“the perfect gold storm” - grant's interest rate observer fall 2012.pdf · 2012. 11....
TRANSCRIPT
“The Perfect Gold Storm”
Presented by Pierre Lassonde| Tuesday October 23rd, 2012
Grant’s Interest Rate Observer Conference, New York
A gold bull market brings a production response...
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OOPS! Not this time
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0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8TSX Gold Index / Gold ($USD)
TSX GOLD/GOLD(US$)
13 week moving avg
52 week moving avg
Pierre Lassonde | “The Perfect Gold Storm” | 23 October, 2012
New finds are proving increasingly elusive...
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Represents 189 gold deposits discovered since 1990, each with at least 2m oz of gold in total reserves, resources and past production (or at least 1m oz in reserves) Data sources: Metals Economics Group – Strategies for Gold Reserves Replacement 2012
Pierre Lassonde | “The Perfect Gold Storm” | 23 October, 2012
It’s all about grade...or lack of it
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Resource nationalism is polarising production...
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New finds are taking longer to bring to market...
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Data sources: Metals Economics Group – Strategies for Gold Reserves Replacement 2012
Pierre Lassonde | “The Perfect Gold Storm” | 23 October, 2012
Analysts: Perfectly wrong forecasts
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Oil price: Costs proxy Gold price: Revenue proxy
Dead cat bounce or ninth life
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• Cut-off grades reaching limits of current technologies
• Energy (25%) & labor (40%) could provide stability
• Capex still a wild card (location, labor productivity)
• Consensus price forecast ≠ reality
Yearly gold supply – 2001 & 2011
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All the gold in the world! 171,300 tonnes
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Jewellery 50%
Private Investment
19%
Central Banks 17%
Tech 12%
Unaccounted 2%
• Value @ $1,700/oz =US$ 9.3 Trillion • ~0.78 oz/person on the planet (assuming 7 B people) • ~1 part/billion in earth’s crust
Pierre Lassonde | “The Perfect Gold Storm” | 23 October, 2012
68’
Demand continues to expand and broaden...
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Central banks return as net buyers after 20 years...
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and are not done yet...
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Investment growing steadily, but gold is significantly under-owned...
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Gold’s share of global allocations, 1980-2011
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Includes: global equity, global marketable gov't debt, global private investment stocks of gold Excludes: corp/agency debt, money markets, commodities, real estate, hedge funds, private equity
If gold’s share doubled, it would amount to c.66,000 tonnes, equivalent to 23 years of production at current levels.
Pierre Lassonde | “The Perfect Gold Storm” | 23 October, 2012
China and India account for a lion’s share of growth...
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With rising incomes driving demand in India...
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and China...
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Commodity super-cycle
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Global Debt Crisis Bottom Line: most countries have excessive debts …
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Source: IMF Fiscal Monitor, April 2012 and IMF World Economic Outlook, April 2012; DundeeWealth
Government Gross Debt% of GDP
PIIGS
Over 90%
spells trouble!
Europe’s pension liabilities are massive
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Source: Research Center for Generational Contracts, January 2009NB – Future contributions are not taken into account
AustriaBulgaria
Czech RepGermany
SpainFinlandFranceGreece
HungaryItaly
LithuaniaLatviaMalta
NetherlandsPoland
PortugalSwedenSlovakia
UK
%GDP
100% of GDP
Before euro: PIIGS regularly devalued
Pierre Lassonde | “The Perfect Gold Storm” | 23 October, 2012
PIIGS EXCHANGE RATESJanuary 1957 to December 1998
Units per Deutschemark: Jan 1957=100100
10
21.1
15.0
10.9
6.7
4.3
Log Scale
Index Value When Euro starts - 1999
24.8
Source: DundeeWealth
Gold rises and falls with FX liquidity
24
%
-36
-24
-12
0
12
24
36
48
60
82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12-14
-7
0
7
14
21
28
35
42
Global Liquidity:FX Reserves
Gold
Global Liquidity: FX Reserves + US MBaseSource: IMF, Federal Reserve
Correlation: .62
Last month: August 2012Liquidity estimated
% %
Pierre Lassonde | “The Perfect Gold Storm” | 23 October, 2012
Printing of money drives gold …
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200
350
500
650
800
950
1100
1250
1400
1550
1700
1850
82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 120.0
1.5
3.0
4.5
6.0
7.5
9.0
10.5
12.0
13.5
15.0
16.5
Global LiquidityFX Reserves (trillion$)
Gold (US$)
Last month: August 2012Liquidity estimated
Dow / Gold ratio: The Ultimate Test
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“The Perfect Gold Storm”
Presented by Pierre Lassonde| Tuesday October 23rd, 2012
Grant’s Interest Rate Observer Conference, New York
Thank you