gold price: jan - dec 2012 us$ · new year, gold will be counted at 100 percent of its market value...
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DMCC Gold Bulletin
Issue 1.2, H2 2012
1,500
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Feb
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US$
Months
Gold Price: Jan - Dec 2012 US$
Gold Price
Gold Price Movement (Jan – Dec, 2012)
Dear Colleagues,
Best wishes for the New Year! 2012 was a bright year for DMCC, having officially launched two versions of the “UAE
Gold Bullion Coin”, the introduction of DMCC‟s Guidelines on Responsible Sourcing of Precious Metals, and the
successful outcome of the inaugural Dubai Precious Metals Conference. We would like to thank you for your
continued support and participation in these initiatives that keep Dubai on the map as one of the world‟s leading gold
trading hubs and continues to position DMCC as one of the world‟s leading commodities centre.
Issue 1.2, H2 2012
(US$ per Oz)
Average price of gold for H1 2012 was US$1,651 which represents a 14% increase from H1 2011. The average price for H1 2011 was US$ 1,445
International Market News
How high will the implementation of Basel
III force the nominal price of gold?
Basel III is a global regulatory standard agreed upon by
the members of the Basel Committee on Banking
Supervision as an attempt to harden banks‟ balance
sheets against another financial meltdown. As of the
new year, gold will be counted at 100 percent of its
market value when a bank‟s assets are audited.
Moreover, under Basel III, a bank‟s tier one assets must
rise from 4 percent to 6 percent of its total assets.
The average price of gold from January to December
2012 was US$ 1,669 which is 7% more than the same
period last year.
Philip Klapwijk, Global Head of Metals Analytics at
Thomson Reuters GFMS has estimated the price of
gold to reach US$1,800 before the end of the year,
which is 5% less than the US$1,900 highs of 2011.
DMCC GOLD BULLETIN
This means that many banks are likely to replace
substantial portions of their mortgage-backed securities
and bond portfolios with gold. The more gold a bank
acquires, the more likely that bank will survive the next
wave of sovereign defaults, either through outright
inability to pay (such as Greece, as long as it retains the
Euro) or debt monetization (like the endless “quantitative
easing” programs of the U.S. Federal Reserve). Source:
Bullion Bulletin
We expect Basel III to be a big contributor to the rise in price of gold in 2013 and beyond.
Source: LBMA
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DMCC Gold Bulletin
Issue 1.2, H2 2012
2
Gold demand remains resilient
The below chart shows the breakdown of gold demand at the price per ounce for various sectors:
It has been estimated that all the gold ever mined by the end of 2009 aggregates to 165,000 tonnes. That is barely enough gold to fill three Olympic-sized swimming pools.
World gold holdings (Source: World Gold Council)
Holding Percentage
Jewellery 52%
Central banks 18%
Investment (bars, coins)
16%
Industrial 12%
Unaccounted 2%
Global gold demand in Q3 2012 was 1,084.6 tonnes (t),
down 11% from the record Q3 2011 figure of 1,223.5t.
In comparison to the previous quarter gold demand was
up 10% and the Q3 2012 demand was above the five
year quarterly average of 984.7t therefore gold demand
remains resilient.
In value terms, gold demand in Q3 2012 was 14% lower
year on year at US$57.6bn and the average gold price
of $1,652/oz was down 3% from the record average Q3
2011 price.
Overall investment demand was 16% below the
exceptional levels in Q3 2011, which was led by a steep
drop of the coin and bar segment caused predominantly
because of the weak demand from western markets.
Demand from this category was 30% weaker year on
year at 293.9 tonnes. It is important to note Q3 2011
saw a record 422.1 tonnes of bar and coin demand
which was almost double the prevailing 5 year
quarterly average.
India was the strongest performing market in the third
quarter with year on year growth of 7% and 12% in
jewellery and investment segments respectively. The
market accounted for 30% of global consumer
demand at 223.1 tonnes.
Gold is trading at a lifetime high in India now in Rupee
terms. Gold prices shot up on account of the rise in
price in international markets as well as depreciation
of the local currency against the US dollar. In spite of
this in some regions a decent demand still persists
due to wedding season.
Source: World Gold Council
Q3'12 volume, tonnes Change - Q3'12 - Q3'11, tonnes Change - Q3'12 - Q3'11, %
-11%
-31%
56%
-30%
-6%
-2%
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3
DMCC Gold Bulletin
Issue 1.2, H2 2012
Market Perspective
Dubai Gold Trade H1 2012
In H1 2012 the total amount of gold imported into Dubai
was at 421 tonnes valued at US$20.1 billion while export
volume was at 310 tonnes and valued at $16.3 billion.
Dubai‟s top trading partners were India, Switzerland, and
Turkey. These three countries make up ~50% of the
trade with Dubai. Dubai exported 103 tonnes of gold
valued at $7 billion to India; this is about 33% of Dubai‟s
total gold exports (in terms of weight). In the same period
Dubai received 33 tonnes from India valued at $2 billion
which represents 8% of Dubai‟s imported gold (in terms
of weight).
China in Review
China offers a massive gold market, albeit one that is
tightly controlled. The country is the world‟s biggest
gold producer and ranked as the No. 2 gold
consumer in the third quarter of this year. It has
official gold reserves of 1,054 metric tons, the world‟s
sixth-largest, World Gold Council data shows.
Since the 3rd
of December, 2012, China allows over-
the-counter gold trading between banks for the first
time, a significant financial reform for the world‟s
second-largest buyer of the precious metal.
The move reflects the Chinese government‟s latest
effort to develop Shanghai into a major gold trading
center, and mirrors similar developments in the
country‟s currency and oil markets.
“The introduction of interbank trading is intended to
develop China into a more liquid market such as
London, and demonstrates the government‟s
readiness to open the market to greater participation
by international banks” said Jeremy East, global head
of metals trading at Standard Chartered PLC.
Did You Know?
The DMCC Tradeflow platform now offers the gold trading community a way to make use of inventory stored in the UAE and turn these resources into assets.
Once traders have registered ownership of their gold in this way, DMCC Tradeflow provides several services from which warrant holders can draw benefit. First, a trader can electronically transfer ownership of gold to another trader, without the gold ever leaving the vault. A trader can also pledge the gold stated on the Warrant as underlying collateral to secure more favourable financing. This is essentially mortgaging stored gold in favour of financiers, to guarantee a working capital loan. The platform also provides an escrow service that enables trade between two entities with no prior business relationship, with DMCC acting as a neutral third party to ensure secure transfer of both gold and funds between the parties.
(Source: Dubai Customs Statistics Department)
421
20.1
310
16.3
Tonnes USD Value Billion
H1 2012 Dubai Gold Trade
Import
Export
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DMCC Gold Bulletin
Issue 1.2, H2 2012
4
Dialogue with
Frederic Panizzuti, CEO, MKS Precious Metals DMCC
How do you see gold?
Gold is viewed an asset class
investment in its own right and also
functions as a sort of insurance
policy. I am going to stay away from
the word “safe haven” as a
terminology for gold. I say this
because there was a couple of
times gold lost 7-8% in the
afternoon and by night time it had
regained all that it had lost. This is
how an asset might react, but you
would not expect that to be the
action of a true “safe Haven” asset.
What is the price outlook on the yellow metal in 2013? I was speaking recently at the
Middle East Investment Summit
where I was asked to provide a
forecast for gold in 1 year as well as
in 5 years. My 1 year forecast was
US$2,050 and my five year forecast
was US$1,200. A relatively
provocative statement, but it served
for the participants to realise that
price developments are not a one-
way street and that expectations
change when the underlying
fundamentals of a market are
shifting.
My one year forecast is based on
the fact that the US will quickly
deal with the fiscal cliff; which is in
the political interest of both parties.
The US will also raise the debt
ceiling which will play a major role
in the price of gold and also take
care of other long term issues. The
low interest yielding environment is
here to stay for quite a while yet
and that should help to strengthen
gold‟s case as an asset class.
Most major Central Banks of the
world are busy trying to debase
their currency through major
stimulus programmes and that
might also prove to be helpful for
the evaluation of gold as a hard
“currency” asset.
The Euro sovereign debt crisis will
go on; the German election in
Sept. 2013 will lead to „sticking
plasters‟.
My engine for growth will be China
and the ASEAN region
(Association of Southeast Asian
Nations). The emergence of China
into the world economic scene as
a new leader in the gold market is
also bound to have an impact.
China and India are providing
potentially 40 per cent of the
worlds yearly physical offtake for
gold. The growing interest of the
Chinese population for gold,
coupled with the cultural affinities
of the Indian population for gold,
create a stable if not even stronger
base case scenario for future gold
price support.
I do believe there will be more of a
soft landing next year, with the US
and China leading the way, Europe
is lagging behind but 2 out of 3
aren‟t that bad.
For the longer-term view: Some of the drivers for gold, that
brought us to the current price
levels, will not be there anymore. If
you buy gold at $1,800 and in 3
years time you sell it at $1,300, you
should be happy, because you have
lost money on approximately 5 per
cent, maximum 10 per cent of your
portfolio. This is still good assuming
that the other 95% of your portfolio
would have done well. Investments
in Gold should, in the view of our
Bank, form 5 but maximum 10 per
cent of a prudently managed
portfolio.It is important to look at the
individual drivers that have led the
market to be in the current situation.
Should, over time, these drivers do
not exist or change fundamentally,
then we might see the gold price
potentially to drop in 5 years, e.g.
due to a significantly higher global
interest rate environment. The
positive news for gold prices in the
future are of course, that other fresh
drivers might appear, like for
example: strong inflationary
tendencies, new geo-political
tensions, continued risk
diversification from Central Banks
accumulating more gold as part of
their diversifed currency portfolios.
How does ENBD cater to the market on the gold front?
Our products are specially
structured for our Dubai market in
general and for our specific
customer needs in particular.. Dubai
is home to a very competitive and
vibrant physical market.
EmiratesNBD is actively providing
gold loans on a fixed, as well as
“unfixed” basis, gold savings
certificates and the digital Gold
investment account. We expect to
add loans against physical gold,
inventory financing for the
professional industry, loans against
the Gold savings Certificates and
Silver related products in the very
near future.
Dialogue with
Gerhard Schubert, Head of Precious Metals, Emirates NBD
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5
DMCC Gold Bulletin
Issue 1.2, H2 2012
The Dubai Multi Commodities Centre issued its
international DMCC „Responsible Sourcing of Precious
Metals Review Protocol‟ in November 2012.
In June this year, DMCC made it a mandatory
requirement for Dubai Good Delivery („DGD‟) refineries
to implement all of the provisions of the DMCC Practical
Guidance for Responsible Sourcing of Precious Metals,
as a pre-requisite for DGD members to continue their
membership. DGD members are now self-implementing
the initial steps to be in a position to be audited and
publish reports on their level of conformity with the
DMCC guidance by June 2013.
The DMCC Review Protocol will provide guidance to
international audit firms for conducting assessments on
DGD member refineries‟ due diligence processes, as
well as ensure a level of conformity when implementing
DMCC‟s Practical Guidance for Responsible Sourcing
of Precious Metals.
Gautam Sashittal, Chief Operating Officer, DMCC, said:
“The „Dubai Good Delivery‟ standard is a world-class
robust international benchmark for the production of
gold and silver, and the Review Protocol will enable
DGD member refineries to implement the concluding
steps of DMCC‟s Practical Guidance by engaging the
services of DMCC-approved assurance providers
and/or auditing entities.
“Following the Organisation for Economic Co-Operation
and Development‟s (OECD) launch of its „Draft
Supplement on Gold in November 2011,‟ intended for
conducting due diligence for responsible sourcing of
gold, DMCC led the UAE precious metals industry in
introducing its 5-step Practical Guidance in April 2012.
The introduction of the DMCC Review Protocol is the
natural next step to ensuring responsible sourcing
throughout DGD accredited refiners‟ supply chain and
will serve as an international industry benchmark.”
DMCC continues to be a part of the OECD‟s interim
governance group for the implementation of their
guidance and has taken further steps to make
compliance with these guidelines a mandatory
requirement for all DGD-accredited refineries through a
host of activities, including practical workshops.
The first series of workshops were launched in July and
were primarily aimed at UAE-based gold trading
organisations to explain the DMCC Practical Guidance
for Responsible Sourcing of Precious Metals in detail,
and the related procedures that should be implemented
across the supply chain.
DMCC has also been in discussions with concerned
UAE governmental agencies to ensure that the Practical
Guidance for Responsible Sourcing of Precious Metals
is implemented across the UAE.
Hassan Nasser, Director, Compliance and Inspection,
DMCC, said:
“DMCC plays an integral role in ensuring that the UAE
provides precious metals industry participants a secure
and regulated environment with the right infrastructure
and practices that will continue to allow them to
participate in the global markets. As a major global
trading hub for gold and as a government authority,
leading the development and the implementation of the
OECD guidelines demonstrates the DMCC‟s
commitment to promote responsible and fair trade
practices in the UAE.”
Today, Dubai is one of the foremost gold centres in the
world, with trade totalling 1,200 tonnes ($56 billion in
value) in 2011. The Practical Guidance series of
workshops are currently being held at the Almas
Conference Centre in Almas Tower, Jumeirah Lakes
Towers, and those interested in participating can email
DMCC on [email protected].
DMCC issues International Responsible Sourcing of Precious Metals Review Protocol
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DMCC Gold Bulletin
Issue 1.2, H2 2012
Almas Tower Level 2 PO Box: 48800 Dubai U.A.E T. +971 4 433 67 11 F. +971 4 375 18 96 [email protected]
Following the success of the inaugural Dubai Precious
Metals Conference (DPMC), we are pleased to share
that the second DPMC will be held from April 6-7, 2013
at Almas Tower, Jumeirah Lakes Towers, Dubai.
The inaugural Dubai Precious Metals Conference saw
over 230 delegates across 18 countries come together to
deliberate the future of the precious metals industry.
We have a great line-up planned for the next conference.
There will be presentations, debates and panel
discussions involving topical themes such as bullion
banking, platinum trends, jewellery markets and price
predictions.
Open discussions will include the critical issues affecting
the bullion trade and how Dubai has emerged as a
precious metals trading hub in the last 10 years. All with
an emphasis on world-class infrastructure and value
chain development.
DPMC is the region's most exciting precious metals
platform, featuring a diverse range of industry experts,
market commentators and key participants from across
the globe.
Visit us on www.dpmc.ae for more information.
DMCC Update
Second edition of the bullion coin
The second edition of the Gold Bullion Coins have been
launched, featuring a portrait of His Highness Sheikh
Mohammed bin Rashid Al Maktoum, Vice President and
Prime Minister of the UAE and Ruler of Dubai and a
rendering of Palm Jumeirah, the world‟s largest man-
made island.
The UAE Gold Bullion Coins are available in four
denominations weighing 1 oz, ½ oz, ¼ oz and 1/10 oz.
The 99.99 gold purity (24 karat) coins carry Argor-
Heraeus‟ stamp of quality and authenticity.
DGD update
Al Etihad Gold Refinery has achieved DGD accreditation for Gold and Silver.
The DGD Standard is the only globally accepted and
relevant standard for 1kg gold bars with a minimum of
995 fineness, as well as the physical delivery standard at
the Dubai Gold and Commodities Exchange ( DGCX ) for
futures contracts traded. DMCC also concluded its Dubai
Good Delivery ('DGD') renewal cycle for accredited
refineries this month which now stands at 19 refineries
across 13 countries represented.