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The Strategic Case for Gold Amsterdam 11 October 2009

The Strategic Case for Gold Amsterdam 11 October 2009. Disclaimer.

gary-rogers
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The Strategic Case for Gold Amsterdam 11 October 2009

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  1. The Strategic Case for GoldAmsterdam11 October 2009

  2. 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 the World Gold Council only and are subject to change without notice.

  3. Introducing World Gold Council MEMBERS Agnico Eagle AngloGold Ashanti Barrick Gold Corporation Coeur d’Alene Mines Corporation Compania de Minas Buenaventura Eldorado Gold Goldcorp Gold Fields Limited Harmony IAM Gold Kinross Gold Corporation Newmont Mining Corporation Peter Hambro Mining Yamana Gold ASSOCIATES Cedimin China National Gold Corporation The Hutti Gold Mines Company Kahama Mining Minera Yanacocha S.R.L. Mitsubishi Materials Corporation Royal Gold Inc. • Funded by the world’s leading gold mining companies • We promote the use of gold in all its forms through marketing activities in major international markets. • Offices in key consuming countries: • India • China • Middle East • United States

  4. Outline • Demand and supply fundamentals – resilient demand and constrained supply • The outlook • Key investment attributes • A hedge against inflation • A hedge against dollar movements • A safe haven and insurance policy • A diversifier

  5. Demand and Supply Fundamentals

  6. Q2 tonnage down 9% on Q2 2008

  7. Price volatility a constraint on jewellery demand

  8. China the lone positive jewellery story

  9. A breakdown of investment demand Source: GFMS

  10. European flows remain very buoyant

  11. ETF flows generally long term in nature

  12. Share of identifiable demand Source: GFMS

  13. Total Q2 supply down 23% on Q1 2009

  14. Net central bank sales have continued to reduce

  15. The Strategic Investment Casefor Gold

  16. Why gold? A safe haven and form of insurance • A simple asset • No default risk • No counterparty risk • Liquid • Gold’s history • As a means of exchange • As the centre of the global monetary system

  17. Gold is a hedge against inflation uncertainty • Inflation or deflation? • Gold is a long run hedge against inflation • Yet, a period of deflation suggests ongoing economic uncertainty, so safe haven flows would remain underpinned • Medium to longer term, inflation is a significant risk

  18. Gold is a long run hedge against the US dollar

  19. Gold is a diversifier Redtext denotes that correlation coefficient is not significantly different from zero. Violet text denotes that correlation coefficient is negative (5% level of significance).

  20. Gold is not particularly volatile

  21. where does gold fit into a portfolio?

  22. Results with gold added

  23. Over and above a commodity basket Optimal Portfolios Composition Map volatility 4.3% 4.3% 4.6% 4.9% 5.4% 6.0% 6.7% 7.3% 8.0% 8.8% 9.6% 10.5% 11.4% 0.0% 10.0% 20.0% 30.0% 40.0% allocation 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% UK Gilts Short UK Gilts Medium UK Gilts Long Global Bonds UK Equities Europe Ex UK Equities North American Equities Pacific Equities Gold Commodities

  24. Summary • The demand for gold has shown considerable resilience across the economic cycle • The three sectors provide a source of balance • The outlook for supply remains constrained • High levels of uncertainty – economic, inflation, currency – are supportive for gold • Gold’s biggest strength is its diversification properties - the focus on diversification and risk management are expected to continue

  25. Questions? www.gold.orgwww.invest.gold.org

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