WHY ARE GOLD AND SILVER MARKETS SO VOLATILE? REVIEW OF GOLD & - - PowerPoint PPT Presentation

WHY ARE GOLD AND SILVER MARKETS SO VOLATILE?

• REVIEW OF GOLD & SILVER PRICE VOLATILITY
• WILL THIS VOLATILITY CONTINUE?
• HOW TO DEAL WITH IT?

• GOLD PRICE VOLATILITY
• Source: Thomson Reuters GFMS

• GOLD AND SILVER PRICE VOLATILITY
• Source: Thomson Reuters GFMS

• GOLD AND SILVER PRICE VOLATILITY:

ANNUAL AVERAGES 1980-2011 IN %*

*Annual Averages of Monthly Volatility; 2012 = Jan-Jul period Source: Thomson Reuters GFMS

• %&%'"(!")(*"

GOLD AND SILVER ANNUAL TRADING RANGES AS A % OF ANNUAL AVERAGE PRICE

• !"#$%&

Source: Thomson Reuters GFMS

• GOLD AND SILVER ANNUAL TRADING

RANGES IN 2011 USD TERMS

+(!,#*"-

• Source: Thomson Reuters GFMS

+"$,#*"-

GOLD DEMAND: 2002 VS. 2011

World Investment* 16% Other 9% Fabrication (excl. all coins) 75%

2002: 4,045 tonnes 2011: 4,486 tonnes

Other 10% Fabrication (excl. all coins) 54%

Source: Thomson Reuters GFMS

16% World Investment* 36%

*World Investment is the sum of Implied Net Investment, Physical Bar Investment and all Coins & Medals

SILVER DEMAND: 2002 VS. 2011

World Investment* 2% Other 3% Fabrication (excl. all coins) 95%

2002: 26,468 tonnes 2011: 32,365 tonnes

World Investment* 27% Fabrication (excl. all coins) 73%

Source: Thomson Reuters GFMS *World Investment is the sum of Implied Net Investment, Physical Bar Investment and all Coins & Medals

• WORLD INVESTMENT’S SHARE

OF TOTAL DEMAND

• Source: Thomson Reuters GFMS

GOLD FUTURES AND ETFs TOTAL ANNUAL TURNOVER

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./.&('"(00 /&&("#.&('"(0

• ."# +&

*Includes Comex, Tocom, CBOT/NYSE Liffe, SGE Spot, SGE AU(T+D), SHFE, MCX, NCDEX, DGCX **SPDR Gold Shares.

Source: Respective issuers

SILVER FUTURES AND ETFs TOTAL ANNUAL TURNOVER

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./.&('"(00 /&&("#.&('"(0

• ."# +&

*Includes Comex, Tocom, CBOT/NYSE Liffe, SGE(T+D), MCX, NCDEX ** iShares Silver Trust.

Source: Respective issuers

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GOLD FUTURES TURNOVER VS. FABRICATION

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*Includes Comex, Tocom, CBOT/NYSE Liffe, SGE Spot, SGE AU(T+D), SHFE, MCX, NCDEX, DGCX.

• Source: Thomson Reuters GFMS, Relevant Exchanges

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SILVER FUTURES TURNOVER VS. FABRICATION

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*Includes Comex, Tocom, CBOT/NYSE Liffe, SGE(T+D), MCX, NCDEX.

• Source: Thomson Reuters GFMS, Relevant Exchanges

1 1 1 1 1 *(("+-

,

CORRELATION BETWEEN PRICE AND NET “INVESTOR” LONG POSITION ON COMEX

1 1 1 1 1

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,

Source: Thomson Reuters GFMS

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GOLD PRICE VOLATILITY AND NET NON-COMMERCIAL LONG POSITIONS IN COMEX FUTURES

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Source: CFTC

Net Non-Commercial Long Positions

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SILVER PRICE VOLATILITY AND NET NON-COMMERCIAL LONG POSITIONS IN COMEX FUTURES

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Net Non-Commercial Long Positions

Source: CFTC

1 1 1 1 5"$$*"

QUARTERLY CORRELATION OF DAILY SILVER PRICE WITH GOLD & COPPER PRICES

Gold

1 1 1 1 1

• 5(("5

Source: Thomson Reuters GFMS

Copper

• GOLD, SILVER, COPPER AND USD/GBP VOLATILITY

ANNUAL AVERAGES

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• $%&'
• Source: Thomson Reuters GFMS

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WHY ARE GOLD AND SILVER MARKETS SO VOLATILE?

• REVIEW OF GOLD & SILVER PRICE VOLATILITY
• WILL THIS VOLATILITY CONTINUE?
• HOW TO DEAL WITH IT?

WORLD INVESTMENT’S SHARE OF GOLD DEMAND

FORECASTS FOR 2012-15

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)(77"# *"+,-. ()+/0. 1+2-.

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1 *

Source: Thomson Reuters GFMS

WORLD INVESTMENT’S SHARE OF SILVER DEMAND

FORECASTS FOR 2012-15

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()

)(77"# *"+,-. ()+/0. 1+2-.

• ("$,"6

1 *

Source: Thomson Reuters GFMS

• &("#.&('"(

COMEX’S SHARE OF GLOBAL GOLD AND SILVER FUTURES MARKETS’ TURNOVER

• ("$7/&&("

*Includes Comex, Tocom, CBOT/NYSE Liffe, SGE(T+D), MCX, NCDEX. **Includes Comex. Tocom, CBOT/NYSE Liffe, SGE Spot, SGE AU(T+D), SHFE, MCX, NCDEX, DGCX.

• Source: Thomson Reuters GFMS, Relevant Exchanges

THOMSON REUTERS GFMS GOLD PRICE FORECAST FOR 2012-15

• 9:;

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• 89:

Volatility

%

Source: Thomson Reuters GFMS

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THOMSON REUTERS GFMS SILVER PRICE FORECAST FOR 2012-15

• 9:;

Volatility

?

• 89:

'"()(*"/("*# +<#"5#"-

Source: Thomson Reuters GFMS

WHY ARE GOLD AND SILVER MARKETS SO VOLATILE?

• REVIEW OF GOLD & SILVER PRICE VOLATILITY
• WILL THIS VOLATILITY CONTINUE?
• HOW TO DEAL WITH IT?

HOW TO DEAL WITH IT?

• Information and Analysis: Limit risk through continuous

monitoring of market and data releases, news stories/events that can impact on investor activity and the price

• Enforce disciplined and well thought out trading strategies

(e.g. ‘unemotional’ thinking + ‘hard’ stops) (e.g. ‘unemotional’ thinking + ‘hard’ stops)

• Use options for protection if these are ‘cost effective’ (e.g.

straddles, collars or volatility swaps)

• For those with access to credit, take advantage of gold loans

and other consignment programmes that eliminate or at least mitigate price risk.

DISCLAIMER

The information and opinions contained in this presentation have been obtained from sources believed to be reliable, but no representation, guarantee, condition

• r warranty, express or implied, is made that such information is accurate or

complete and it should not be relied upon as such. Accordingly, Reuters Ltd 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
• r

solicitation to buy

• r

sell gold, silver, platinum

• r

palladium

• r

any gold, silver, platinum or palladium related products. Expressions of opinion are those of Reuters Ltd only and are subject to change without notice.