Gold Focus 2016 Launch Philip Klapwijk, Chief Consultant Toronto, 31 st March 2016
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Presentation Outline Review of 2015 Economic backdrop: Largely negative for gold (US monetary policy, US dollar, commodity prices, inflation, stocks) Key Supply Factors Key Demand Factors Main physical gold markets: China and India Market & Price Outlook for 2016 Q&A
2015: price weakness continued over much of the year US$/oz 2.000 1.800 1.600 1.400 1.200 ene-11 ene-12 ene-13 ene-14 ene-15 ene-16 Gold Price 50 DMA 100 DMA Source: Bloomberg
Probability of a rate hike by FOMC meeting* % 100 90 80 70 60 50 40 30 20 10 0 ene-15 abr-15 jul-15 oct-15 December Meeting September Meeting *Percentage probability inferred by bond prices Source: Bloomberg
US dollar strength (high level) did not help US$/oz 1.800 1.600 1.400 1.200 ene-13 jul-13 ene-14 jul-14 ene-15 jul-15 Gold Price Dollar Index Dollar Index 105 100 95 90 85 80 75 70 Source: Bloomberg
Western investors continued equities focus weighed on gold US$/oz 1.800 Index 2.200 1.600 1.400 1.200 2.000 1.800 1.600 1.400 ene-13 jul-13 ene-14 jul-14 ene-15 jul-15 Gold Price S&P 500 1.200 Source: Bloomberg
Net selling from institutional investors continued in 2015 Tonnes 3.500 3.000 2.500 2.000 1.500 ene-13 jul-13 ene-14 jul-14 ene-15 jul-15 ene-16 ETF Comex Source: Bloomberg
Presentation Outline Review of 2015 Economic backdrop: Largely negative for gold (US monetary policy, US dollar, commodity prices, inflation, stocks) Key Supply Factors Key Demand Factors Main physical gold markets: China and India Market & Price Outlook for 2016 Q&A
Mine production reaches a record high (3,211 tonnes) Canada 157t, +4% Kazakhstan 64t, +29% Russia 269t, +1% China 460t, 0% Mexico 133t, +18% Ghana 95t, -11% Namibia 6t, +184% Indonesia 113t, +20% Source: Metals Focus
Global gold mine production Tonnes 3.400 3.200 3.000 2.800 2.600 2.400 2.200 US$/oz 1800 1600 1400 1200 1000 800 2.000 2010 2011 2012 2013 2014 2015 600 Mine Production Gold Price Source: Metals Focus, Bloomberg
Mine costs continued to fall US$/oz 1.200 800 600 400 200 0 2010 2011 2012 2013 2014 2015 Total Cash Total Production All-In Sustaining * Total Cash Cost plus Depreciation equals Total Production Cost Source: Metals Focus Gold Mine Cost Service
Mine costs fall the contribution from currencies US$/oz 2.000 1.800 1.600 1.400 1.200 ene-10 ene-11 ene-12 ene-13 ene-14 ene-15 ene-16 Actual Gold Price (US$/oz) Rebased Gold Price* (US$/oz) The blue line represents a rebased gold price, that has been adjusted for local currency movements from the world s largest 20 gold producing countries. Local currencies have been indexed from January 2010, and weighted by the countries 2015 gold production volumes. Source: Bloomberg, Metals Focus
Recycling in 2015 Tonnes 2.000 Index, 2010=100 140 1.600 120 1.200 100 800 80 400 60 0 2010 2011 2012 2013 2014 2015 40 Global Recycling Developing Countries Index Industrialised Countries Index Source: Metals Focus
Presentation Outline Review of 2015 Economic backdrop: Largely negative for gold (US monetary policy, US dollar, commodity prices, inflation, stocks) Key Supply Factors Key Demand Factors Main physical gold markets: China and India Market & Price Outlook for 2016 Q&A
Gold demand jewellery & physical investment Tonnes 3.000 2.500 2.000 1.500 500 US$/oz 2.000 1.800 1.600 1.400 1.200 0 2010 2011 2012 2013 2014 2015 Jewellery Investment Gold Price 800 Source: Metals Focus, Bloomberg
Jewellery consumption, 2014 vs 2015 Tonnes 2.500 2.450 2.400 2.350 2,481t -62-33 -26 +3 +38-4 2,397t 2.300 2.250 2.200 2014 China/HK Middle East Russia Western* India Others 2015 *North America & Europe excluding the CIS Source: Metals Focus
Physical investment, 2014 vs 2015 Tonnes 1.150 1.100 1.050 +37 +26 +25-35 -11-28 950 1,008t 1,021t 900 850 2014 China/HK Europe North America Middle East India Others 2015 Source: Metals Focus
Chinese and Indian gold demand* Tonnes 1.600 1.400 1.200 800 600 400 200 0 2010 2011 2012 2013 2014 2015 China India *Jewellery, physical investment and industrial demand Source: Metals Focus
Mainland China official bullion imports Tonnes 1.600 1.400 1.200 800 600 400 200 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Imports to China via Hong Kong Imports directly into Mainland China (N.B. Imports from Hong Kong are net of China exports to the SAR as recorded in Hong Kong import data) Source: Various; Metals Focus
Chinese demand over 2010-2015 Tonnes 1.600 1.400 1.200 800 600 400 200 0 2010 2011 2012 2013 2014 2015 Jewellery Physical Investment Industrial Demand Source: Metals Focus
Shares of gold jewellery segments in China 100% 80% 60% 40% 20% 0% 2014 2015 24K Plain 24K 4-9s 18K Source: Metals Focus
India official bullion imports Tonnes 1.200 800 600 400 200 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Switzerland UAE South Africa Australia Others Source: Indian Ministry of Commerce
Indian demand over 2010-2015 Tonnes 1.200 800 600 400 200 0 2010 2011 2012 2013 2014 2015 Jewellery Physical Investment Industrial Demand Source: Metals Focus
Central bank purchases remained strong Tonnes 700 600 500 400 300 200 100 0 2010 2011 2012 2013 2014 2015 Gross Purchases Gross Sales Net Purchases Source: Metals Focus
Market remained in balance in 2015 Tonnes 6.000 US$/oz 1.800 5.000 4.000 1.600 1.400 3.000 2.000 1.200 0 2010 2011 2012 2013 2014 2015 Supply Demand Gold Price 800 Source: Metals Focus, Bloomberg
Presentation Outline Review of 2015 Economic backdrop: Largely negative for gold (US monetary policy, US dollar, commodity prices, inflation, stocks) Key Supply Factors Key Demand Factors Main physical gold markets: China and India Market & Price Outlook for 2016 Q&A
Global supply forecast for 2016 Tonnes 4.350 4.340 4.330-14 +1 4.320 4,348t -9 4,325t 4.310 4.300 2015 Mine Production Recycling Hedging 2016F Source: Metals Focus
Costs curve helps explain why production is holding up US$/oz 1.750 1.500 1.250 750 2015 Gold Price ($1,160/oz) US$/oz 1.750 1.500 1.250 750 500 250 0 500 Total Cash - 2015 250 All-In Sustaining - 2015 0 0 20 40 60 80 100 Cumulative Gold Production (%) Source: Metals Focus Gold Mine Cost Service
Global demand forecast for 2016 Tonnes 4.400 4.350 +16 4.300-19 -10 4.250 4.200 4,359t -35 4,269t 4.150 2015 Jewellery Industrial Investment Official Sector 2016F Source: Metals Focus. Jewellery basis fabrication series.
Gold market should remain broadly balanced in 2016 Tonnes 6.000 5.000 4.000 3.000 2.000 0 2012 2013 2014 2015 2016 F Supply Demand Source: Metals Focus
Changing expectations for path of US interest rates* 1,0 0,8 0,6 0,4 0,2 0,0 ene-16 mar-16 abr-16 jun-16 jul-16 sep-16 nov-16 dic-16 17/12/2015 24/03/2016 *inferred by bond prices Source: Bloomberg
USD/EUR USD/EUR exchange rate over last two years 1,45 1,40 1,35 1,30 1,25 1,20 1,15 1,10 1,05 1,00 4/1/14 7/1/14 10/1/14 1/1/15 4/1/15 7/1/15 10/1/15 1/1/16 Source: European Central Bank
US PCE Core Inflation (year-on-year %) US PCE Core Inflation Rate 2,0 1,9 1,8 1,7 1,6 1,5 1,4 1,3 1,2 1,1 1,0 ene-15 mar-15 may-15 jul-15 sep-15 nov-15 ene-16 Source: FRB St Louis
Turnaround in institutional investors activity in 2016 Tonnes 2.500 2.250 2.000 1.750 1.500 1.250 jul-14 oct-14 ene-15 abr-15 jul-15 oct-15 ene-16 ETF Comex Source: Bloomberg
Gold 25-Delta Risks Reversal* Difference in Implied Volatility (%) 6 4 2 0-2 -4-6 -8 2010 2011 2012 2013 2014 2015 2016 *The difference in implied volatility between 25-delta call and put options. This illustrates whether investor interest in the option market is skewed to the call side (if positive) or put side (if negative), as well as the extent of the skew. Source: Bloomberg 1 Month 1 Year
Metals Focus quarterly gold price forecast US$/oz 1.400 1.350 1.300 1.250 1.200 1.150 1.100 1.050 ene-15 jul-15 ene-16 jul-16 Spot/Average Source: Metals Focus, Bloomberg
Metals Focus quarterly gold price forecast US$/oz 1.400 1.350 1.300 1.250 1.200 1.150 1.100 1.050 ene-15 jul-15 ene-16 jul-16 Spot/Average High Low Source: Metals Focus, Bloomberg
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