014 2015 2020

y US recovery

Ten Analysts' Consensus Forecast Merrill Lynch Citigroup Deutsche Bank Forbes Manhattan Allan Hochreiter

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Conclusion Conclusion

High oil prices put the global economy at risk implying higher gold prices Turmoil in the Middle East, Africa and Europe likely to continue for years Geological disturbances (natural disasters) appear to be on the increase Geological disturbances (natural disasters) appear to be on the increase US inflation is bottoming – positive for gold US Dollar weakness will likely continue – despite all the problems Gold price should rise through 2012 to 2015 p g SA gold mines unlikely to benefit due to the rand effect B ETF B lli fi t h i Buy ETFs or Bullion as first choice Buy TSX gold shares as second choice

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SLIDE 27

Questions?

René Hochreiter 011 268-5847 rene@allanhochreiter co za rene@allanhochreiter.co.za

Private and Confidential