GFMS GOLD SURVEY 2015 © 2015 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. Thomson Reuters and the Kinesis logo are trademarks of Thomson Reuters. S020029 03/15. THOMSON REUTERS www.valcambi.com www.tanaka.co.jp GFMS GOLD SURVEY 2015 The cover of the GFMS Gold Survey 2015 is sponsored by the following companies: TANAKA PRECIOUS METALS Tanaka Precious Metals is Japan’s leading precious metals refiner and manufacturer. Although best known internationally for its high specification industrial products, used in various applications ranging from semiconductors to communications, the company is also a producer and trader of a wide range of gold bullion bars and coins. Tanaka bars are acceptable “good delivery” on the London gold market. Valcambi is a leader in precious metals refining and operates one of the world’s largest and most efficient integrated precious metals plants situated on a 33 hectare site, at Balerna, Switzerland. We are one of the world’s largest manufacturers of minted ingots. Reacting to the demands of investors in different markets around the globe we are continuously carefully developing within the size range from 0.5 g to 1000 g, gold, silver, platinum and palladium minted bars in different forms and new designs. For our clients, according to their wishes we customize individually obverse and reverse of the bars, certificates and tailored packaging solutions. All products produced in our foundry and minting facilities are certified by our laboratory, carefully inspected by our operators, individually packed and controlled before shipment. The Hallmark is not only a guarantee for quality of Swiss workmanship, it guarantees also the fineness of the most sought after bars in the world, desired by precious metals connoisseurs and investors alike. A Valcambi manufactured bar is not only sold at an outstanding price but is synonymous with unique craftsmanship, guaranteed fineness, transparency and reliability. GFMS Gold Gold Market Market Research Research GFMS and Forecasts Forecasts and SEEK MORE SEEK MORE Dig deeper into the gold market with GFMS research Dig deeper into on theThomson gold market withEikon. GFMSUse research and forecasts Reuters the and forecasts on Thomson Eikon. Use the the key new GFMS gold pages to Reuters quickly understand new GFMS gold market pages to quickly understand key drivers behind movements. See whichthe factors drivers market movements. See which drovebehind price performance in the past, what willfactors drive drove price performance in the past, willand drive the evolution of these markets in thewhat future, what is the evolutioninside of these markets in the future, and today. what is happening various sectors of the industry happening inside various sectors of the industry today. The cover of GFMS Gold Survey 2015 features the wide range of Tanaka and Valcambi minted and cast bars. Different pictures on a celluloid symbolise reasons why gold should be looked at as an investment. Cover designed by Valcambi and executed by BtoB Creativity, Coldrerio, Switzerland. GFMS gold pages include: GFMS gold pages include: • Historical supply and demand statistics •• Historical supply and demand statistics Forecasts of supply, demand and price •• •• Forecasts of supply, and price Field research reportsdemand on key markets Field research reports on key markets Exclusive analyst commentaries giving expert • Exclusive commentaries giving expert insight onanalyst news and market developments insight on news and market developments To find out more contact us on [email protected] ToFor findmore out more contactvisit us thomsonreuterseikon.com on [email protected] information For more information visit thomsonreuterseikon.com © 2015 Thomson Reuters. S019825 03/15. © 2015 Thomson Reuters. S019825 03/15. GFMS GOLD SURVEY 2015 BY: Rhona O’Connell, Head of Metals Research & Forecasts William Tankard, Manager, Mining Cameron Alexander, Manager, Regional Demand Andrew Leyland, Manager, Regional Demand Ross Strachan, Manager, Regional Demand Matthew Piggott, Lead Analyst Saida Litosh, Senior Analyst Sudheesh Nambiath, Senior Analyst Janette Tourney, Senior Analyst Johann Wiebe, Senior Analyst Ling Wong, Senior Analyst Erica Rannestad, Senior Analyst Samson Li, Senior Analyst Sara Zhao, Analyst Natalie Scott-Gray, Analyst Dante Aranda, Analyst Gregory Rodwell, Analyst John Bedi, Analyst Beverley Salmon, Customer Relationship Manager Milo Troman-Taylor, Design and Layout PUBLISHED APRIL 2015 BY THOMSON REUTERS The Thomson Reuters Building, 30 South Colonnade London, E14 5EP, UK E-mail: [email protected] Web: https://thomsonreuterseikon.com/markets/metal-trading/ THEGFMS GFMSTEAM TEAMAT ATTHOMSON THOMSONREUTERS REUTERS GRATEFULLY THE THE FOLLOWINGCOMPANIES COMPANIESFOR FORTHIS THISYEAR’S YEAR’S GFMS THE FOLLOWING www.pamp.com www.heraeus-precious-metals.com Italpreziosi SPA ACKNOWLEDGES THEGENEROUS GENEROUSSUPPORT SUPPORTFROM FROM ACKNOWLEDGES THE GOLD SURVEY SURVEYAND ANDITS ITSQUARTERLY QUARTERLYUPDATES UPDATES TANAKA PRECIOUS METALS www.perthmint.com.au www.valcambi.com www.igr.com.tr TABLE OF CONTENTS 1. Summary and Price Outlook 2. Investment 64 • Indian Sub-Continent 64 • East Asia & Oceania 65 • Middle East 67 • Europe 68 • North America 70 7. Fabrication Demand 60 • Overview 60 • Sales 61 • Purchases 62 6. Gold Bullion Trade 52 • Overview 52 • Scrap Supply 54 5. Official Sector 32 • Mine Production 32 • Production Costs 45 • Producer Hedging 50 4. Supply from Above-Ground Stocks 15 • Overview 15 • Exchange Traded Funds 20 • Activity on Commodity Exchanges 22 • Over the Counter Market 26 • Physical Bar Investment 26 • Official Coins 29 • Medals and Imitation Coins 31 3. Mine Supply 8 • Supply 10 • Demand 11 • Price and Market Outlook 14 71 • Carat Jewellery 71 • Electronics 93 • Dentistry 95 • Other Industrial and Decorative Uses 96 8. Appendices 98 FOCUS BOXES • • • • • • • • • • Gold Survey 2015: Supply-Demand Methodology Investment in Commodities Gold Price Correlations Production and Consumption-Weighted Gold Prices Corporate Activity in 2014 E-Scrap Supply Russia vs Ukraine Swiss Gold Bullion Trade Gold Leasing in China Inflates Imports and SGE Turnover Consumption and per Capita Demand (Excluding Bank Activity) 9 18 19 24 44 59 63 69 78 82 © THOMSON REUTERS 2015. All content provided in this publication is owned by Thomson Reuters and/or its affiliates (the “Thomson Reuters Content”) and protected by United States and international copyright laws. Thomson Reuters retains all proprietary rights to the Thomson Reuters Content. The Thomson Reuters Content may not be reproduced, copied, manipulated, transmitted, distributed or otherwise exploited for any commercial purpose without the express written consent of Thomson Reuters. All rights are expressly reserved. TRADEMARKS “Thomson Reuters” and the Thomson Reuters logo are trademarks of Thomson Reuters and its affiliated companies. The third party trademarks, service marks, trade names and logos featured in this publication are owned by the relevant third parties or their affiliates. No use of such mark, names or logos is permitted without the express written consent of the owner. DISCLAIMER OF WARRANTIES AND NO RELIANCE This publication is provided by Thomson Reuters on an “as is” and “as available” basis. Thomson Reuters makes no representations or warranties of any kind, express or implied, as to the accuracy or completeness of the Thomson Reuters Content. Thomson Reuters is an aggregator and provider of information for general information purposes only and does not provide financial or other professional advice. Thomson Reuters is not responsible for any loss or damage resulting from any decisions made in reliance on the Thomson Reuters Content, including decisions relating to the sale and purchase of instruments, or risk management decisions. ISSN: 2055-1797 (Print) ISSN: 2055-1800 (Online) FORTHCOMING RELEASES • GFMS COPPER SURVEY 201514th April 2015 • GFMS GOLD SURVEY 2015: Q1 UPDATE AND OUTLOOK28th April 2015 • WORLD SILVER SURVEY 20156th May 2015 • GFMS PLATINUM & PALLADIUM SURVEY 201514th May 2015 • GFMS GOLD SURVEY 2015: Q2 UPDATE AND OUTLOOK July 2015 • GFMS COPPER SURVEY 2015 - UPDATE October 2015 • GFMS GOLD SURVEY 2015: Q3 UPDATE AND OUTLOOK October 2015 • GFMS GOLD SURVEY 2015: Q4 UPDATE AND OUTLOOK January 2016 ACKNOWLEDGEMENTS The estimates shown in the GFMS Gold Survey for the main components of mine production, scrap, fabrication and investment demand are calculated on the basis of a detailed supply/demand analysis for each of the markets listed in the main tables. In the vast majority of cases, the information used in these analyses has been derived from visits to the countries concerned and discussions with local traders, producers, refiners, fabricators and central bankers. Although we also make use of public domain data where this is relevant, it is the information provided by our contacts which ultimately makes this GFMS Gold Survey unique. We are grateful to all of them. NOTES UNITS USED troy ounce (oz) = 31.1035 grammes tonne = 1 metric tonne, 32,151 troy ounces carat = gold purity in parts per 24 • Unless otherwise stated, US dollar prices and their equivalents are for the PM fix of the London Bullion Market. • Unless otherwise stated, all statistics on gold supply and demand are expressed in terms of fine gold content. • Throughout the tables, totals may not add due to independent rounding. TERMINOLOGY “-” Not available or not applicable. “0.0” Zero or less than 0.05. “dollar”, “$” US dollar unless otherwise stated. “Identifiable Investment” The sum of physical bar investment and all coin fabrication, plus the net change in Exchange Traded Fund (ETF) holdings. “Jewellery Consumption” Fine gold content of all new jewellery (i.e. does not include exchanged or second- hand pieces) sold at the retail level. It is calculated as being equal to jewellery fabrication, plus imports less exports (i.e. the net inflow of jewellery). An adjustment is also made for retail stock movements. “Physical Surplus/ Deficit” The difference between the supply of new and secondary gold to the market in a calendar year and measurable demand for physical gold. This excludes opaque Over the Counter (OTC) investment in gold and commercial bank transactions. “Net Balance” The physical surplus or deficit of gold with the addition of highly visible ETF and exchange stock inventory changes. “Retail Investment” Identifiable net investment in physical gold in bar and coin form. The bars may or may not conform to ‘London Good Delivery’ status but will be in a form that is commonly traded in the country of origin. Coins include all official and unofficial coins and medallions, with and without a face value. GFMS GOLD SURVEY 2015 SUMMARY AND PRICE OUTLOOK 1. SUMMARY AND PRICE OUTLOOK After a turbulent 2013, last year saw the gold market stabilise with most aspects of supply and demand adjusting to lower prices. The end of the US Federal Reserve’s quantitative easing programme and a change in market focus to potential rate hikes and a stronger US dollar remained the driving force behind gold prices. Excluding impairment charges costs fell 2.3% to $1,208/oz due to favourable exchange rate movements and the ramping up of new lower cost mines. The industry also saw the average head grade of processed ore increase for the first time since our records began in 2000, and likely the first time since the 1970s. In dollar terms gold has traded lower on the back of its lessening appeal as an asset class, with lower perceived risk from systemic financial instability and continued low inflationary pressures. Outside the United States it has been a different story, however, with Europe finally embarking on its own quantitative easing programme in 2015 and a slowdown in emerging markets and resource‑based economies undermining many currencies against the dollar. Meanwhile physical demand consolidated after the excesses of 2013. Importantly some themes remain in place, notably increased 18-carat jewellery purchases at the expense of higher carat material. The more volatile bar market (which is measured on a net consumption basis) saw an expected decline in demand as the investment case for gold weakened, but remained at much higher levels than pre-financial crisis with an estimated $34bn spent against $5.3bn in 2007. Likewise the coin market witnessed its lowest level of production since 2007 with 251 tonnes of gold consumed in coins, down from a record 380 tonnes in 2013. Looking at the supply-demand balance as a whole the reduction in purchases in bars, coins and investment-grade jewellery helped to push the market into a 204 tonne physical surplus for the year. Lower prices over the past 24 months have also had an impact on the supply side of the market with scrap supply down from a peak of 1,728 tonnes in 2009 to 1,125 tonnes in 2014, while output from the mining industry increased 2.3% in 2014 to 3,133 tonnes, as All‑in‑Costs fell 25% to $1,314/oz, owing primarily to lower impairment charges. WORLD GOLD SUPPLY AND DEMAND (tonnes) 20052006200720082009 2010 2011 2012 2013 2014 Supply Mine production Scrap 2,561 2,496 2,499 2,429 2,612 2,742 2,846 2,875 3,061 3,133 903 1,133 1,006 1,352 1,728 1,713 1,675 1,677 1,287 1,125 Net Hedging Supply-92 -434 -432 -357 -234 -106 Total Supply 3,372 3,195 3,072 3,424 4,106 4,349 18 -40 -39 4,539 4,513 4,310 103 4,362 Demand Jewellery 2,722 2,302 2,426 2,308 1,819 2,033 2,034 2,008 Industrial Fabrication 449 480 ...of which Electronics 294 325 ...of which Dental & Medical 62 ...of which Other Industrial 92 2,439 2,213 487 471 422 476 468 331 318 283 333 330 426 419 400 295 289 61 58 56 53 48 279 43 39 36 94 98 97 86 34 95 95 92 93 Net Official Sector -663 -365 -484 -235 -34 87 77 457 544 409 466 Retail Investment 416 428 436 916 830 1,221 1,556 1,343 1,775 1,079 ...of which Bars 261 236 236 659 548 934 1,230 1,039 1,394 829 ...of which Coins 155 192 200 257 283 287 326 304 380 251 2,923 2,845 2,864 3,460 3,038 3,807 4,515 4,321 5,041 4,158 Physical Surplus/Deficit 448 350 208 -36 1,068 542 25 192 -732 204 ETF Inventory Build 208 260 253 321 623 382 185 Physical Demand Exchange Inventory Build 34 39 212 58 -35 -391 406 Gold Price (London PM, US$/oz) 444.45 603.77 695.39 871.96 Net Balance 29 32 -10 279 -880 -160 54 -6 -10 -98 106 -154 -78 246 1 363 972.35 1,224.52 1,571.52 1,668.98 1,411.23 1,266.40 Source: GFMS, Thomson Reuters Totals may not add due to independent rounding. Net producer hedging is the change in the physical market impact of mining companies’ gold loans, forwards and options positions. 8 GFMS GOLD SURVEY 2015 GOLD SURVEY 2015: SUPPLY-DEMAND METHODOLOGY Not all of the 183,600 tonnes of gold is near-to-market, however. The majority of gold used in electronics before the 21st century would not have been recycled and ended up in landfill. Likewise much of the above ground stockpile of jewellery, bars and coins will have been lost over time or taken to the grave. Importantly, however, there remains a liquid stock of near-to-market material used as a store of value that is many times annual physical demand. The volumes of gold transferred in 2014, as reported by London Bullion Market Association clearing members, totalled approximately 157,000 tonnes, with a value of $5.9 trillion. This trade, often between commercial banks themselves, may result in the physical shipment of gold, or merely a paper reallocation of bars within a vault. Even the above figure does not represent the total value of gold transactions globally. As a rule of thumb, the net transfers are roughly one-third of the total loco London market volume. The changing dynamics of the market and the proliferation of trading centres in the Far East in particular mean that loco London trade is now closer to 70% of the world total as against its historical share of 90%. This share changed during 2014 in particular and we can therefore assume an average market share of perhaps 80% for the year as a whole. This leads to turnover of roughly 589,000 tonnes for the year overall, with a value of approximately $22 trillion, or roughly 188 times mine production. This ample liquidity (most of the time) is why, like most currencies, gold usually trades at full carry. This includes not just bars and coins held by individuals and commercial banks but also large tonnages of jewellery primarily bought for investment purposes. Inventories held by commercial banks have also been supplemented in the past by leasing of central bank stockpiles, themselves estimated at 30,900 tonnes, although a re-assessment of counterparty risk has seen this lessen in recent years. When assessing the size of new demand on an annual basis it is important not to confuse the volume of shipments of these above ground stocks with new physical demand. Thomson Reuters’ supply and demand data are collected and collated by our team of research analysts based in Australia, China, Europe, India and the USA within an extensive field research programme which involves interviewing stakeholders across the supply chain in every market and utilising the unique data sets available to us after researching the market continuously since 1967. The full datasets and mine cost profiles are available exclusively on Thomson Reuters Eikon. The existence of large volumes of OTC trade and near‑to‑market inventory means that the annual physical surplus or deficit in the market may not directly impact the price. It will, however, impact upon lead times, premia and margins across the value chain. The addition of a physical surplus / deficit in the GFMS Gold Survey allows us to remove the pre-2014 residual balancing line item of net-implied investment / net-implied disinvestment. ABOVE GROUND STOCKS (END 2014) 100000 90000 80000 70000 Tonnes 60000 50000 40000 30000 Changes in known stock levels are also included in the supply-demand balance in order to account for the highly visible moves in Exchange Traded Fund (ETF) holdings and published inventory changes at gold futures exchanges. It is important to note that the resulting Net 20000 10000 0 Jewellery Central Bank Holdings Bars and Coins Other Fabrication and Unaccounted Source: GFMS, Thomson Reuters 9 SUMMARY AND PRICE OUTLOOK Physical surpluses and deficits in the gold market are less relevant than those in the industrial metals, owing to the available level of above ground gold stocks. We calculate that some 183,600 tonnes of gold have been produced in human history and much of this is still in circulation. For analysts of the gold market this generally leads to the assumption that rather than annual supply and demand determining the price, it is the price that determines how much new physical supply and demand are attracted to the market each year. The price itself is determined by a number of changing factors, the most important relates to demand for gold as an asset class and the Over-theCounter (OTC) market. Balance does not include changes in OTC investment or disinvestment. Changes in ETF holdings are a helpful guide to investment trends in gold, but ultimately only make up a small part of the market. GFMS GOLD SURVEY 2015 SUPPLY IN 2014 ——Mine production increased for a sixth successive SUMMARY AND PRICE OUTLOOK year in 2014, rising by 2% to a record volume of 3,133 tonnes. ——All-in Costs fell by 25% to $1,314/oz last year, as impairment charges fell back from heightened levels in 2013. All-in Costs, excluding writedowns, averaged $1,208/oz. ——Producer hedging generated 103 tonnes of accelerated supply in 2014, only the second year of net producer hedging since 1999. ——Global scrap supply retreated 13% in 2014 to a seven-year low of 1,125 tonnes, chiefly as a result of a weaker dollar gold price and an improved economic environment. Global mine production increased by 2% last year to reach an all-time high of 3,133 tonnes. This marked the sixth consecutive year of production growth, prolonged by the legacy of investments made during years of higher prices. Aside from China, where strong output growth was broad-based, many of the headline increases in many of the world’s largest producing countries came from large projects that had either been recently commissioned properties ramping up production, such as at Detour Lake, Kibali, Oyu Tolgoi and Tropicana, or due to significant expansions, such as at Kupol. In contrast, some of the largest mine site losses came at more mature operations, such as Barrick’s Cortez and Newmont’s Nevada Complex, both in the United States. to greenfield exploration expenditure. Furthermore, producers are focused on optimising portfolios and implementing operational improvements at existing mines in order to better cope with a gold price that lies beneath the average All-in Cost of production, and far below estimates of an incentive price required for the exploration and development engine to restart in earnest. As such, in terms of both volumes and profitability, the mining industry remains in a precarious position. Producer hedging activity switched to the supply side of the market last year, with net hedging of 103 tonnes. This was only the second such outcome since the 1990s. The impetus behind this development was a move by two producers, Polyus Gold International and Fresnillo plc, both of which entered into new hedge positions to more proactively manage cash flows associated with planned investments. In addition to these two companies, several producers responded to the US dollar rally by opportunistically entering into modest domestic currency denominated gold hedges (most notably A$ based). One of the factors that has helped magnify the impact of this moderate swing to net hedging has been the fact that the producer hedge book has in recent years been run down to exceptionally low levels. In the event that the hedge book is expanded further in future years, an enlarged delivery profile would necessitate progressively higher volumes of gross hedging to bring about, for example, 100 additional tonnes of net hedging. Despite these additions, global production growth slowed in 2014 and we expect that 2015 will see production growth halt. Behind this expectation, capital investment in new project development remained constrained during 2014, while there were also cuts Global scrap supply declined by almost 13% last year to an estimated 1,125 tonnes, broadly in line with the 10.3% drop in the dollar gold price. The fall sent scrap supply to a seven-year low; contributing just 26% of world supply, compared to 42% during the peak in 2009. The industrialised world recorded some of the greatest falls, as lower gold prices and improved economic outlook WORLD GOLD SUPPLY SUPPLY FROM ABOVE-GROUND STOCKS 6000 Net Producer Hedging Real Gold Price 2000 2000 Net Official Sector Sales Scrap 1000 3000 2000 500 1500 1500 1000 1000 500 500 1000 0 0 2005 2007 Source: GFMS, Thomson Reuters 10 2009 2011 2013 0 0 2005 2007 Source: GFMS, Thomson Reuters 2009 2011 2013 Constant 2014 US$/oz 4000 Constant 2014 US$/oz 1500 Tonnes 2000 Scrap Mine Production Tonnes 5000 Real Gold Price Net Producer Hedging Net Official Sector Sales GFMS GOLD SURVEY 2015 DEMAND IN 2014 ——Total physical demand fell by 18% last year, to a four-year low of 4,158 tonnes, as all areas, with the exception of official sector purchases, recorded year‑on-year declines. ——Despite lower gold prices in US dollar terms, jewellery demand dropped by 9% in 2014, largely on the back of a sharp decline in Chinese offtake. ——Industrial fabrication continued to slide last year, falling by 4% to 400 tonnes, the lowest level since 2003, due to weakness in all major sectors. ——Total Identifiable Investment, which includes physical bar investment, all coins and ETF inventory build, increased by 3%, primarily due to a slower pace of ETF selling last year. Meanwhile, retail purchases of gold bars and coins slumped by nearly 40%, largely due to a lack of interest from key Asian markets. ——Net official sector buying rose by 14% to 466 tonnes, which was the second highest annual total since 1964. WORLD GOLD DEMAND New Producer De-Hedging After three consecutive years of decline, jewellery fabrication in India returned to growth last year, rising by 14% year-on-year to a record high of 690 tonnes, and hence restoring its status as the world’s largest jewellery manufacturer. Last year’s result was primarily down to a strong rebound in the second half of the year, thanks to restocking on the back of lower gold prices and falling local premia. In addition, the relaxation of the regulation that allowed Premier and Star trading houses to import gold under the 80:20 scheme resulted in a higher availability of the metal, thus putting downward pressure on local premia. Meanwhile, gold jewellery fabrication Real Gold Price 2000 3000 Retail Investment* 2000 800 1000 Real Gold Price 2000 Identifiable Investment* 1600 2000 1200 1500 1000 800 Constant 2014 US$/oz 1200 3000 Constant 2014 US$/oz 1600 Jewellery 4000 Jewellery Fabrication 2500 Industrial Fabrication Tonnes 5000 Tonnes Moreover, the comparative analysis between 2014 and 2012, which is deemed to be a more ‘normal’ year for Chinese gold demand, reveals that jewellery fabrication in 2014 was still up 7% on the 2012 level. It is interesting to observe that excluding China from the global offtake data reveals that jewellery fabrication demand in the rest of the world jumped by 6%, predominantly driven by a rebound in demand in India and a modest recovery in some parts of the developed world, particularly the United States and some European countries. JEWELLERY FABRICATION AND IDENTIFIABLE INVESTMENT Net Official Sector Purchases 6000 Total physical demand slumped by 18% last year, to the lowest level since 2010. The chief driver of last year’s fall was the 9% decline in jewellery fabrication to 2,213 tonnes. This was largely down to a hefty decline in jewellery fabrication demand in China, which suffered a 33% year-on-year drop, as a softer economy and a drop in sentiment reduced investment-related purchases. Moreover, the market needed some more time to digest the extra gold consumed during the buying frenzy witnessed in 2013. It should be emphasised, though, that demand was exceptionally high in 2013 and despite a marked contraction last year’s figure represented the second highest level ever recorded in China. 500 0 400 2005 2007 2009 2011 * Retail Investment refers to physical bar and coin investment. Source: GFMS, Thomson Reuters 2013 0 400 2005 2007 2009 2011 2013 *Identifiable Investment is the sum of physical bar investment, official coins, medals & imitation coins and net ETF inventory build. Source: GFMS, Thomson Reuters 11 SUMMARY AND PRICE OUTLOOK constrained liquidations. North America and European flows declined 22% and 17% respectively, with the former recording a notable slow down in e-waste recycling. Jewellery scrap from India is estimated to have declined 26% to a three-year low, while recycling in the Middle East retreated by 15% in 2014, largely as a result of the weaker price profile and further erosion of near-to-market stockpiles. The major outlier last year was East Asia where scrap volumes from the region were estimated to have registered a 1% rise. The annual increase, while modest, was entirely due to a 12% jump in Chinese scrap volumes, where weak consumer demand and an oversupply of inventory led to a sharp rise in supply chain liquidations. in the United States posted a modest recovery, on the back of improving economic sentiment and lower gold prices. European jewellery demand jumped by 10% to the highest level since 2008, largely driven by higher manufacturing in Turkey and a return to growth in Italy. That said, the above gains were somewhat alleviated by losses in some other key markets across East Asia and the Middle East. Industrial fabrication saw a 4% reduction last year, mainly on the back of the continued decline in global electronics demand, which was dragged down by weaker economic conditions in some parts of the world and ongoing substitution. Demand for gold used in dental and other industrial & decorative applications continued to suffer from substitution and thrifting despite the lower gold price environment. Total identifiable investment, which includes physical bar investment, all coins and ETF inventory build, rose by 3% in 2014, to 919 tonnes. While this is considerably lower than the record high of 1,741 tonnes of 2011, last year’s result was still elevated by historical standards. A close analysis of individual components of our identifiable investment figure reveals that the 3% rise in tonnage terms was primarily down to the smaller scale of ETF selling registered last year. Net outflows from gold ETFs totalled 160 tonnes in 2014, against 880 tonnes a year earlier. This was thanks to a broad stabilisation in the first quarter of the year, on the back of renewed concerns over global economic recovery and increased geopolitical tensions, and less aggressive liquidation in the following quarters. Demand for gold bars and coins registered a nearly 40% slump last year, falling to an estimated 1,079 tonnes. This was largely attributable to waning investor appetite from key Asian markets, particularly PHYSICAL SURPLUS / DEFICIT OF GOLD from China and India, which together accounted for more than half of the 2014 drop. Physical bar demand in China dropped 53%, to the lowest level since 2010, as a result of anti-corruption policy measures introduced by the government, slowing economic activity and lower price expectations. In addition, exceptionally high demand in 2013 after the sudden price crash also contributed to weaker investment demand last year. Purchases of gold bars in India plunged by an even more remarkable 59% in 2014, to hit the lowest level since 2005. High and volatile local premia, lower price expectations and the shortage of metal on the back of gold import restrictions introduced by the government in 2013 were among the key factors that contributed to last year’s decline in activity. It should be noted, though, that despite a marked drop in our global retail investment figure last year, it was still the fifth highest on record. For the first time since the 1960s, official sector activity recorded a fifth successive year of net purchases in 2014. Indeed, net buying rose by 13% to 466 tonnes, which was the second highest annual total since 1964. Critical to the upturn in purchases were acquisitions by Russia, and to a lesser extent Kazakhstan. Russia was already the biggest reported purchaser in 2013 but it more than doubled its pace, acquiring 173 tonnes in 2014. This was fuelled by geopolitical tensions that stemmed from the Ukraine crisis and which saw strong buying from Russia in the last nine months of 2014. Underpinning this, as well as substantial purchases from Iraq, was an effort to support the domestic the currency, and in Russia’s case a desire to diversify reserves away from the dollar. The high net purchase figure was supported by no major sales from signatories to the Central Bank Gold Agreement which saw the fourth round begin in September. CHINA REMAINS WORLD’S LARGEST GOLD CONSUMER 1200 Real Gold Price 1000 1500 2000 1250 800 200 1200 0 -200 800 -400 India 750 500 250 -600 -800 2005 2007 Source: GFMS, Thomson Reuters 12 China 1000 Tonnes 400 Constant 2014 US$/oz 1600 600 Tonnes SUMMARY AND PRICE OUTLOOK GFMS GOLD SURVEY 2015 2009 2011 2013 400 0 2005 2007 2009 2011 2013 Source: GFMS, Thomson Reuters *Demand consists of jewellery fabrication, industrial fabrication and retail investment Trade Weighted Dollar 95 90 85 80 1 (11/02/14): US debt ceiling raised through to March 2015, technical default averted (22/02/14): President Yanukovych leaves Ukraine 3 4 Source: GFMS, Thomson Reuters (29/01/14): A further $10bn taper is announced Mar 2 3 4 (03/01/14): ISIS occupies Fallujah, city near Baghdad. Tension escalates in the region. Ukraine crisis adds to geopolitical risk premium Feb 2 Gold DXY 1 105 Jan 14 100 (Inverted, 1 January 2014 =100) 75 8 7 6 5 Apr 6 May 7 8 9 Jun Jul 13 Aug 14 9 (21/05/14): India eases gold (19/03/14): Additional taper takes stimulus down to $55bn import rules per month (15/04/14): Gold short-covering 10 (18/06/14): Fed reduces further bond purchases to $15bn of rally meets profit taking MBS and $20bn per month of followed by heavy technical long dated Treasuries sales amid improving US economic sentiment 11 (02/07/14): British MPs urge watchdog to probe allega(25/04/14): Russia threatens tions of price-rigging in gold military exercise along Ukraine border 12 (11/07/14): CME cuts gold futures margins by 10% (01/05/14): U.S April NFP rose 304,000 13 (17/07/14): Malaysian commercial airliner crashes in Ukraine. Geopolitical tensions increase 5 10 11 12 Sep Oct 17 18 (07/11/14): Russian rouble weakens 13% in a week to lowest on record (01/08/14): Argentina defaults on its debt 15 (14/08/14): Russian President Putin plays low on crisis in Ukraine at a speech in Crimea 16 (04/09/14): ECB cuts refinancing rates to 0.05% and overnight deposit to -0.20% 17 3rd and 4th week October: Indian festival demand reaches peak for the year 14 15 16 23 (05/12/14): November US NFP registered at 321,000 (23/12/14): US Q3 GDP grows at 5% (02/01/2015): Weaker-thanexpected US manufacturing data. Speculation on a delay of a rate hike begins to build 21 22 23 (30/11/14): Swiss referendum gets negative vote 20 Feb 26 Mar 15 27 (26/01/2015): Leftist leader Alexis Tsipras wins Greek parliamentary election (15/01/2015): SNB abandons cap on the franc 24 25 (06/02/2015): Stronger-thanexpected U.S. jobs data. US Dollar rises 27 (06/03/2015): Upbeat US non-farm payroll data fuels speculation of an earlier rate hike than previously anticipated 26 25 24 Jan 15 (28/11/14): India’s gold import rule 80:20 scheme abolished Dec 19 21 22 19 Nov 18 20 1100 1150 1200 1250 1300 1350 1400 SUMMARY AND PRICE OUTLOOK GOLD PRICE & TRADE-WEIGHTED DOLLAR (INVERTED) - DAILY GFMS GOLD SURVEY 2015 Gold London p.m. Fix, US$/oz 13 GFMS GOLD SURVEY 2015 Until the beginning of April 2015 the gold price, as with almost all asset classes, has been second-guessing when the Federal Reserve will increase rates and reacting to movements in the dollar. Gold as an asset class is to the fore and this has seen the price suffer as higher rates and a healthy US economy imply better returns from fixed income and equity markets. There has been much debate as to how low gold could go in a rising interest rate environment and whether we will see a return to pre-crash price levels in the region of $600‑700/oz. Those on the mining side of the market will point out that margins are unsustainably thin for the current industry at $1,200/oz and investment in new capacity has already been heavily curtailed. In gold’s unique position, with huge above ground stockpiles, this becomes less of a support than it would be in industrial metals markets. Instead we view price support as coming from a structural change in demand that developed since 2008; not in Western financial markets, but in physical demand from price sensitive markets across Asia. Moreover, the response of these markets has already been tested in Q2 2013 when, with prices averaging $1,400/oz, there was almost an additional 400 tonnes of demand from China and India alone. Leading to shortages of physical supply and spikes in premia. At $1,000/oz the purchasing power of physical demand becomes even more pronounced, and below this level there is a danger that a sustained disconnect would develop between prices and premia, in our view. In short, we see enough physical demand at $1,000/oz to see unsustainable drawdowns in near-to-market above ground stockpiles. of quantitative easing programmes outside the US, underlying geopolitical risk in Eastern Europe, the Middle East and the South China Sea, coupled with the desire for physical assets in times of not just country level crises, but also for family level savings, rainy day planning and tax avoidance should all support purchases. There appears to be less upside risk in the market at the moment given the relative health of the US economy versus Europe and Emerging Markets. It will take a shock to the market to push prices north of $1,500/oz in our view, with the most likely candidates being a major regional conflict, reaction to monetary policies targeting ingrained deflation, or, conversely, a return to inflationary pressure. In our base case forecast gold is set to average $1,170/oz in 2015. For 2016 we expect modest strength, with a base case of $1,250/oz as buying in Asian markets picks up and institutional investment demand in these markets also serves to offset the recent decline in OTC gold demand from the West. For the supply side of the market this scenario is likely to see the continuation of a constrained investment environment and lower mine output by 2016. Scrap supply should also be close to levelling off and hedging is likely to remain a feature, albeit not a defining one, of the market. Sustained falls below $1,000/oz are not our base case scenario, however. The continued prevalence Turning to demand we expect jewellery consumption to continue to grow at a modest pace while retail investment in bars and coins is unlikely to return to the peaks we saw in 2013. It is not going to disappear, however, and we expect that over 1,000 tonnes of gold a year will continue to be stockpiled by bar and coin investors in the yellow metal. Finally we continue to forecast purchases from the official sector, although these will be lower given declines in energy prices since late 2014. REAL AND NOMINAL GOLD PRICES INDEX OF GOLD PRICE IN MAJOR CURRENCIES 2000 400 Real Price (Constant 2014) Nominal Price 350 Index, 2nd January 2007= 100 1500 US$/oz SUMMARY AND PRICE OUTLOOK PRICE AND MARKET OUTLOOK 1000 500 Rupee Euro Dollar 300 Yen 250 200 150 100 0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Source: GFMS, Thomson Reuters 14 50 Jan-07 Jan-09 Source: GFMS, Thomson Reuters Jan-11 Jan-13 Jan-15 GFMS GOLD SURVEY 2015 2. INVESTMENT • Total Identifiable Investment, which includes physical bar in the June-July period. Investor interest was fuelled by gold’s appeal as a safe haven, in the wake of renewed concerns about slowing global economic recovery and the escalation of geopolitical tensions. investment, all coins and ETF inventory build, posted a modest 3% increase in 2014, to reach 919 tonnes. • If measured in value terms, however, total identifiable OVERVIEW investment dropped by 8% to approximately $37 billion. • The muted year-on-year increase in the tonnage figure • Retail purchases of bars and coins posted a major slump last year, dropping by nearly 700 tonnes from the all-time high registered a year earlier. This was due to a waning investor appetite from key Asian markets, which was, in turn, attributable to various government policies aimed at reducing gold demand, and lower price expectations, which saw many investors waiting on the sidelines. Despite the sharp drop, the absolute level remained elevated by historical standards and was still the fifth highest on record. • The OTC market on balance saw modest net buying in Total identifiable investment demand for gold rose by just 3% to 919 tonnes last year. While this pales by comparison with the record high of 1,741 tonnes of 2011, it should be emphasised that last year’s result still remained elevated by historical standards. To put this into perspective, for the period between 2000 and 2007 investment demand averaged 477 tonnes, before the financial crisis changed investors’ attitude towards risk to the extent that average investment demand from 2008 to 2013 jumped to 1,425 tonnes. It is also interesting to observe that last year’s result was achieved in spite of 2014, helped by opportunistic buying in Asia, although the overall level of activity was notably lower than in 2013. • While investor activity in the futures markets fluctuated considerably over the course of the year, managed money net long positions on COMEX registered a robust increase of some 200 tonnes for the year as a whole. This was driven by short-covering, as well as some fresh investor interest, particularly in the first quarter of the year and IDENTIFIABLE INVESTMENT* (tonnes) 2010 2011 2012 2013 2014 Retail Investment 1,221 1,556 1,343 1,775 1,079 of which bars 9341,2301,0391,394 829 of which coins** 287326304380 251 ETF Inventory Build Total Identifiable Investment Indicative Value*** 382 185 279 -880 -160 1,603 1,741 1,622 895 919 63 88 87 41 37 * Excludes investment activity in the futures and OTC markets. **Official Coins and Medals & Imitation Coins. ***Indicative value calculated on an annual basis using annual average gold prices. Source: GFMS, Thomson Reuters 15 INVESTMENT The key theme driving investor sentiment in the gold market during 2014 revolved around global monetary policy, particularly in light of policy tightening in the United States, along with additional stimulus measures from the world’s other major central banks. On the one hand, improving economic sentiment in the United States and the shift in US monetary policy, following the announcement by the Federal Reserve of the first round of tapering in December 2013, put significant pressure on gold, restraining investment demand. However, at the same time, intensifying concerns over the global economic recovery, loosening of monetary policy in other major advanced and some emerging countries, and geopolitical risk factors helped to underpin investment demand for gold, particularly in the first quarter of the year. These factors also helped to explain, to some extent, a modest increase in our total identifiable investment figure for 2014 as a whole. was entirely down to the smaller scale of ETF selling in 2014 in comparison to the previous year. Net outflows from gold ETFs slowed considerably to 160 tonnes last year. This was due to a broad stabilisation in the first quarter and less marked liquidation in the following quarters. GFMS GOLD SURVEY 2015 The first half of the year saw a broad stabilisation in demand for gold ETFs, particularly in the first three months, when total holdings fell by fewer than three tonnes and February recorded a month-on-month increase for the first time in more than a year. This was driven by fresh concerns about slowing global economic recovery, following the release of weaker-than-expected economic data in the United States, and softer economic activity in some key emerging countries. This, along with rising geopolitical tensions between Russia and Ukraine, sparked some safe-haven interest in gold. Once again, ETF buyers were moving in tandem with investors on COMEX, who had raised their net long positions by 341 tonnes or 382% by the third week of March, before profit taking set in. The move was driven by short-covering, as investors were closing out their positions, or in some cases switching to the long side amid reduced risk appetite and in search for a shelter. Short positions plunged by 195 tonnes or 82% during this period to the level last visited in December 2012. This was accompanied by the notable build-up in long speculative positions, which rose by 147 tonnes or 45% from the beginning of the year to the highest for more than a year. the United States. This was evidenced by a sizeable reduction in investors’ net long positions on COMEX, largely on the back of a sharp increase in short positions. Similarly, gold ETFs suffered attrition as some investors locked in gold-related profits and switched to the US dollar. While the tonnage decline was comparably small, the selling lasted for the period between April to mid-June, before the broad stabilisation and some fresh interest in July, although this proved to be short-lived. The resurgence in interest followed the more dovish tone of the FOMC June meeting, where the Committee expressed concerns about US economic recovery and cut its 2014 growth forecast. This put downward pressure on the US dollar, while gold benefited from increased investor risk aversion, which sent the price to a near four-month high of $1,340/oz on 10th July. The escalation of military tensions in Iraq and renewed fears about slowing global growth, after the OECD and the World Bank slashed their 2014 growth forecasts, also provided some support. The speculative safe-haven interest in gold receded in the next couple of months, as geopolitical risks diminished and more robust economic data began to roll out from In the meantime, a series of weak economic data in the Eurozone and the persistence of dangerously low levels of inflation prompted the ECB to introduce a raft of measures aimed at stimulating the economy. The central bank cut its benchmark interest rate to 0.15% from 0.25% at its June meeting and introduced negative interest rates to encourage more lending. This undoubtedly provided a temporary support to the gold price and triggered the next bout of investment activity on COMEX. The net investor long almost tripled in the period between early June to mid-July, to hit 449 tonnes by the second week of July, the highest since December 2012 and the highest point for the year. This was largely driven by a sharp decline in short speculative positions, which plunged by 158 tonnes or 70% during that period, coupled with a 132-tonne or 35% increase in the long- IDENTIFIABLE INVESTMENT US DOLLAR INDEX Coins* 2000 Real Gold Price 2000 Bars 120 500 0 1000 -500 110 Index 1500 Constant 2014 US$/oz 1000 100 90 80 70 -1000 500 2005 2007 2009 2011 *Official coins and medals & imitation coins. Source: GFMS, Thomson Reuters 16 130 ETF Inventory Build 1500 Tonnes INVESTMENT the 40% drop in bar and coin demand, which accounts for the larger portion of our identifiable investment figure. This was entirely thanks to a marked slowdown in selling from gold ETFs recorded last year. Combined ETF holdings declined by 160 tonnes in 2014, in comparison to 880 tonnes a year earlier, representing an 82% yearon-year drop. Nonetheless it was the second year of ETF redemptions, after ten years of increases. 2013 60 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Source: Thomson Reuters GFMS GOLD SURVEY 2015 S&P 500: GOLD RATIO GOLD & US NONFARM PAYROLLS CORRELATION 6 Ratio 4 3 2 1 0 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Source: Thomson Reuters Meanwhile, ETF selling resumed in August and lasted through the end of the year, although the scale of outflows was considerably lower compared to 2013. Investors liquidated approximately 136 tonnes of their gold ETF holdings during the period between end-July and year-end, as opposed to over 230 tonnes over the same period a year before. ETF and COMEX investors again ran in tandem as net sellers of gold through August and September, before net positions picked up in midOctober, largely on the back of fresh speculative interest, which saw long positions jump by 73 tonnes or 20% within just two weeks. Renewed interest was sparked by a series of disappointing US economic data, which sent worrisome signals on the health of the economy. In addition, weak economic data in the Eurozone and a worse-than-expected inflation reading from China added to global growth concerns, triggering investment activity and driving the gold price towards a one-month high of $1,250/oz on 21st October. Moreover, the yellow metal gained some support after the ECB unveiled another round of stimulus measures at the September meeting, including interest-rate cuts to a record low for the second time in four months and 0.6 0.4 0.2 0.0 -0.2 -0.4 -0.6 -0.8 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Source: Thomson Reuters the asset-purchase plan, before the markets’ attention switched back to Fed’s policy. Gold came under renewed pressure in the last week of the month ahead of the FOMC meeting, as investors were waiting on the sidelines for further hints on the US interest rate outlook. The net long continued to contract over the next couple of weeks after the Fed announced the ending of the asset purchase programme. However, persistent concerns over global economic recovery fuelled some safe-haven interest towards the year-end, further aided by monetary policy loosening by other major central banks. The chart above provides an interesting analysis on how the S&P 500:gold ratio evolved over time. This ratio is a good indicator of investor sentiment, and sends signals of investors’ confidence about the US economy and the equity markets. Despite the wide fluctuations, it is clear from the graph that the ratio had been steadily rising over the past couple of years. This is broadly a reflection of the improving economic climate in the United States and a return of risk appetite, which had seen investors flee from safe-haven gold towards riskier and high-yielding asset classes such as equities. The chart on the right demonstrates the correlation between US nonfarm payrolls data and the gold price. It is interesting to observe that the relationship between the two variables returned to negative territory in 2014, as the pace of jobs growth accelerated, particularly from the second quarter, sending a strong signal on the health of the economy. To put this in perspective, an average of 260,000 jobs per month had been created in 2014, compared to an average of 199,000 jobs per month a year earlier. The rate of growth picked up sharply in the past few months, with an average of 330,000 jobs per month in the period between November and January, recording the best three-month average in 17 years and underpinning the strength of the economic recovery. The 17 INVESTMENT side component. Turning to the second half of the year, as the US economy had taken a turn for the better and continued to gain momentum, with strong job gains, falling unemployment rate and a return in risk appetite, investors’ attention switched from safe-haven gold to equity products and the US dollar, which had become the major beneficiary of any risk-related investment activity during that period. In addition to the growing optimism towards the US economy, a big shift in the Fed’s policy and its commitment to tapering drove the greenback higher for the remainder of the year. In the period between July and December, the US dollar index jumped by 13% to hit a new eight-year high of 90.27 at year-end. 24-Month Rolling Correlation 5 1.0 0.8 GFMS GOLD SURVEY 2015 INVESTMENT IN COMMODITIES (8%). Energy was the worst performing subsector, registering a loss of 45% over the year. Within the precious metals Last year was generally a dismal year where commodities price complex, rhodium and palladium were the only commodities performance was concerned. With the exception of rhodium that registered gains in 2014, at 37% and 12% respectively. The and palladium, many commodities, whether from the precious remaining precious metals all posted losses, with silver posting metals complex, base metals complex, energy or agriculture the biggest loss at 21%. The gains in rhodium and palladium ended the year with lower price levels. Of particular significance were largely down to recovery in the global automobile sector, were the double digit percentage declines in iron ore and crude with the former gaining extra momentum from labour strikes oil, both of which saw their asset prices halved over the course in South Africa, further broadening the deficit in the rhodium of the year. market balance. Conversely, the losses in gold and silver prices were primarily driven by expectations of monetary policy The key drivers that shaped the commodities markets in normalisation in the U.S., which resulted in the strengthening of 2014 can be largely summarised into three factors (1) U.S. US dollar and decreased demand for safe haven assets. risk. The dollar index gained 12% over 2014 on the back of Using CFTC monthly Index Investment Data as a gauge of a strengthening U.S. economy and the end of the tapering investment activity in the commodities sector, notional values programme by the Fed. This shifted the markets’ attention in the U.S. commodities futures market have been trending towards an expected interest rate hike in 2015. The dollar downwards since 2012, with the decline gathering pace in 2014. strength was made even more pronounced by weaker economies From a record high of $242.6 bn in 2011, the notional value in elsewhere, notably the Eurozone, Japan and emerging markets, commodities futures had declined by 41% to $143.2 bn by the resulting in further appreciation of the dollar against these end of January 2015, the lowest level since 2009. This decline, currencies. however, is mainly explained by falling commodity prices as open interest has largely held up against that in 2011. Meanwhile, the market also saw further expansion of supply in some commodities, notably in iron ore output and increased That said, many hedge funds that were set up to ride the oil and gas production in North America. Without concomitant commodities super-cycle have also closed their doors as supply growth in demand, this contributed to a supply glut in these has caught up with the China-led demand shock that had markets and subsequent price declines. The impact of the rise characterised many markets since the mid-2000s. A closer in the dollar, however, was mitigated somewhat in precious look at CFTC Managed Money positions for each sector within metals markets by a series of events last year that led to commodities showed that the decline in net positions in energy heightened geopolitical risks, namely the Ukrainian crisis and and the agriculture sector were the main drivers behind the the Northern Iraq offensive, which helped catalyse demand for overall reduction in net positions last year. The positioning of safe haven assets. energy futures, which saw a sharp decline in the net position much earlier than the oil price descent later in the year suggests In terms of price performance, the precious metals complex was that the oil price decline may have been partially driven by right in the middle of the pack relative to other commodities speculative shorting of the market in addition to its already and asset classes, registering a gain of 3% in 2014. The dollar unfavourable fundamentals. index was the best performing asset (12%), followed by equities CFTC INDEX INVESTMENT DATA (US$BN) NET POSITIONS IN KEY COMMODITY FUTURES CFTC Index Investment Data (US$bn) 300 120 3-month moving average 100 Livestock Agriculture Energy 80 US$ S bn 200 US$ bn INVESTMENT dollar strength (2) market surpluses and (3) geopolitical 100 60 Copper Precious Metals 40 20 0 0 2011 Source: CTFC 18 2012 2013 2014 2015 -20 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 Source: CTFC GFMS GOLD SURVEY 2015 Looking ahead, our macroeconomic view supports a stronger dollar on the back of INDEXED PERFORMANCE ACROSS ASSETS IN 2014 Note: 2nd January 2014 = 100 the strengthening U.S. economy. This may 70 80 90 100 110 120 130 140 150 50 60 70 80 90 100 110 120 130 140 150 S&P 500 Palladium commodities as an asset class, especially Dollar Index precious metals which are typically Dow Jones Industrial Average sought as a safe haven during times of some support to producers’ margins by 60 Rhodium be detrimental to the price performance of crisis. A weaker oil price may provide 50 Nickel MSCI International World Price Index (USD) Zinc reducing production costs but demand Aluminium – the other side of the equation – plays Wheat an equally important role in shaping the Gold fundamentals. Corn Euro Platinum With China’s proclaimed ‘new normal’ Tin of slower economic growth, demand for commodities may wane, albeit a sharp Thomson Reuters/Core Commodity CRB Index Lead spur some physical demand uptake. With Soybean the exception of India, other emerging Silver markets are mired in recession or slow growth, as evident in Russia and Brazil. INVESTMENT correction in precious metals prices may Copper US 10 Year Benchmark S&P Goldman Sachs Commodity Index Henceforth, it remains to be seen whether WTI the U.S. can continue to build on the Brent economic recovery to offset slowing Iron Ore growth elsewhere. Source: GFMS, Thomson Reuters GOLD PRICE CORRELATIONS first half, the correlation was low when high oil prices were a proxy for the US’s economy strength due to its shale industry, The table illustrates daily-log return correlations between gold but the relationship increased when both fell in the second half. and a number of asset classes. The correlation between gold and silver during 2014 remained the strongest among other The correlation between gold and the S&P 500 went into the assets under scrutiny, which should not be too surprising, given negative territory in 2014. The improving economic outlook for the historical link between the two metals. The gold:silver the US economy prompted investors to flee from safe-haven relationship was particularly strong throughout the year. assets towards more conventional, higher-yielding assets like However, this relationship weakened somewhat in the third equities, sending the S&P 500 to record high levels at year-end. quarter, as concerns that China’s slowing GDP growth could hamper demand for industrial metals triggered massive selling GOLD PRICE CORRELATIONS from funds. Silver lost over 25% in the second half, being dragged down along with other base metals, while gold lost over 10% in the same period. 2013 2013 2014 2014 2014 2014 Q3 Q4 Q1 Q2 Q3 Q4 Euro/US$ Rate 0.50 0.45 0.28 0.14 0.17 0.38 Quarterly Silver 0.880.85 0.790.82 0.670.80 The dollar index rose over 12% in 2014, but gold only lost 1.8%, Oil (WTI) 0.23 0.07 -0.17 0.20 0.31 0.34 suggesting that dollar strength was far from fully reflected in S&P 500 0.10 0.03 -0.25 -0.17 -0.18 -0.11 lower dollar gold prices. That said, the dollar:euro correlation rose notably in the fourth quarter. At that time, dollar strength Annual 2009 2010 2011 2012 2013 2014 was clearly a contributory factor in dragging the dollar Euro/US$ Rate 0.32 0.16 0.10 0.50 0.34 0.33 denominated gold price sharply lower. Silver The correlation between gold and oil prices continued to be loose in 2014, and has reached the lowest since 2010. In the 0.82 0.81 0.740.840.900.80 Oil (WTI) 0.17 0.34 0.27 0.36 0.28 0.24 S&P 500 0.03 0.21 -0.03 0.26 0.17 -0.16 Source: GFMS, Thomson Reuters 19 GFMS GOLD SURVEY 2015 INVESTMENT economy added 295,000 jobs in February, representing the twelfth consecutive month in which more than 200,000 jobs were created, sending the gold price to a three-month low of $1,167/oz. Turning to other components of our total identifiable investment figure, demand for physical bars and coins fell by a sharp 39% last year, to an estimated 1,079 tonnes, although the 2014 figure was still the fifth highest on record. This was largely attributable to a lack of interest from the key physical markets such as China and India, which together accounted for more than a half of last year’s drop in our global retail investment figure. Physical bar demand in China plunged by a marked 53% in 2014, to the lowest level since 2010. The introduction of government measures aimed at supressing corruption and bribery in the country, slowing economic activity and a lack of clear price direction were among the major factors contributing to weak gold investment activity. It is worth emphasising, though, that last year’s result should be viewed in the context of the exceptionally high demand in 2013, when the sudden crash in the gold price triggered a rush of bargain hunting, driving investment demand to record levels. Investment demand in India fell by an even more pronounced 59% last year, to hit the lowest since 2005. This was due to a supply shortage of metal through official channels in light of gold import restrictions introduced by the Indian government in 2013, high and volatile premia, and lower price expectations, which saw professional investors deferring purchases of gold bars and coins in an anticipation of further price declines. Looking at 2015, after a fairly strong start to the year, gold entered a downtrend in the second half of January, plunging below the key $1,200/oz level in mid-February, on the lack of physical support and generally weak sentiment, as the market was waiting for clarity on US interest rate policy. After a brief recovery at end-February on the dovish tone of the FOMC minutes, gold continued to slide in the following weeks on positive US jobs data, stronger dollar and ahead of the FOMC March meeting. However, gold prices rallied on the dollar’s retreat after the Fed signalled that the first interest rate hike might not come as soon as initially thought. EXCHANGE TRADED FUNDS —ETF holdings fell by 9% in 2014, with the second half of the year accounting for over 70% of total outflows. Combined holdings of ETFs declined by 160 tonnes, or 9% over the year, from 1,811 tonnes to 1,652 tonnes. Total ETF holdings in value terms at the end of the year, at $64 bn, were $6 bn or 9% lower year-onyear, a stark difference to 2013 in which ETF outflows posted a $73 bn or 51% decline. Despite outflows in each quarter, redemptions in the second half of 2014 made up over 70% of the total, with the heaviest outflows concentrated in the fourth quarter. The easing in ETF liquidation over the first quarter of 2014, which resulted in February recording the first monthly inflow since December 2012, was driven by rising geopolitical tension in Crimea, weaker than expected US economic data due to poor weather and financial turmoil in emerging markets. However, by late GOLD ETFS & OTHER SIMILAR PRODUCTS (tonnes) end-2013 end-2014 change % share of total change SPDR Gold Shares 798.2 709.0 -89.2 56% iShares COMEX Gold Trust 162.4 161.2 -1.2 1% ZKB Gold ETF 176.1 137.6 -38.6 24% ETF Securities 108.3 124.1 15.8 -10% GBS LSE 97.3 84.3 -13.0 8% Central Fund of Canada 52.7 52.7 0.0 0% Julius Baer 66.0 51.0 -14.9 9% Xetra Gold 44.5 48.5 4.0 -3% Source Physical Gold ETC 38.5 44.1 5.6 -3% Sprott Physical Gold 48.5 39.5 -9.0 6% NewGold Gold Debentures 41.3 34.5 -6.7 4% Others Total 177.4 165.1-12.3 1,811.2 1,651.6 -159.6 8% 100% *Other includes DB Euro Hedged, GBS ASX, Royal Canadian Mint, DB Physical Gold ETC (EUR), ETFS - Swiss Gold, iShares ETC, Mitsubishi Tokyo, DB Physical Gold ETC, ETFS Precious Metals Basket Trust, Goldist, ETFS Asian Gold Trust, ETFS NYSE, DB Physical Gold CHF Hedged, Claymore Gold Bullion ETF, Dubai DGX, DB Physical Gold GBP Hedged ETC, DB Physical Gold SGD Hedged ETC, Central Gold Trust, HuaAn Gold ETF, Guotai Gold ETF, FinEx Physically Held Gold ETF, ETFS Hong Kong, E Fund Gold ETF, Bo Gold ETF, Credit Suisse Xmtch, Indian ETFs; Source: Respective issuers 20 GFMS GOLD SURVEY 2015 GLOBAL ETF HOLDINGS (end-period) Tonnes US$bn Tonnes US$bn Tonnes US$bn Tonnes US$bn 12.Q1 2,465 131.77 12.Q2 2,465 126.70 12.Q3 2,603 148.63 12.Q4 2,691 143.41 13.Q1 2,515 129.21 13.Q2 2,112 80.95 13.Q3 1,992 84.96 13.Q4 1,811 70.14 14.Q1 1,809 75.11 14.Q2 1,770 74.83 14.Q3 1,737 67.94 14.Q4 1,65264.04 Source: Respective issuers Among the individual funds, the largest redemptions were in the established entities, with SPDR Gold Shares, the largest gold ETF, posting an outflow of 89 tonnes or 11% over the year, more than half of the total outflows recorded for the period. Meanwhile, other noteworthy decreases were registered by ZKB Gold, Julius Baer and GBS LSE which saw losses of 39, 15, and 13 tonnes respectively. In stark contrast, London based ETF Securities was the only ETF to record a significant inflow in 2014, of 16 tonnes. It is also worth noting that 2014 saw the introduction of two new gold-backed exchange traded funds. California-based Merk Funds launched The Merk GOLD ETFS AND OTHER SIMILAR PRODUCTS 3000 ETF Securities Other 2000 iShares Gold 2500 SPDR Gold Shares Gold Price ZKB GBS (LSE listed) 1200 US$/oz Tonnes 2000 1600 1500 800 1000 400 500 0 Jan-07 0 Jan-09 Jan-11 Jan-13 Jan-15 Source: GFMS, Thomson Reuters, collated from respective ETF issuers’ data Gold Trust in May on the New York Stock Exchange, while China’s Bosera Asset Management Co. Limited introduced China’s fourth gold-backed exchange traded fund in August, Bo Gold ETF, registered to the Shenzhen Stock Exchange. Since the opening of The Merk Gold Trust, ETF inflows have increased by 48% or 1.5 tonnes, while Bo Gold ETF has posted outflows of 98% or one tonne. After five consecutive months of redemptions, gold ETFs recorded their first monthly inflow in January 2015, of 65 tonnes, a level that was last achieved in September 2012. In value terms, total ETF holdings rose to $70 bn, a $6 bn increase. SPDR Gold Shares was responsible for three quarters of the purchases, while other established entities such as ETF Securities and GBS LSE posted inflows of six tonnes. The driving force behind the reversal from outflows to inflows was mainly due to gold regaining its safe haven appeal, as fears grew over the health of the global economy, while expectations heightened over the upcoming Greek elections and potential for European stimulus measures from the ECB. On 15th January, a shock move from the Swiss National Bank to remove the euro cap on the Swiss franc, prior to markets opening, may have been a contributor to the increase in inflows, of 27 tonnes, that were recorded over the next 48 hours, with SPDR Gold Shares responsible for 80% of the transactions. On 22nd January, gold recorded its highest level in over four months, breaking over the psychological $1,300/oz barrier (on an intra-day basis), following the announcement by the ECB to initiate a $60 bn QE program, to curb deflation and increasing market volatility, bringing total ETF holdings to 1,717 tonnes by month end. Over February, ETF inflows continued, albeit at a reduced level increasing by 22 tonnes, to reach an end-month total of 1,739 tonnes. Firm global equity markets and an ever increasing US dollar were the core factors behind the reduction, where gold consequently slid by $70. Turning to the beginning of March and ETF once again returned to outflows, posting daily redemptions totalling 31 tonnes by 13th March, to reach 1,708 tonnes, representing a 3% rise in combined gold ETF levels since the end of 2014. 21 INVESTMENT April with equity markets at all time highs, weakerthan-expected physical demand from Asia and the US Fed announcing a 2014 year-end to its stimulus programme, ETF outflows gained momentum. In the second half of the year, liquidation continued to pick up pace as the gold price declined by $109 from the end of June to December. This was driven by a variety of factors, including a surging US dollar and a plummeting oil price, while the weakening yen following the announcement from the Bank of Japan on further easing of monetary policy was another drag. Expectations that the US would actually start to tighten monetary policy following the end of the Fed QE programme in October, encouraged redemptions in the final quarter of 2014 of 85 tonnes, to end the year at 1,652 tonnes. GFMS GOLD SURVEY 2015 NET INVESTOR LONG POSITIONS ON COMEX (end-period) 2009 Futures contracts 2010 2011 2012 2013 2014 208,088 167,914106,043 98,894 17,725 87,050 equivalent in tonnes 647 522 330 308 55 271 value US$ (bn) 22.6 23.6 17.0 16.4 2.1 10.5 Options contracts -10,528 2,073 5,876 6,86716,379 11,341 equivalent in tonnes -33 6 18 21 51 35 value US$ (bn) -1.1 0.3 0.9 1.1 2.0 1.4 Source: CFTC (Managed Money Net Positions) ACTIVITY ON COMMODITY EXCHANGES —Trading volumes on major commodity exchanges, with the exception of Chinese markets, posted sizeable declines last year. Following a rise in 2013, total volumes of gold futures traded on COMEX decreased by 14% last year, to 41 million contracts. This is equivalent to a nominal 126,024 tonnes and to an average daily turnover of 502 tonnes. Open interest, at 371,646 contracts by end-December, was down by a modest 2%. The fall in turnover in 2014 can, in part, be attributed to a continuation of the weak investor interest that began in the second half of 2013. Indeed the total volume fell by 26% year on year to 19.4 million contracts or just over 60,321 tonnes. The first ten months were relatively stable, with daily trading volume averaging 154,187 contracts. The signalling by the Fed of the closure of stimulus led to a stronger dollar and a corresponding fall in the gold price led interest to grow substantially in November and December, with daily trade volumes averaging 197,702 contracts and a total of 8.0 million contracts, up 24% year on year. Investor activity in COMEX options followed suit, with an 8% year-on-year COMEX VOLUME & OPEN INTEREST 400 200 375 350 Mar May Jul Sept Nov Jan-15 Mar Net Positions (contracts, thousands) 400 200 1400 150 1300 100 1200 50 1100 0 Jan-14 Mar Source: CFTC 1000 May Jul Sept Nov Jan-15 Mar Comex Settlement Price (US$/oz) 425 Daily Open Interest (contracts, thousands) 450 600 Source: Thomson Reuters 22 By early October, a surge in the US dollar saw investors rapidly liquidate long positions, by 74 tonnes, in turn restoring their short positions to a level last seen in December 2013. However, this did not last long, as 475 open Interest 0 Jan-14 CFTC reports on managed money can be used as a proxy for investor activity on the exchange. The first half of 2014 was characterised by a significant contraction in short positions of 139 tonnes, with the first quarter of the year responsible for over two-thirds of the drop. Investors instead were seen to favour long positions; by late June an increase of 128 tonnes had been recorded, resulting in a near 300% rise in net investor positions to reach 356 tonnes. The renewed investor interest in the first half of the year was triggered by fresh concerns over global economic recovery, amid a series of disappointing US economic data, financial turmoil in emerging markets and an escalation of geopolitical tensions in Ukraine, which saw gold prices rise to multi-month highs by March. However, with more upbeat economic data in the following months, together with growing speculation that the ECB would announce policy easing at the June meeting, safe haven assets were put under pressure. MANAGED MONEY NET POSITIONS IN COMEX FUTURES 800 Daily Volume (contracts, thousands) INVESTMENT COMEX rise, to 1.5 million contracts. The year-end open position at 1,401,393 contracts or 4,359 tonnes was up by 3% from the end-2013 level. GFMS GOLD SURVEY 2015 rallying prices fuelled short covering. Indeed, by the time gold had risen above $1,200 in December, shorts had liquidated to such an extent that the net long had risen to its highest level since August. The first quarter of 2015 saw an advance on the managed money net long position, up to 522 tonnes in the last week of January, back to levels last seen at the all time when gold was over $1,750 oz in October 2012. Since then longs fell back heavily, while shorts almost tripled from the end of January to the middle of March. At end-January 2015 the CME launched a new gold contract on COMEX, a Gold Kilo futures, which is physically delivered in Hong Kong. It is linked to the 9999 gold price in Hong Kong and trades around the clock. GOLD TRADED ON COMMODITY EXCHANGES (total volume in nominal tonne equivalents) 2012 2013 2014 COMEX Change y-o-y 136,522 147,093 126,024 -14% 5,917 20,088 23,858 19% 11,895 12,225 8,745 -28% 2,113 3,347 4,724 41% 10,324 8,945 3,972 -56% SGE Spot 950 2,003 2,560 28% ICE Futures US 1,177 1,116 508 -54% DGCX 497 426 426 -0.1% Borsa Istanbul 312 438 239 -45% na na 78 na SHFE TOCOM SGE Au(T+D) MCX SGE International Board* *Trading commenced in mid-September 2014. Source: Thomson Reuters, relevant exchanges CHINESE EXCHANGES SGE GOLD SPOT VOLUME & PRICE PREMIA 800 20 2 1 10 0 -1 -2 Jul Jan-13 Jul Jan-14 Jul Jan-15 Note: Reported trading volume is bilateral. Data above is divided by two. Daily Trading Volume (contracts, 000s) 3 700 300 Open Interest 250 600 500 200 400 150 300 200 100 Open interest (contracts, 000s) 4 Daily Price Premia (%) Daily Trading Volume (contracts, 000s) The premium/discount of the SGE price against the London am fix, which can be seen as a proxy for supply tightness in the Chinese market, fell sharply, starting the year at $25/oz and dropping to a first quarter low of 5 Price Premia Source: SGE China’s only legal source of VAT free gold and platinum, the Shanghai Gold Exchange (SGE), saw trading volumes of Au(T+D) futures post a 41% gain year-on-year to 4,724 tonnes in yet another year of significant growth for the exchange first founded in 2005. Turning to the physical spot contracts (AU9999 and Au9995); total volume for the year recorded 2,560 tonnes, up by 28% year on year or 10.5 tonnes per day. In terms of the total volume traded on the exchange, the first nine months of 2014 saw fairly stable volumes with a daily average of 9.3 tonnes. Activity gradually picked up in the rest of the year, with a daily average of 13.8 tonnes as a strong dollar attracted investment demand in emerging markets. SHFE VOLUME & OPEN INTEREST 30 0 Jan-12 emerging markets currencies. This encouraged investors in those countries to invest in gold as a hedge against falling currencies. 100 0 Jan-12 50 Jul Jan-13 Jul Jan-14 Jul Jan-15 Source: SHFE 23 INVESTMENT In recent years there has been greater investor participation in gold futures trading outside the traditional commodity exchanges, none more so than in China. As illustrated in the earlier table, the Shanghai Futures Exchange saw a significant 19% year-on-year rise in trading volumes in 2014, to a nominal equivalent of 23,858 tonnes. This, however, is largely a function of the extended trading hours, rather than an indication of strong investment activity. The introduction of the after-hours trading session in July 2013 saw a dramatic increase in trading volumes on the exchange. However, a comparative analysis between the second half of 2014 and the second half of 2013 reveals that those volumes have contracted by more than 20%. As can be seen in the SHFE chart, activity surged at the very end of October, much like the COMEX. Average daily trading volumes were the equivalent of 149 tonnes in November and December compared to 86 tonnes for the rest of the year and up 53% year on year. This was the result of an FOMC meeting that signalled the closure of quantitative easing, causing the dollar index to spike and putting pressure on GFMS GOLD SURVEY 2015 September saw the launch of a new foreign exchange board based in the Shanghai Free Trade zone, the SGE International board with its own yuan denominated contracts. Although they are managed by the same people the operations are independent of each other with the international board conceivably aimed at attracting offshore RMB to flow back to China. For the first time, foreigners gained access to the strictly regulated Chinese gold market. From the beginning of the contracts to the end of the year there was a nominal 78 tonnes of activity. The start of 2015 has seen increased investor interest, with trading volumes reaching a nominal 50 tonnes in the first two months. dramatically. There was a nominal 3,632 tonnes traded in the first half of 2014, down 52% year on year, but only down 22% on the second half of 2013. Activity did start to pick-up at the start of September with the average daily turnover over September and October standing at 42,679 contracts. Like other exchanges, turnover surged at the start of November with the strengthening dollar, with the daily average turnover reaching 67,789 contracts in that month. However by mid December, interest had again dropped off to levels seen in the traditional summer lull period. Trading volumes on the TOCOM ended the year at 35,881, up 38% on the end-2013 figure. Open interest in gold futures ended the year at 73,137 contracts, down by 19% on the end-2013 figure. TOCOM Net investor positions on TOCOM futures can be used as a proxy for speculative activity on the exchange. After starting the year at 32,182 contracts, net long positions remained flat until mid February. Driven by the release of poor Q4 2013 GDP numbers and a rising gold price, the net position fell strongly, becoming a net short of 10,885 contracts on 16th March. The speculative short then evaporated as longs increased, albeit at a slower rate than the decline. The net long position hit a year high net long of 44,662 contracts in mid June as gold prices dropped. The net position then fell back to a stable daily net position of around 20,000 contracts from mid June to mid October. The Tokyo based exchange offers one kilogramme and one hundred gramme gold futures and options contracts, for which the price is quoted in yen. Following a relatively flat performance in 2013, trading volumes resumed their long term decline, to the lowest level since 2000, at just over 8.7 million contracts (equivalent to a nominal 8,745 tonnes) down 28% year-on-year. In part, this was due to a continuation of the low investment activity that started in the second half of 2013 as gold prices declined However this masks a steady growth in both the short and long position. The comments by officials at the Bank of Japan that inflation may fall below 1% caused a rout in the net long, from 36,753 contracts on 7th November 2014 to a net short of 10,177 contracts in 28th November 2014. Shorts tailed off towards the end of the year leading to an end 2014 net long of 2,575 contracts. The start of 2015 saw a surge in the yen gold price, which led to a continued fall in the net position. An equally steep PRODUCTION AND CONSUMPTION-WEIGHTED GOLD PRICES The production and consumption-weighted gold price indices 200 Index, 2nd January 2009 = 100 INVESTMENT a $13/oz discount in mid March. This coincided with a curtailment of bullion exports to China from Switzerland, indicating that the Chinese market was flush with metal and that fabricators had overstocked. The premium was stable at a daily average of $0.9/oz over the second quarter; this was largely due to weak jewellery demand and lack of investor interest. From mid July until the end of October the premium crept up with a daily average of $3/oz, but nowhere near what was seen at the beginning of the year. The last two months of the year was a highly volatile period of the premium, but down to a daily average of $2/oz. show gold prices adjusted by weighted price inflation indices. The weights are dictated by gold supply and demand from key countries. The real gold price is the nominal price adjusted for 150 US CPI, the generally accepted convention; however, it ignores inflation and currency fluctuations in countries where local gold prices may be telling a drastically different story. Real 100 gold prices declined 0.6% in 2014. Consumption-weighted Real Gold Price Consumption Price Production Price 50 Jan-09 12%. Production-intensive countries like Russia and China saw higher local gold prices (adjusted for inflation) last year, mainly Jan-10 Jan-11 Source: GFMS, Thomson Reuters 24 prices fell 2.4% and production-weighted prices increased by Jan-12 Jan-13 Jan-14 due to currency depreciation against the US dollar. GFMS GOLD SURVEY 2015 decline in the gold price led positions to return to a net long by mid February 2015. OTHER EXCHANGES A number of relatively new commodity exchanges around the world, launched in previous years in response to market liberalisation and growing investor interest in commodities, have expanded their activity, overtaking some traditional exchanges. In September 2014 NYSE Liffe contracts were migrated to ICE Futures US. These contracts continued the long decline of their predecessor, at a nominal 508 tonnes, down 56% year on year. Meanwhile, end year open interest, at a nominal one tonne, was down 72% on the 2013 level. Volume traded on the 100 oz contract trickled to almost negligible amounts, with open interest following suit. The total volume of the 33.2 ounce “minigold” fell by a slightly lower rate, i.e. 54% year-on-year, to 0.5 million contracts or a nominal 507 tonnes. Endyear open interest stood at 1,800 contracts, down sharply by 57% on the end-year figure of 2012. LBM Number of Transfers LBM Transfers** Tonnes Comex Turnover Tonnes LBM/ Comex Ratio 2010 1,737 571 5531.0:1 2011 2,296644607 1.1:1 2012 2,678 616542 1.1:1 2013 4,4646835841.2:1 2014 4,207569500 1.1:1 *daily averages, **represent the net volume of loco London gold transfers settled between clearing members of the LBMA Source: LBMA; Thomson Reuters 2014, but delays have meant, that as of early 2015, this has not been launched. It is expected that this will be a one-kilogramme 995 Au contract. The Istanbul Gold Exchange, opened in 1995, merged with the Istanbul Stock Exchange in 2013, creating the Borsa Istanbul. The 92 members of the exchange are the only companies allowed to trade gold through Turkey and this must come via the exchange with at least one trade. In addition, all domestic production must also come through the exchange. Total volumes on the Borsa Istanbul dropped heavily last year, to a nominal 239 tonnes, down 45% of the 2013 figure. This was driven by lower investment demand for bars and coins, thus less material needed to go through the exchange. Unique to the Borsa Istanbul is the T+0 (same day) spot delivery. It is also of note that there is continuous trading every day, including weekends and holidays, in the precious metals markets. In October 2014 the Singapore Exchange launched a 25 kilobar 9999 gold contract for the wholesale market, with the contracts being settled by physical delivery. It will be made up of a series of six daily contracts. TURNOVER ON THE LONDON BULLION MARKET 800 Daily Average Turnover (Tonnes) 600 300 400 200 200 100 0 Daily Average Value (Bln USD) Since the launch of the exchange in November 2005, gold futures have also been available on the Dubai Gold and Commodity Exchange (DGCX). After a moderate fall in 2013, the total volume in gold futures listed on the DGCX was essentially flat at 426 tonnes year on year. In spite of the strategic location and organisation of the exchange (its backers include the Dubai Multi Commodities Centre and the MCX, and offers contracts priced in US dollars), investment activity on the exchange has remained constrained over the past few years. The DGCX had been set to launch a spot gold contract in June 400 Daily Average Value of Transfers 0 2000 2002 2004 2006 2008 2010 2012 2014 Source: LBMA 25 INVESTMENT There are currently a number of commodity exchanges in India that offer gold futures contracts, of which the leader is the Multi Commodity Exchange. Turnover on the exchange witnessed a near 60% decline over 2014, with trading volumes falling to their lowest levels since 2005, posting 302 tonnes in April. A series of regulations and gold import restrictions introduced by the Indian authorities, in addition to the implementation of the Commodity Transaction Tax of 0.01%, saw traders shift to alternative exchanges such as COMEX, the Dubai Gold and Commodity Exchange, and alternative unregulated markets in India. However, the easing of import regulations as of 21st May has seen volumes improve, reaching 385 tonnes in November. So far in 2015 volumes have remained flat with an average daily trading volume of 16 tonnes up to 20th March compared with the same figure for the last three months of 2014. LONDON BULLION MARKET (LBM) AND COMEX TURNOVER* GFMS GOLD SURVEY 2015 OTC MARKET —Following the frenzy of 2013, overall activity in the INVESTMENT OTC market was appreciably lower last year. Overall, this arena saw net activity, mainly achieved by opportunistic buying in Asia. The Over-the-Counter (OTC) market trades a variety of products linked to the gold price, including spot and forward products, metal accounts, as well as vanilla options and other derivatives, which can be tailor-made to suit particular investment purposes. The OTC market tends to be populated largely by institutional investors, who are attracted to the flexibility inherent in products traded therein, the relatively low transaction costs and discrete nature of operations. The high entry level costs inherent in the market tend to make it inaccessible to retail players (with the exception of high net worth individuals). There was net investment in the OTC market in 2014 and this helped to provide some support to gold prices at times, not least in the first quarter, fuelled by geopolitical turmoil and bargain hunting. Indeed, the same could be said for the action at the tail end of last year when bargain hunting for investors in dollar terms meant that gold prices in many other currencies rallied robustly. However, it is worth noting that the overall level of activity in this arena was noticeably softer than in 2013. Supporting this view is data from the LBMA, showing that the net volume of gold transferred in 2014 was down 17% compared to the same period a year earlier. It is not surprising that the value of these transactions for the same time period fell by an even more severe 25%. The spectacular activity in 2013 arguably skews the year-onyear comparisons but even sidestepping that year overall turnover on the LBMA was the lowest annual turnover since 2005. Interestingly, the number of transfers only edged lower by 6%, as the decline derived from the size of the average transfer, which continues to slide lower. This is chiefly indicative of heavy investor selling in 2013, especially by institutional investors (and buying by different investors) not being replicated en masse in 2014. This was both a symptom and a cause of the low volatility in the market, and in this vein it was only in November that activity was up for the first time year-on-year on the back of increased volatility. It is also arguably the case that a trend across the wider markets to move more activity into the futures markets may also have been a drag on volumes. Part of this reduction reflects the growing importance of regional markets and loco London transactions are losing market 26 share. Thus a key factor underpinning shifts in the OTC market is the continued shift from west to east. There are many examples of this, but most recently it is worth noting the stellar growth in activity in Shanghai. Another important development in this mould is the launch of gold contracts on three Asian exchanges, which are likely to cause a further shift away from western markets in the coming months and years. At the beginning of 2015 there was a pickup in activity. In January this was undoubtedly encouraged by rising gold prices as there was strong investor buying, especially in Europe sparked by increasing signs (and realisation) of quantitative easing by the ECB, as well as the uncertainty caused by the unpegging of the Swiss franc. Indeed LBMA transfer numbers were up by a fifth year-on-year in January. Subsequently, field research indicates activity has dropped back, and also involved more selling, not helped by the continued strength of the US dollar and the consequences for dollar-denominated gold prices. PHYSICAL BAR INVESTMENT — Demand for bullion bars dropped by over 40% yearon-year in 2014, to an estimated 829 tonnes, the lowest since 2009. —The lower figure was primarily on the back of a sharp decline in investment demand in Asian markets, led by China and India. —Elsewhere, demand for bars in Europe and North America posted double-digit losses. World demand for physical bars saw a sharp decline last year, dropping by 566 tonnes or 41% to a five-year low of 829 tonnes. This was largely driven by a sizeable contraction in demand from Asia, as a lack of gold price volatility and lower price expectations, plus advance buying in 2013, prompted investors to defer purchases of physical bullion. Various government policies aimed at reducing local demand for gold also helped to explain last year’s marked drop. In other parts of the world, bar purchases in Europe saw a notable decline last year, on the back of a lack of clear price direction and a gradually improving economic sentiment, while stronger economic recovery in the United States saw investors switch from safe-haven gold to high-yielding assets, resulting in a double-digit percentage decline in bar purchases. EUROPE After reaching a peak of 337 tonnes in 2011, European demand for gold bars declined, to hit 210 tonnes in 2014. It is worth stressing that, despite the 15% drop, last year’s figure was nevertheless high by historical standards. GFMS GOLD SURVEY 2015 NORTH AMERICA Physical bar demand in North America fell to 28 tonnes in 2014, down 27% from the previous year. In 2013, bar demand rose by 23% on the back of lower prices, which garnered interest among small retail-level investors. These investors seem to have purchased the bulk of their targets in 2013, as it likely brought forward demand that might have occurred in 2014. As the US economy gathered momentum, investor interest in non-yielding assets was reduced. The S&P 500, a proxy for the US equity markets, reached fresh record highs throughout the year, diverting investment dollars away from safe RETAIL INVESTMENT 600 Other North America 500 Europe China Tonnes 400 India 300 200 100 0 Q1-10 Q1-11 Q1-12 Source: GFMS, Thomson Reuters Q1-13 Q1-14 haven gold. There was increased liquidation of investor gold holdings in the third and fourth quarters of the year in the US as well, which weighed on net bar demand. INDIAN SUB-CONTINENT Indian investment demand fell by 59% to 110 tonnes last year, the lowest since 2005. India’s share of the global total fell to 13%, a level not observed in the last decade. This is sharply lower than the annual average of 35% of the global market share calculated for the period 2004 to 2012. A drop of this magnitude was due to a supply shortfall of metal through official channels, lower price expectations from professional investors, a crackdown on corruption, and a liquidity crunch during first half of 2014 due to the general election. Gold available through official channels has been a key source of income for a large part of the trade to maintain regular cash flow and show higher turnover on the books of most of the jewellery retailers and bullion traders. This can be inferred by extensive physical trading activity noted in silver, which saw imports rise to a new record for the second consecutive year. As a result, the tactical investment part was missing by and large, with gold coming in through unofficial channels and going into jewellery. High and volatile premia were yet another factor keeping away short term physical trading activity. With metal availability restricted to a few hands the change in premia over a week could occasionally exceed the London spot price. Also in the physical market, the customs duty is basis the fortnightly tariff rates set by customs and thus will differ from the ad valorem rates, another risk that the trade was not willing to take. Professional investors were sellers in the market leading to a high level of dishoarding; however this was quickly absorbed by jewellery market to partly make up for the supply shortfall. Selling was also high from political circles ahead of the general election in the first half. Wealth managers were focussed on enticing investors to equity markets over gold, and the appetite for portfolio diversification into gold was generally down. Event based buying was the only source which helped drive demand. For instance both during Akshaya Tritya in April and Dhanteras in October generated strong purchases, although in smaller sized bars. One-hundred gramme investment bars were of less interest to the public as people bought 10 and 20 grammes, largely to keep up with tradition. That said, lower prices in November saw the return of investment flows, but it still was not a convincing price point for investors at large and secondhalf investment was down by 36% from the first half. 27 INVESTMENT This was largely a result of continued investor interest in physical bullion, largely on the back of persistent economic and financial uncertainties in the region. The bulk of the selling last year was concentrated in the first half, when demand fell by an estimated 27% when compared to the corresponding period in 2013. It should be noted, though, that the first half of 2013 witnessed an extraordinary buying spree, particularly in the second quarter, following the sharp correction in the gold price. Among other factors contributing to the last year’s decline were gold’s disappointing price performance, along with improving investor confidence and booming equity markets, which were the key determinants of investor behaviour in markets like Germany and France. Meanwhile, declines in some other, structurally weaker economies such as Italy, were less pronounced as protracted economic headwinds continued to encourage portfolio diversification into safe-haven gold. In stark contrast to the first six months of the year, investment demand in the latter half was down by ‘just’ 3% yearon-year, as the anticipation (and realisation later on) of quantitative easing by the ECB encouraged some interest at the end of 2014 and helped to underpin a strong start to 2015 by retail investors. GFMS GOLD SURVEY 2015 PHYSICAL BAR INVESTMENT (tonnes) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Europe Germany 9.3 22.3 30.3 109.1 128.7 121.7 154.5 104.1 112.5 97.0 Switzerland 9.2 10.5 12.5 88.9 97.1 92.4 115.9 80.4 65.1 44.6 Belgium -1.2 -4.3 -2.0 -0.1 12.2 18.7 23.8 19.2 21.0 21.8 1.5 3.2 4.4 4.0 0.9 4.9 14.0 8.5 11.6 10.0 Turkey Other Countries Total Europe -30.6-32.9-40.3 5.6 -7.3 -10.2 28.4 35.3 37.5 36.5 -11.9 -1.2 4.8 207.4 231.5 227.5 336.5 247.4 247.6 209.8 North America United States Canada Mexico Total North America 12.4 4.9 -2.5 51.4 63.5 62.0 47.5 25.9 33.4 24.8 1.44.0 1.45.2 7.43.4 5.12.65.03.0 0.70.8 1.85.33.32.82.92.8 0.1 0.1 14.5 9.7 0.8 61.9 74.3 68.3 55.5 31.3 38.4 27.9 South America Venezuela 0.00.00.00.02.02.02.02.02.62.0 Other Countries -4.3-3.6-2.0-0.60.60.30.50.5 1.20.3 Total South America -4.3 -3.6 -2.0 -0.6 2.6 2.3 2.5 2.5 3.8 2.3 Asia INVESTMENT China India 9.0 10.1 21.0 60.8 102.3 178.6 237.8 249.3 362.1 171.1 102.8 139.8 148.6 159.9 117.5 266.3 288.0 205.9 265.8 109.8 Thailand 28.0 15.9 4.6 42.6 -10.1 63.0 103.6 101.9 157.9 84.4 Vietnam 34.0 69.5 56.1 96.2 58.2 67.0 87.8 67.4 84.8 56.4 Iran 11.9 12.0 20.2 30.6 15.8 33.8 40.4 44.2 50.4 43.4 Indonesia 3.0 -1.0 0.3 2.9 -6.0 15.3 24.8 7.3 8.0 9.0 13.5 10.9 14.5 Saudi Arabia 22.1 43.1 18.1 17.4 16.3 17.8 14.6 Pakistan 3.4 2.1 2.6 -4.4 -19.4 7.0 14.6 12.3 23.9 13.4 UAE 8.3 6.6 5.9 8.0 4.4 6.1 9.1 7.9 9.5 8.5 1.6 1.3 1.4 0.6 3.0 2.7 7.0 7.9 South Korea Other Countries Total Asia -0.3 -8.0 52.2-34.4-39.2 -23.1 -31.4 -27.3 -7.5 12.1 49.2 34.8 261.5 229.8 230.5 386.8 234.2 625.0 818.9 742.0 1,071.5 562.4 Oceania & Other Australia 0.7 Egypt 0.90.60.70.40.7 1.20.70.815.29.9 Total Oceania & Other World Total 0.8 1.0 2.9 4.4 10.2 15.5 14.8 17.6 16.2 1.6 1.4 1.7 3.3 5.1 11.3 16.2 15.6 32.8 26.1 261.4 236.1 235.8 658.8 547.7 934.4 1,229.5 1,038.9 1,394.1 828.5 …of which:- Middle East* 36.0 34.845.0 61.4 34.9 65.8 93.1 73.3115.9 97.9 East Asia* 119.1 54.7 CIS* Indian Sub-Continent*108.1 143.0 152.3 156.6 37.1 171.7 100.9290.5 435.3 456.7688.7 357.8 3.33.64.24.44.9 3.12.8 2.7 2.72.8 98.5 273.6 304.4 220.8 293.0 126.0 Source: GFMS, Thomson Reuters; *The key regional bullion markets EAST ASIA Bar investment in China dropped to 171 tonnes in 2014, decreasing by a whopping 53% year-on-year to the lowest level since 2010. The significant retreat was heavily impacted by the anti-corruption activities in Chinese government introduced since April 2013. Indeed, gifting had been a substantial part of physical bar demand and had been part of the fabric of corruption in Chinese history as gold bars have high value, high liquidity, and gold is deeply rooted in Chinese culture. Yet as the policy rolled out, the gifting sector was 28 significantly weakened, since those found guilty of corruption have faced anything form a lengthy jail sentence to capital punishment. Another key reason for the drop is the lack of confidence among investors, with the price of gold under pressure, and this kept would-be investors on the sidelines. Also, the strong performance of the domestic stock market attracted investment away from gold. In an effort to reign in a spiralling trade deficit in 2013 the State Bank of Vietnam made significant changes to how the gold market operated in the country. In what is a GFMS GOLD SURVEY 2015 remarkable arrangement, the government has effectively moved to control all imports of bullion. In addition, it has banned the production of minted bars aside from that sanctioned and controlled by government authorities. This in turn has limited the volume of gold bars that can be released into the domestic market at any one point in time. The GFMS team at Thomson Reuters estimates that investment demand in Vietnam retreated by a third last year to an estimated 56.4 tonnes. Given the lack of available supply, and the high premium these products attract, consumers are increasingly purchasing 24-carat encapsulated rings when looking to invest in the gold market, especially in rural areas where access to official minted bars is limited. Following the return to net investment in 2013 (the first in seven years) Japanese bar investment returned to trend last year, with net disinvestment reaching an estimated 1.9 tonnes. The year started well for the physical WORLD PHYSICAL BAR INVESTMENT 1500 70 Value of Bar Investment 60 50 Tonnes 40 30 500 20 10 0 0 2005 2007 Source: GFMS, Thomson Reuters 2009 2011 2013 Value (US$, bn) 1000 MIDDLE EAST After surging by over 38% in 2013 to a record high, bar hoarding in the Middle East declined 15% last year to an estimated 98 tonnes. Following a strong start to the year, when a rising gold price encouraged some speculative activity, the lack of volatility and a general lowering of price expectations saw investment demand falter thereafter. Consumers, it would appear, have, in many cases, lost faith that gold can deliver the yields that other asset classes (chiefly the equities markets) have done in the last twelve months. Sizeable declines were registered across almost the entire region, led by Iran and Saudi Arabia (as the largest investment markets in this Bloc) which retreated by 14% and 18% respectively. It was a similar pattern across the region, with double digit falls seen in the UAE and most of the GCC. The only exception in 2014 was Kuwait, where demand increased 28% year-on-year, from a low base, as high wealth investors took advantage of any dips in the price to build gold assets. OFFICIAL COINS — Global official coin minting declined by 37% year-onyear in 2014, as the market recovers from frenzied physical buying that had largely characterised demand in the previous year. Total coin fabrication was visibly lower in 2014 compared to 2013, totalling 173 tonnes – a 37% year-on-year decline. The decline in official coin fabrication was especially pronounced in North America (-36%) and Europe (-44%), two of the largest bullion coin fabricating regions globally. While the steep decline in 2014 could be partly explained by an anomalous year in 2013, which was characterised by fervent bargain hunting on the back of severe price declines, the fall in official coin fabrication in 2014 also indicated waning enthusiasm for gold as a safe haven asset. Coin demand in 2014 was 17% down against 2012. The drop in enthusiasm 29 INVESTMENT Following the record levels in 2013, bar hoarding in Thailand slumped by 47% last year, declining 74 tonnes to an estimated 84.4 tonnes. A lack of volatility, which restricted regular trades, a drop in price expectation among investors with media reports suggesting that gold would fall further, and with many speculators still under water from their purchases in 2013, saw physical investment in the first half crash by 57% year-on-year. In addition, a surging equities market in Thailand (the SETI rose by over a tenth last year) also saw funds diverting to this higher yielding asset class. The second half delivered a year-on-year decline of 30%, punctuated by brief periods of buy side activity during the fourth quarter when gold in baht terms dipped briefly below 19,000 baht per baht bar. This price level fuelled renewed demand for the yellow metal, although offtake during this period paled in comparison to the level of demand in the first half of 2013. investment market, buoyed by investors front loading purchases ahead of the 3% rise in the consumption tax rate in April. This lifted net investment in excess of five tonnes, a level not seen in the Japanese market since 2008. The investment market swung back to net disinvestment in the third quarter with volumes surging in the final period of 2014 as a weaker yen drove gold in domestic terms to over 4,700 yen per gramme, a level not since May 2013. The higher price provided a profit taking opportunity for investors, with many taking the chance to liquidate their gold holdings. GFMS GOLD SURVEY 2015 OFFICIAL COINS (INCLUDING THE USE OF SCRAP) (tonnes) Turkey 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 52.056.756.7 53.130.935.658.939.990.640.5 Canada 10.2 8.3 9.0 27.638.2 34.135.823.935.5 22.1 United States 14.027.519.031.850.944.536.527.5 34.121.8 South Africa 1.5 2.4 6.8 8.7 23.2 20.0 23.8 23.7 27.5 21.5 China 9.4 9.4 7.2 5.5 6.7 8.523.9 21.4 21.8 15.4 Austria 7.2 4.4 5.324.933.4 17.9 21.1 12.420.3 13.6 Australia 4.4 5.3 5.6 9.6 11.0 8.410.610.016.2 11.6 Iran 4.2 4.0 4.5 5.3 7.6 9.4 9.6 9.210.3 7.5 United Kingdom 3.33.53.44.34.74.45.86.84.94.7 Russian Federation 0.9 1.64.35.76.55.44.66.45.74.5 Germany 5.55.55.55.55.05.0 4.75.04.24.2 Switzerland 0.10.10.10.20.20.30.30.11.91.9 Other Countries 5.03.63.85.45.5 5.13.0 4.13.73.9 World Total 117.7 132.3 131.3 187.4 223.8 198.5 238.7 190.4 276.6 173.2 reflected the general recovery from the global financial crisis prompting investors to search for higher returns from other investment avenues. This is evident in the volume of coin fabrication, which has returned to levels last seen before 2008. While volumes had declined by 37% on a year-on-year basis, total value posted an even sharper decline of 44%, following on from declining investor interest and a lower average gold price. The average gold price in 2014 declined by 10% on a year-onyear basis, bringing the total value invested in the coin market to $7 billion, the lowest level since 2009. Using our proprietary gold bullion coin survey as a gauge of regional bullion coin sales, we observed the biggest yearon-year decline was in Asia (excluding Japan), where the largest buyer of bullion coins is China. Coin sales to this region declined by 50%, another sign that the gold buying frenzy that characterised much of the physical shift from west to east in 2013 has retreated considerably, as investors have adopted a more cautious stance after a bout of irrational buying. Meanwhile, sales to North America, traditionally the world’s largest market for bullion coins, declined by 36%, symptomatic of waning interest for gold in light of higher yielding investment alternatives elsewhere. hedge for investors in these countries who experienced a depreciating currency towards the end of the year. Furthermore, both the Japanese and EU economies appeared to have lost considerable momentum towards the end of the year as central banks in both regions sought to introduce QE to boost liquidity. This dissuaded local investors from liquidating their investments, and in some cases encouraged further investments in gold to hedge against currency movements and economic slowdown. Looking at coin fabrication on a quarter-byquarter basis, the large declines mainly took place in the first and third quarter. In the absence of strategic investment in physical gold, investment demand for coins largely relied on speculators and bargain hunters over the year. After falling to an average of $1,276/oz in the last quarter of 2013, the gold price held firm over the first three quarters of the year, averaging at $1,287/oz and trading in a range of $1,214/oz to $1,385/oz. Comparing this to the sharp price correction and wide trading range of $1,192/oz to $1,694/oz in the previous year, there was OFFICIAL BULLION COIN SALES 120 2000 Gold Price 30 100 80 1500 US$/oz Interestingly, bullion coin sales in Japan and Europe held up better. We estimate that coin sales to Europe declined by 25% (against the global average of -30%) and decline by a mere 3% in Japan. While Europe saw declines in demand in the same order of magnitude in the first three quarters, demand surged towards the final quarter. This is largely explained by foreign exchange movements. While the dollar denominated gold price had been trending downwards throughout the year, euro and yen denominated gold prices held firm over the same period. Gold served as a good inflation Tonnes INVESTMENT Source: GFMS, Thomson Reuters 60 40 1000 20 0 Q1-09 500 Q1-10 Q1-11 Q1-12 Q1-13 Q1-14 Source: GFMS Quarterly Bullion Coin Survey, Thomson Reuters GFMS GOLD SURVEY 2015 MEDALS AND IMITATION COINS (INCLUDING THE USE OF SCRAP) (tonnes) India Other Countries World Total 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 32.855.864.763.553.582.680.0106.396.370.8 4.2 3.6 3.7 6.2 5.4 5.7 7.8 7.1 7.5 6.6 37.0 59.4 68.4 69.7 58.9 88.3 87.8 113.4 103.8 77.4 Source: GFMS, Thomson Reuters no sufficient downward move to draw in fresh buying from bargain hunters, nor was there sufficient upside to lure in speculators. It was only in the final quarter where a relatively large price correction saw some buying activity return to the market. Entering 2015, we have seen relatively lacklustre sales in the first two months and expect coin sales to trend lower than 2014, albeit at a slower rate of decline. Physical investment demand for gold in the near term will continue to be driven by price expectations and the relative attractiveness of alternative investment opportunities. As the US rate hikes become imminent, this will provide a challenging backdrop for continued investment in physical gold. MEDALS AND IMITATION COINS — Indian demand for coins fell to 71 tonnes, the lowest in five years as lower price expectations discourage investment activity. Demand for medallions and imitation coins in India last year declined 26% compared to 2013. This also marks The ban on bank and post offices from retailing coins was a big blow to the minted coin industry and equally important was curbing advances on gold coins weighing more than 50 grammes. Thus the collateral market accepted only jewellery and some even branched out to sell standard jewellery, which would return to them as collateral at some point in time. Low making charges were the key that made coins a point of attraction compared to jewellery. That said, with more standardised hallmark jewellery being sold, future volumes will be limited for the coin market and may not return to levels seen before. While the ban on coin imports was lifted in the 28th November circular, banks are still not allowed to sell coins. Part of the current volumes also includes medallions imported unofficially by Indians working in GCC or East Asian countries during their visit to India. The ease of hooking the medallion to chain was an easy way to pass the green channel at airports. Also important to note was the increase in sale of coins that fake the stamp and design of some Swiss coins, primarily due to the restriction that existed on coin imports. Looking ahead we are not very bullish about demand for the rest of 2015 despite possible price declines. On the other hand we note a strong growth in the locally minted 995 coin market and should see a greater shift from 916 coin. The government’s proposal to launch India’s first official coin, ‘Ashoka Chakra’, should elicit a consumer response; though it largely depends on the denomination and the distribution network employed. 31 INVESTMENT Ranking of coin producers, both bullion and numismatic, showed that Turkey continues to occupy the top of the list, producing a total of 40.5 tonnes, despite a 55% year-on-year decline in production. It should be noted that coin fabrication in Turkey rose by an eye-popping 127% in 2013 to achieve total production of 91 tonnes, a record-high and more than twice its production in 2012. This is followed by Canada (22 tonnes), the United States (21.8 tonnes) and South Africa (21.5 tonnes). China, which we estimate to be the fourth largest coin producer in 2013, lost its position to South Africa last year, with a total production of 15.4 tonnes, largely on the back of declining bullion sales, reflecting satiation amongst existing investors from the buying frenzy of 2013 and a limited inclination to expand their holdings. This is followed by Austria and Australia, producing 14 and 12 tonnes respectively. Rankings for the remainder of the list are largely unchanged. With the exception of the U.K. which saw production decline 3%, most major coin fabricating countries saw coin production decline by double digit percentages. the second consecutive year of decline and the steepest drop since the decade long bull market in gold. Lower price expectations and higher premia discouraged purchases, though seasonal factors and attractive price points during last year helped lift volumes. Having said that, tight regulations implemented by the government and the Reserve Bank of India that discouraged demand for coins from the second half of 2013. Also many jewellery retailers showed a lack of interest in selling coins due to low margins from coin when compared to plain jewellery, apart from the weeks leading to Akshaya Tritya and Dhanteras. GFMS GOLD SURVEY 2015 TOP 20 GOLD MINING COUNTRIES 3. MINE SUPPLY Rank • Global mine production expanded by 2% last year to reach a record level of 3,133 tonnes. • The dominant influence behind this lift was the ramp up of projects that had been commissioned in previous years. 2014 production increases courtesy of project growth, while expansions were behind firm gains in Russia and China. • Notable production losses were seen in the United States, Peru and South Africa. Production (t) 1 1China 2013 2014 438.2461.8 2 2Australia 268.1272.9 3 3Russia 248.8262.2 4 229.5 4 United States 5 5Peru 6 • Canada, the DRC and Mongolia saw the greatest 2013 6 South Africa 205.0 187.7 172.6 177.0 163.8 7 7Canada 133.3 153.8 8 8Mexico 119.8 118.2 9 9Indonesia 109.6 116.4 10 10Ghana 107.4 108.2 11 11Brazil 80.1 80.7 12 12Uzbekistan 77.4 80.4 13 14Argentina 50.1 59.8 • Average Total Cash Costs fell by 3% in 2014 to $749/oz. 14 13PNG 60.5 58.2 15 18Kazakhstan 42.6 49.2 • The main factor behind the drop in costs was favourable 16 16Mali 48.2 17 17Tanzania 46.6 45.8 18 15Chile 48.6 44.2 exchange rate movements for many producers as a result of the rally in the US dollar. • All-in Costs dropped by almost one-quarter, as the frequency and magnitude of asset impairments both reduced when compared with 2013. The drop in All-in Costs, excluding impairments, was a less dramatic 3%, at an average of $1,208/oz in 2014. 47.4 19 19Colombia 41.2 43.1 20 20Philippines 40.5 42.6 Rest of World World Total 506.4 546.9 3,061.5 3,133.1 Source: GFMS, Thomson Reuters MINE PRODUCTION hedge book last year, with two companies, Polyus and Fresnillo, behind much of the activity. • At the margin, the strong dollar phenomenon also elicited hedging activity as producers sought to hedge small volumes in domestic currency terms to lock in improved local gold prices. INTRODUCTION Last year reflected a period of strategy consolidation for many producers, after the year of turmoil in 2013 which in many cases necessitated lifting reserve cut-off grades, consequent heavy and widespread impairments, and headcount reductions both at mine sites and head offices, all in response to the fall in metal prices. • Mine production is expected to be broadly flat in 2015, as the contribution from projects fades. GLOBAL GOLD PRODUCTION 4000 3500 Australia Russia South America Other Other Africa South Africa North America China Other Asia 3000 2500 Tonnes MINE SUPPLY • Producers collectively added 103 tonnes to the global 2000 1500 1000 500 0 2005 2007 2009 Source: GFMS, Thomson Reuters 32 2011 2013 Mine production delivered a sixth consecutive year of growth, increasing by just over 2% last year, to reach a record volume of 3,133 tonnes. Much of 2014’s growth came from new operations that have been brought online following investments made during the boom years. Geographically these were diverse, with the key beneficiaries of project-related growth having been Canada, the Democratic Republic of the Congo (DRC), and Mongolia. Russia saw a strong gain with production up by 5%, with the majority of growth having come from expansion of existing operations, as did China, which was also up by 5% year-on-year, to represent the strongest absolute growth in 2014. Heavy losses were few in number, but included the United States, Peru and South Africa. GFMS GOLD SURVEY 2015 MINE PRODUCTION WINNERS AND LOSERS, 2014 VERSUS 2013 -15 t -10 t -5 t -0.5 t +0.5 t +5 t +10 t +15 t Source: GFMS, Thomson Reuters GLOBAL PROCESSED GOLD GRADE VS PRICE Ch5 Scrap Share of Total Supply Gold Price Processed Ore Grade 2000 1.8 1500 1.6 1000 1.4 500 1.2 2005 2009 Source: GFMS, Thomson Reuters 2013 0 Annual Average US$/oz Processed Ore Grade (g/t) 2.0 operations, all of which produced first gold in 2013, and Pueblo Viejo, which poured first gold in 2012. Indeed, the only project of global significance to have entered production in 2014 was Cerro Negro in Argentina, having contributed almost five tonnes of gold production in its debut year. After a campaign to control costs that has now been underway for two years, Total Cash Costs in dollar terms fell last year, albeit by a modest 3%. The key influence behind this positive outcome, however, was predominantly beyond producers’ control in the form of favourable moves in exchange rates to the US dollar; with the dollar rally in the second half of 2014, the majority of currencies weakened, in some cases substantially, such as the Russian rouble and Ghanaian cedi. Another factor supporting a reduction in costs has been a shift by producers to process higher grades ore, where feasible, as reflected by the inflection point in 2013, charted below left. Looking at All-in Costs, a proprietary GFMS metric developed to reflect the long term cost of mining, costs were reined in more dramatically, as asset impairments, although still a relatively common occurrence in 2014, came in substantially lower year-on-year. To this end, All-in Costs for 2014 totalled $1,314/oz, a 25% year-onyear reduction. Stripping out the effects of impairments, 33 MINE SUPPLY Nevertheless, this lift in output represented a substantial slow-down in the rate of growth relative to that seen in the previous year. Much of this has been due to the thinning of the project pipeline; a key factor in the growth of recent years has been the advancement and delivery of greenfield projects into production, particularly in the period that followed the global financial crisis, which coincided with the gold price progressively achieving record levels between 2009 and 2012. To underscore this point, the top five growth stories at the asset level in 2014, which collectively added 60 tonnes year-onyear, were all projects that had seen substantial capital investment before the gold price receded. Specifically, these were the Kibali, Oyu Tolgoi, Tropicana, and Akyem GFMS GOLD SURVEY 2015 MINE SUPPLY Although sustaining capital has, by necessity, been maintained, projects have in the main been kept on hold as part of an industry-wide move to keep non-core expenditure to a minimum. This has been compounded by mining companies’ apparent renewed recognition of their role as custodians of their investors’ capital. With most companies’ boards reluctant to take on new tranches of debt, and following the punishing run that most mining companies’ share prices have suffered, equity raisings are almost inconceivable. As such there has been an increasingly visible theme for investments to be funded from internal cash flow and to demonstrate sufficiently attractive returns to make any proposal more compelling to the board than returning that cash to shareholders. As a result of this, the near-term pipeline of projects has thinned and the scope for new developments to continue to deliver production growth in 2015 has waned. The GFMS team at Thomson Reuters expects that global production growth will stall next year as the project pipeline delivers less incremental growth and a handful of depleted mines close. M&A remained subdued last year, with the value of deals in the gold space having dropped by 9% compared with 2013 to $7.3 billion, amounting to just one-fifth of the recent peak in deal flow recorded in 2011. Although several larger companies are sitting on cash and have outlined that in principle they are ready to do deals should the right opportunity be presented, there have only been a small handful of meaningful transactions. It is also of note that the industry engaged in net producer hedging in 2014. This was only the second such occurrence on an annual basis since 1999 (the other having been in 2011) and of the two, at 103 tonnes 2014 was the first occurrence of meaningful volume. This switch in activity back to the supply side of the market, coupled with record levels of mine production, meant that total supply from the mining industry was 3,237 tonnes; another record, breaking the previous 1999 high by more than 100 tonnes, albeit then from a much heavier balance of hedging in 1999. The dominant reason for the shift to producer hedging was a move by two producers, Polyus Gold International and Fresnillo plc., in both cases to manage cash flow risk associated with planned investments. In the case of Polyus, which entered into a series of exotic hedge contracts in the second quarter, the purpose was to provide cash flow stability over the medium term, 34 during which time elevated investment (and production volumes) were planned to take place, associated with the development of its Natalka project. For Fresnillo, which hedged in the fourth quarter, the rationale was similar; to provide additional price stability as it purchased the minority 44% stake of the Penmont Joint Venture (comprising the Herradura and Noche Buena mines, among other assets) from Newmont. Aside from the above two players, that were collectively responsible for almost two-thirds of the outstanding hedge book at year-end, relatively smaller-scale hedging took place by a number of companies. Many of these followed the strengthening of the US dollar, with hedges denominated in Australian dollars that sought to take advantage of a higher domestic gold price. We would caution that in many cases investors remain staunchly opposed to producer hedging and we would not describe these events as being reflective of a return to producer hedging en masse. AFRICA African gold output was up nine tonnes or 1% year-on year, bringing the total to 588 tonnes. The region’s output was characterised by strong gains in the western and central parts of the continent being offset by lower production in the south of the continent. Output in South Africa followed the long-running downward trend in production with year-on year output down 7% or 13 tonnes to a total of 164 tonnes. This was despite limited industrial action during the period, following on from the two-year wage agreement struck in 2013 by a number of the major producers. Suffering the heaviest year-on-year fall in output was South Deep, heavily impacted in the first half by a four month suspension of underground production while a ground support programme was implemented. Although higher SOUTH AFRICAN MINE PRODUCTION 350 300 250 Tonnes however, leaves a more modest outcome, with All-in Costs less write-downs reduced by 3% year-on-year at just above $1,208/oz. 200 150 100 50 0 2005 2007 2009 Source: GFMS, Thomson Reuters 2011 2013 GFMS GOLD SURVEY 2015 grade ore was processed in the second half, this was not enough to offset the shortfall in processed tonnes, which resulted in a three tonne drop in production. Higher processed grades were not enough to offset lower mill throughput at both Mponeng and Doornkop where combined output fell by three tonnes. In August, South Africa’s strongest earthquake for 45 years was recorded near Orkney and caused infrastructure damage to nearby mining operations including Moab Khotsong, Kopanang and Great Noligwa. Although no significant damage was reported to the underground and surface infrastructure at Tau Lekoa, the operations suffered a four day loss of production following the earthquake. Kopanang was also affected by a fall-of-ground fatality and a subsequent temporary production halt contributing to a tonne of lost production. Increases in production in South Africa were led by Kusasalethu where higher ore grades more than offset lower throughput volumes leading to a one tonne increase in output. The Kloof operations recorded a one tonne increase as mill throughput continued to increase. Despite the operational setbacks at Moab Khotsong, the operation recorded a one tonne increase in output thanks to an improvement in head grades. OTHER AFRICAN MINE PRODUCTION 450 400 Tanzania Other Mali Congo (DRC) Ghana Burkina Faso Despite the spectre of Ebola hanging over parts of west Africa during the second half of the year, the region continued to post increases in gold output. Akyem and Agbaou, new operations in Ghana and Côte d’Ivoire respectively, contributed an additional 15 tonnes. Production in Côte d’Ivoire increased 33% or four tonnes to a total of 18 tonnes, continuing the decade-long growth trend. Guinea recorded an 11% increase in output to 21 tonnes with Lefa and Siguiri each contributing an additional tonne. Loulo in Mali added an additional two tonnes due to a combination of increased head grade and mill throughput. Mali recorded a 2% decline in output to 47 tonnes. Behind this drop, output at Yatela fell by one tonne in line with the planned cessation of mining activities. Morila also suffered a one tonne drop in output due to a decrease in the mill throughput and the treatment of lower grade stockpiles. Also lower year-onyear was Niger, which we estimate to have declined by one tonne after SEMAFO moved to place the Samira Hill operation on care and maintenance prior to its sale. After a decade of strong growth, Ghanaian output was relatively flat, rising by just one percent to 108 tonnes. Despite the new operation at Akyem, a number of the more established mines recorded drops in output year-on year. At the Ahafo operation, lower mill throughput and lower grades resulted in a four tonne reduction to a total output of 14 tonnes. Tarkwa recorded a two tonne drop in output where higher ore grades were not sufficient to offset lower throughput, while lower grades but higher throughput at Wassa also led to a two tonne drop. Iduapriem saw a one tonne drop, in line with plans to process existing stockpiles and mine less volume. 350 Tonnes 300 250 200 150 100 50 0 2005 2007 2009 Source: GFMS, Thomson Reuters 2011 2013 Production in Burkina Faso continued to grow, with output up 10% to 39 tonnes. Leading the increase were Essakane and Mana which added a combined five tonnes, largely due to the processing of higher grade ore at both operations. In Mauritania, steady production at the Tasiast and Guelb Moghrein operations resulted in a 1% increase in production to ten tonnes. At Sabodala in Senegal, production was steady at seven tonnes. 35 MINE SUPPLY In Namibia output was up slightly to a total of two tonnes, primarily due to the commissioning of the Otjikoto operation. Here, construction was completed ahead of schedule in early December 2014 and the company announced the first gold pour on 11th December. The operation is scheduled to produce up to five tonnes of gold in 2015 and will add significantly to Namibian gold output. During the year, the country’s other major gold mining operation, Navachab was acquired by QKR Corporation Limited from AngloGold Ashanti. In Zambia, production fell 8% to five tonnes due to a decline in gold output from the Kansanshi copper mine. In Zimbabwe gold output was up 1% to 20 tonnes. Privately-owned Metallon, following efforts to recapitalise its five mines delivered a modest increase, while Blanket mine was fractionally lower year-onyear. In September 2014, the Zimbabwean Government announced a reduction in the gold royalty rate from 7% to 5% in an attempt to boost production. More recently, in February 2015 the state-owned refinery reduced its refining fees in a further attempt to attract feeds from artisanal producers. GFMS GOLD SURVEY 2015 WORLD GOLD MINE PRODUCTION (tonnes) Europe Russia 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 175.4 172.8 169.3 188.7205.2203.4 215.6 229.7248.8262.2 Turkey 5.1 8.1 10.1 11.4 14.5 16.6 24.1 29.6 33.5 32.3 Finland 1.2 1.1 1.5 1.7 3.8 5.6 6.4 8.9 8.4 7.3 Sweden 6.16.75.04.95.56.35.96.06.46.4 Bulgaria 2.32.82.92.83.32.53.44.34.65.4 Spain 1.4 2.20.50.00.00.00.4 1.5 2.12.0 Others 4.03.84.0 4.1 3.7 3.12.42.4 3.7 3.1 Total Europe North America United States 195.5 197.6 193.4 213.6 235.9 237.5 258.3 282.3 307.5 262.3 251.8 238.0 233.6 221.4 229.7 233.3 232.3 229.5 318.7 205.0 Canada 119.5103.5102.2 95.0 96.0103.5 107.8108.0 133.3153.8 Mexico 30.6 Total North America South America 39.0 43.7 50.8 62.4 79.4 88.6 102.8 119.8 412.5 394.3 383.9 379.4 379.9 412.5 429.7 443.1 482.6 118.2 477.0 Peru 217.8213.5183.6195.5201.4184.8189.6184.4 187.7 172.6 Brazil 44.549.258.158.764.767.567.367.380.180.7 Argentina 27.843.442.540.348.863.5 59.154.6 50.159.8 Chile 39.640.4 41.5 39.240.838.444.548.648.644.2 Colombia 24.826.026.026.0 27.0 33.5 37.5 39.1 41.2 43.1 MINE SUPPLY Dominican Republic 0.00.00.00.00.30.50.5 4.126.535.6 Venezuela 21.126.524.324.324.824.925.5 21.822.923.2 Suriname 18.2 Ecuador 11.914.014.014.014.0 17.2 17.6 17.6 17.4 17.8 Guyana 10.1 8.4 9.710.5 11.912.814.414.414.414.4 Nicaragua 3.92.9 3.12.92.64.96.36.98.78.8 Guatemala 0.7 Bolivia 8.09.68.88.4 7.26.46.56.4 6.16.3 Honduras 4.43.93.11.92.62.41.91.92.02.8 16.9 5.2 16.1 7.7 17.9 8.0 20.8 9.0 22.9 9.4 24.6 12.1 26.5 6.6 27.0 6.5 26.6 6.3 Panama 0.10.10.10.10.91.82.12.31.31.9 Other 6.88.0 8.16.46.05.6 5.75.96.0 5.7 Total South America Asia China Indonesia 439.6 468.1 446.9 454.2 483.0 496.6 515.2 508.4 546.6 549.8 229.8 247.2280.5292.0324.0350.9 371.0 413.1438.2 461.8 167.0 114.1 149.5 95.9 160.5 140.1 121.1 93.0 109.6 116.4 Uzbekistan 75.5 74.1 72.9 72.2 70.5 71.0 71.4 73.3 77.4 80.4 Kazakhstan 19.2 21.8 22.6 22.0 22.5 29.9 36.7 40.0 42.6 49.2 Philippines 33.3 36.1 38.8 35.6 37.0 40.8 37.1 41.0 40.5 42.6 Kyrgyzstan 16.6 10.6 10.5 18.4 17.0 18.5 19.7 11.3 20.2 19.2 Mongolia 18.4 18.9 18.4 16.5 14.1 13.9 12.4 12.8 17.8 30.5 Laos 6.76.54.54.75.45.54.46.7 7.25.6 Japan 8.38.98.96.9 7.78.58.7 6.76.4 6.7 North Korea 6.36.36.36.36.36.36.36.36.36.3 Thailand 5.24.33.32.55.44.23.25.25.35.3 Malaysia 5.74.94.33.84.25.25.05.3 5.14.5 Saudi Arabia 7.55.24.54.0 5.14.54.64.74.55.2 Vietnam 2.42.52.72.7 3.13.43.73.9 4.12.6 Tajikistan 2.42.32.3 1.7 1.42.02.22.42.73.4 Armenia 1.6 1.10.40.51.41.62.12.13.54.7 India 3.02.52.92.6 2.12.82.3 1.7 1.6 1.6 Georgia 1.6 Other Total Asia 36 1.5 1.2 1.1 0.8 3.6 3.2 3.5 2.0 2.5 4.84.34.34.35.06.76.46.26.2 7.5 615.3 573.2 638.9 593.7 693.5 719.5 721.4 739.2 801.0 855.8 GFMS GOLD SURVEY 2015 WORLD GOLD MINE PRODUCTION (tonnes) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Africa 177.3 177.0 163.8 Ghana South Africa 315.1 62.8 295.7 69.9 269.9 77.3 233.8 80.4 219.8 90.3 202.9 92.4 202.0 91.0 95.7 107.4 108.2 Mali 46.7 56.9 51.9 47.0 49.1 43.9 43.5 50.3 48.2 47.4 Tanzania 40.1 35.6 45.8 49.3 44.8 40.9 44.6 49.6 49.1 46.6 Burkina Faso 1.7 2.1 2.9 6.9 13.8 25.3 34.1 31.3 35.0 38.5 Dem. Rep. of the Congo 5.3 5.6 6.5 7.2 10.0 17.0 22.0 26.1 25.3 40.0 5.6 3.6 10.1 22.5 27.9 20.1 20.5 Sudan 3.1 2.7 4.0 Zimbabwe 19.5 17.213.5 8.9 9.816.319.019.519.619.9 Guinea 14.3 Ivory Coast 16.6 18.0 23.9 22.5 20.4 19.7 18.4 19.0 21.0 3.03.03.05.38.6 7.313.414.013.618.0 Ethiopia 3.8 4.0 3.9 3.8 5.5 6.6 11.512.012.012.0 Egypt 0.00.00.00.00.0 4.7 6.38.2 11.111.7 Mauritania 0.5 Senegal 0.10.10.10.15.24.54.36.86.56.7 Zambia 0.5 1.0 1.3 1.9 3.13.43.54.25.24.8 Eritrea Other Total Africa 0.6 1.9 6.8 8.4 9.1 8.7 8.2 10.0 10.1 0.50.50.50.50.50.512.810.23.4 1.3 20.618.319.821.418.620.720.320.419.418.3 549.5 539.9 513.6 486.2 509.9 529.8 584.1 579.7 579.4 587.9 Oceania & Other Australia 262.2 246.8 247.4 215.2 223.5 260.8 258.6 251.7 268.1 272.9 PNG 70.961.761.770.370.669.763.557.260.558.2 New Zealand 10.610.610.613.413.4 13.7 11.610.212.4 11.3 Solomon Islands 0.10.10.10.10.10.11.72.02.00.8 Fiji 2.91.50.1 1.1 1.12.11.61.61.40.6 Other Total Oceania & Other World Total 2.5 2.7 1.8 1.70.90.0 0.1 0.10.00.0 349.1 323.4 321.8 301.8 309.7 346.4 337.1 322.8 344.3 343.8 2561.5 2496.4 2498.5 2428.9 2611.8 2742.4 2845.9 2875.4 3061.5 3133.1 Source: GFMS, Thomson Reuters Production in the Democratic Republic of the Congo surged 15 tonnes or 58% last year to a total of 40 tonnes, primarily due to the commissioning of new operations. The largest increase in output of any individual operation on the continent occurred at Kibali. This mine, commissioned in 2013, continued to ramp up production and contributed an additional 14 tonnes, bringing total production to 16 tonnes. Likewise, Namoya, commissioned in the first quarter, continued to gradually ramp up and contributed half a tonne last year. Output from Sudan was slightly up year-on-year, due to a moderate increase in production from the domestic small-scale sector, from a depressed level in 2013. NORTH AMERICA Total mine production in North America contracted by six tonnes in 2014, breaking the trend of five years of consecutive growth. This left total production in North America at 476 tonnes. The drop was largely driven by the United States, where production fell by 24 tonnes, or 11% year-on-year, to 205 tonnes. A significant portion of the fall was attributed to the two largest operations in the country, Barrick’s Cortez and Newmont’s Nevada complexes, which declined by a combined 21 tonnes. The most pronounced fall was registered at Cortez, where a 48% drop in processed grades led to a 14 tonne 37 MINE SUPPLY In Egypt, continued ramp up of mill throughput at Sukari led to an increase in output of one tonne to a total of 12 tonnes. At the polymetallic Bisha mine in Eritrea, completion of mining in the oxide gold cap led to a two tonne fall in production. Tanzanian production declined by two percent or one tonne to 46 tonnes. The completion of mining at Golden Pride and Tulawaka led to a year-on-year loss of two tonnes, while higher grades at Buzwagi contributed an additional tonne. Production at Bulyanhulu increased by one tonne to seven tonnes. The operation benefited from increased head grades and the commissioning of the new CIL circuit to treat reclaimed tailings. The Geita and North Mara mines continued to operate strongly, adding a combined one tonne and contributing an aggregate 23 tonnes to the Tanzanian country total. GFMS GOLD SURVEY 2015 contraction. Whilst lower grades were expected, a 33% increase in throughput rates failed to offset the drop in contained gold in the process stream. At the latter, a 14% drop in mill grades, lower throughput and the sale of Midas in early December 2013 led to an eight tonne drop by year-end. Further declines were recorded at Fort Knox, where lower grades led to a one tonne drop in production. In addition, Kettle River-Buckhorn registered a one tonne fall in output as the mine nears the end of its life. In addition, the suspension of operations at Hollister resulted in a three tonne drop in output. Elsewhere in the country, small gains partially countered these losses, with Bald Mountain and Bingham Canyon making the largest contribution. At these operations processed grades rose by 17% and 43%, respectively, resulting in a combined three tonne increase in output. A further one tonne increase came from Turquoise Ridge, on the back of higher throughput and ore grades. Since a change of ownership in April 2014, production at Marigold increased substantially quarter-on-quarter as higher grade tonnes were mined from the lower benches. Nevertheless, output remained broadly flat primarily due shortfalls in the second quarter when mining activities focused on the stripping of waste material from the pit. change at the mine level came from Peñasquito, where production rose by five tonnes on the back of a 44% increase in average head grades, as well as improved recoveries and throughput, as operations focused on the higher grade ore from lower benches of Phase 4 mine plan. Providing a meaningful offset to the losses in the United States and Mexico, Canadian output grew by 15%, or 21 tonnes, to total 154 tonnes. This second year of strong growth was driven by a continued ramping up of output from Detour Lake, Canadian Malartic, Young-Davidson, and two operations commissioned in 2013 (Mount Milligan and a restart at Goldex). On an aggregate basis, these operations added 17 tonnes. At Detour Lake, head grades rose by 17% coupled with a 59% increase in throughput. At Canadian Malartic and Young-Davidson, processed grades also rose, though at the latter, mining operations at their open pit ceased in the second quarter of 2014 having reached its end of life. Further gains were seen at Timmins West, where higher grades and throughput yielded a two tonne increase in output primarily due to mine sequencing and a mill expansion over the third quarter of 2013. Gold production in Mexico also broke trend and, after ten years that saw volumes rise six-fold as the industry firmly established itself, output in 2014 fell by two tonnes, to 118 tonnes. The slight decline was led by lower processed grades at Los Filos, Mulatos, El Sauzal, Cerro San Pedro and Palmarejo. Aggregate production at these five properties fell by seven tonnes. Further losses were recorded at Soledad-Dipolos, Cieneguita and Mina Moris, where mining activities ceased, leading to a two tonne drop in output in total. These losses were partially offset by new supply from recently commissioned operations such as La India, and El Concheño which combined contributed an extra four tonnes. The most significant NORTH AMERICAN MINE PRODUCTION 300 United States Canada Mexico 250 200 Tonnes MINE SUPPLY SOUTH AMERICA 150 100 50 0 2005 2007 2009 Source: GFMS, Thomson Reuters 38 2011 2013 Following a strong recovery in 2013 of 38 tonnes, mine production in South America registered a small increase of three tonnes in 2014, to a total of 550 tonnes. Though the ramp up in production at new mines and recently commissioned operations continued well into the end of the year and contributed to some strong increases at the country level, another theme, of losses from aging operations and mine closures partially offset these gains. After three years of consecutive decline, mine supply from Argentina grew by ten tonnes or 19% year-on-year to total 60 tonnes, despite limitations on the exchange of Argentine pesos into US dollars and inflationary pressures in the country. The result was mainly driven by new supply from Cerro Negro, where 2014 production reached five tonnes, while at Veladero, production rose by nearly three tonnes, primarily due to higher grades mined from the Federico pit. Although output was partially offset by a 14% fall in tonnes mined due to mining equipment availability issues, heap leach ore processed remained flat. The third largest increase was registered at Gualcamayo, where a 63% increase in feed grade added almost two tonnes relative to 2013. This was partially countered by lower production at Alumbrera where output fell by under half a tonne. GFMS GOLD SURVEY 2015 In the Dominican Republic, gold production rose by nine tonnes, or 34%, to nearly 36 tonnes. At Pueblo Viejo, full production was achieved over the second quarter of 2014 following major modifications to the autoclave facility in the prior year. As a result, output rose by nine tonnes, supported by a 52% increase in throughput, albeit partially countered by a 10% fall in grades. At Las Lagunas, production remained relatively flat despite technical issues that impacted recoveries at the CIL plant over the fourth quarter. We estimate that Colombian gold production rose by two tonnes, or 5%, to 43 tonnes. The majority of production in the country originates from informal operations, which were supported by a 22% increase in the Colombian peso gold price relative to 2013. Modest gains were posted at Mineros S.A.’s El Bagre alluvial operations and La Ye underground mine. A further drop was registered at Segovia, where old hoisting equipment and other material handling systems caused additional delays. At Marmato, production remained flat. Mine production in Suriname stood at 27 tonnes, where the steady increase in output over the last couple of years has justified investment for the construction of a gold refinery which was opened in early 2015. Elsewhere in the region, production fell significantly. The largest decline came from Peru, the region’s largest producer, where output fell by 15 tonnes, or 8%. At Yanacocha, output fell by one tonne, or 5%, due primarily to ongoing depletion of gold inventory on the leach pads. The drop in output from Yanacocha accounted for almost half of a three tonne drop registered in the region of Cajamarca. Following the fall in gold price in 2013, several Peruvian mines including Antapite, Ares, Coricancha and Pierina were placed on care & maintenance activities during 2014, which collectively led to a loss of three tonnes. A more pronounced fall was recorded for the jungle region of Madre de Dios, where attempts by the government to formalise small scale mining and stamp out illegal mining activities have led to an eight tonne drop in output, according to the Ministry of Energy and Mines (MEM). On the other hand, gains registered at Parcoy and La Arena amounted to nearly two tonnes, where at the latter, production rose by 3% due to more ore placed on the leach pads. In Venezuela, gold production was steady at 23 tonnes. We estimate that an ongoing initiative to formalise the unofficial sector was broadly countered by an accommodating trend in the parallel exchange rate. To provide an update on Venezuela’s latest currency reforms, Total mine production in Chile fell by four tonnes due primarily to the suspension of mining operations at La Coipa in October 2013. Having reached the end of its mine life, La Coipa was responsible for a four tonne drop in output. Lower grades at two of the largest operations in the country, El Peñón and Centinela, in 2014 drove a combined three tonne contraction. On the other hand, gains at Maricunga were posted as a result of higher processed grades due to favourable mine sequencing, combined with better recoveries, which led to a two tonne increase in production. MAJOR SOUTH AMERICAN PRODUCTION REST OF SOUTH AMERICAN PRODUCTION 500 400 Argentina Colombia Brazil Chile Dominican Republic 140 120 Peru Ecuador Guatemala Suriname Guyana Other Venezuela 100 Tonnes Tonnes 300 200 80 60 40 100 0 2005 2007 2009 Source: GFMS, Thomson Reuters 20 2011 2013 0 2005 2007 2009 Source: GFMS, Thomson Reuters 2011 2013 39 MINE SUPPLY Brazilian production remained broadly flat at 81 tonnes as gains from the ramp ups at Pilar and Salobo were partially offset by losses from the drop in grades and closure at Tucano-Amapari and Sao Vicente, respectively. Similarly, we estimate that Bolivian domestic mine production stood broadly flat at six tonnes with much of the industry being informal in nature. President Maduro’s government recently announced a third mechanism called Simadi that allows for legal buying and selling of the bolivar at a higher rate than in two preceding systems, SICAD I & II. Since its inception, the parallel rate has plummeted keeping this initiative on the back foot. GFMS GOLD SURVEY 2015 ASIA With an increase of almost 24 tonnes or 5%, China’s mine production increase to total 462 tonnes was the strongest absolute gain globally. This continued to cement its position as global leader and represented the fifteenth consecutive year of expansion of the country’s gold output. The principal driver was an uplift in the volumes produced by small and mid-sized miners that sell their ores and concentrates to third party gold smelters. Accordingly, the volumes of domestically mined gold that was smelted by third parties increased by 19% while, conversely, ‘mine-produced gold’, which comprises integrated mine-to-market production, fell by 11% yearon-year. As has been the case elsewhere, cognisant of the drop in metal prices, a number of producers have over the course of the past 18 months sought to optimise operations and fast-track capital-efficient projects with a strategy of expanding production and lowering unit costs. A feature of last year has been consolidation of smaller producers by the larger companies, such that corporate production volumes in some cases were supported in the face of a drop in mine-produced gold at the country level. Zhaojin, a company whose production footprint has traditionally had a focus on assets close to its headquarters in Zhaoyuan City in Shandong, implemented a diversification plan targeting similar volumes in the future from both Zhaoyuan and from outside the city. This strategy was in line with an announced plan to expand its portfolio through CHINESE MINE PRODUCTION 500 450 400 350 300 Tonnes MINE SUPPLY Zhaojin Mining Industry Co Ltd., one of China’s larger producers of both mined and refined gold, pushed ahead with several projects across the value chain, which included extensive underground development, refurbishment of the gold mill at its Xiadian Mine, and the commissioning of the calcining plant at its Gansu smelter. 250 200 150 100 50 0 2005 2007 2009 2011 2013 Source: GFMS, Thomson Reuters; China Gold Association 40 acquisitions, which included the purchase of a controlling stake in the Gantan mine in Gansu Province. Thanks to M&A, the company’s mined output was flat year-on-year at 20 tonnes. In a similar vein, Zhongjin Gold Co Ltd acquired six smaller mining companies last year under a consolidation initiative by its holding company, China National Gold Group Corp. Bucking the trend, a number of companies delivered firmer mine output year-on-year. Zijin Mining registered a 5% increase in its domestic mine output, with gains from the Hebei Chongli and Longnan Zijin mines more than counteracting a drop in gold output from its flagship Zijinshan gold-copper mine. China Gold International’s Chang Shan Hao asset increased output by 24% last year to five tonnes and has provided market guidance of further growth expectations for 2015. The operation implemented a project to double its crushing capacity in late 2013 which allowed throughput to ramp up through last year. Providing a modest offset, Hong Kong-listed Real Gold announced in August that a combination of factors, including a drop in the gold price and persistent issues with ore dilution, which has progressively led to lower head grades, rendered its Luotuochang mine unviable since 2013, leading to a decision to suspend mining activities. On the smelting side, firm growth was recorded by the gold smelting industry, which was tempered by a drop in domestic gold-bearing feeds to base metals smelters. Regarding the gold smelters, Lingbao Gold, although having delivered a relatively flat output from its mining business, saw its smelting business source and process 12% more gold in the first half of 2014. Similarly, building on the 5% growth from its own mines, Zijin’s sourcing and refining activities of third party feeds grew by 63% last year. Falling outside our numerical analysis for Chinese mine supply, but nevertheless noteworthy, gold production from base metal concentrates imported to China rose appreciably last year, in the form of shipments of precious metals-bearing copper concentrates, which included increased flows of contained gold from Mongolia (Oyu Tolgoi) and from Chile. Historically, many Chinese base metals smelters employed older technology, which meant that the payment rates on offer for precious and minor metals recovery were often not internationally competitive. With optimisation efforts having not only been focused on mining but also on downstream investments in recent GFMS GOLD SURVEY 2015 years, it is likely in our view that China may win additional market share for international concentrates with higher precious metals assays, that previously may have been considered off-limits. Outside China, Asian mine supply rose by 9%, or 31 tonnes. Growth continued to be supported by the ramp up of new mining properties. First among these was Oyu Tolgoi, in Mongolia. Operations there continued to ramp up to design capacity and accounted for a 13 tonne increase year-on-year. This was the second largest gain globally at the mine site, second only to the ramp up of Kibali in the DRC, another recently started mine. Dampening this growth slightly, output from Boroo fell by one tonne due to lower processed grades and lower recoveries from the leach pads. In Indonesia, the region’s second largest producer, output grew by just under seven tonnes. Three tonnes of this rise came from the operations of J Resources, with a near tripling of output from North Lanut and the onset of production at Seruyung. Gosowong and Batu Hijau both posted a one tonne rise associated with higher grades. Some losses dampened the increase; Grasberg, the county’s largest producer and usually the source of significant moves in Indonesian output, saw output almost flat. Production at Martabe also contracted slightly which, when combined with the cessation of production at Mt. Muro, saw just less than one tonne lost between these two properties. Kazakhstan also saw an increase of seven tonnes, or 16%, leaving output at 49 tonnes in total. Much of the increase we ascribe to the activities of state‑held miner Tau‑Ken Samruk, tied in to the start up of a third Kazakh gold refinery, to develop and exploit new feedstock sources, such as at Eshkeolmes, which should have been ramping up production last year. Additionally, we take the view that operational improvements at many existing properties and the start of production at several smaller copper‑gold and primary gold operations helped lift output last year. Results were not all positive, however, as output from Kaz Minerals’ assets in Kazakhstan was down slightly yearon-year, due to a 30% reduction in grade at Artemyevsky as mining transitioned to lower grade areas. Glencore’s production from Kazzinc fell by 13%, or two tonnes, primarily due to lower grades at Vasilkovskye. Elsewhere, production at AltynAlmas was broadly flat in 2014. The country is developing a new mining code that it hopes to adopt in 2015, and is tabling revisions to legislation on subsoil use law, with the aim to simplify and streamline the bureaucratic process of acquiring subsoil rights to therefore encourage further mineral exploration and foreign direct investment. INDONESIAN MINE PRODUCTION OTHER ASIAN MINE PRODUCTION 50 Grasberg's Share of Total Production (%) 64 350 300 58 54 42 150 38 100 Uzbekistan Other Mongolia Kazakhstan Philippines Kyrgystan 250 38 50 Tonnes Other Grasberg 32 30 Tonnes 200 29 200 150 100 50 50 0 2005 2007 2009 2011 Source: GFMS, Thomson Reuters, Freeport McMoran 0 2013 2005 2007 2009 Source: GFMS, Thomson Reuters 2011 2013 41 MINE SUPPLY Potential legislative problems surrounding a mooted ban of copper concentrate exports from Indonesia slated to become effective from 2017, look to have relaxed somewhat, with talks ongoing on the construction of domestic smelters to process copper concentrates. Despite interruptions to exports in 2014, on an annual basis these have not had any real impact on the international gold market. Uzbek output is estimated to have risen once again, by three tonnes, or 4%, as a result of continuing investment in improving operational efficiencies and prolonging the life‑of‑mine at the large, state‑run Muruntau complex, as well as development and modernisation works at several other properties, such as at Kochbulak. In 2014 the main state run operators are reported to have begun work on a significant programme of exploration and development of further gold deposits, in addition to rebuilding and expanding Uzbekistan’s ore processing capacity. One such processing circuit for refractory ores at Mardjanbulak was commissioned late in 2013. GFMS GOLD SURVEY 2015 Production in the Philippines grew by two tonnes, due to gains of one tonne at both Didipio and Co‑O. The former posted a 9% increase in grade, while the latter recorded a 60% increase in throughput. Azerbaijan and Armenia both also saw an increase in output, of one tonne each. Saudi Arabian production also rose modestly, by just less than one tonne, due to increased volumes from Ma’aden; it’s As Suq mine achieved commercial production in July. Only six of the region’s producing countries saw a decline in production, and between them losses totalled only five tonnes. Among the meaningful losses was a two tonne loss in Laos, with the largest contributor a one tonne drop at the Sepon copper-gold mine as gold operations ceased in December 2013. Vietnamese production fell by a similar degree, due to the suspension of operations at Bong Mieu and Phuoc Son. After a recovery in 2013, production in Kyrgyzstan fell slightly, by one tonne, with output falling at Kumtor due to the processing of lower grade ores. Additional small losses were seen in Malaysia, India and Thailand. European output grew for a seventh consecutive year, albeit slower than in 2013, rising by 11 tonnes, or 4%. Whilst this was the second largest increase globally, it was nevertheless only one fifth as strong as the rise seen in Asia. The region’s largest producer, Russia, was responsible for nearly all of this growth. Output in Russia rose by 13 tonnes, or 5% year-on-year, cementing the country’s place as the world’s third largest producer. Some losses were seen, with output at Petropavlovsk’s Pioneer, Pokrovskiy, Malomir and Alluvial operations estimated to have fallen by a combined four tonnes. In addition, output fell slightly at Titimukhta, Mnogovershinnoye and Novoshirokinskoye. Due to the targeted nature of western sanctions against Russia, these have largely not impacted the operational activities of Russia’s gold miners. Of significantly more importance has been the fall in global benchmark oil prices, and the knock-on weakening of the rouble, which has meant that Russian miners have seen a degree of respite from the low price environment in recent quarters. The annual average rouble gold price increased by 8% year-on-year, compared to a drop of 10% in the London p.m. fix. Similar to other jurisdictions, however, there are still instances of reductions in capital expenditure and a focus on achieving operational efficiencies at existing properties, rather than pursuing organic growth through greenfield projects. Polyus Gold, for example, initiated a strategic review process for the development of its globally significant Natalka project, and is conducting a strategic review to identify low-capex growth options. At the mine level the standout gain was at Kupol, where we estimate that production rose by seven tonnes, due to the contribution of higher grade ore from the Dvoinoye operation. The continued ramp up of several properties provided further gains. Mayskoye recorded a production Aside from Russia, the only other increase was seen in Bulgaria, where higher grades and volumes at Chelopech, coupled with the start up of the pyrite flotation circuit, led to a gain of less than one tonne. RUSSIAN, TURKISH AND OTHER EUROPEAN MINE PRODUCTION OTHER EUROPEAN MINE PRODUCTION 350 300 30 Other Turkey 25 Russia 250 150 42 Bulgaria Other 15 5 50 2005 2007 2009 Source: GFMS, Thomson Reuters Spain Finland 10 100 0 Sweden 20 200 Tonnes Tonnes MINE SUPPLY EUROPE increase of three tonnes in its first full year of output. At Albyn and Verninskoye, recovered volumes increased by two tonnes apiece as throughput and grade rose at both properties. An estimated one tonne increase also came from Belaya Gora. Other gains came from increased throughput at both Olimpiada and the Kubaka mill, where production grew by a combined three tonnes. Additionally, gold as a by-product of Russia’s base metal mining industry also rose year-on-year, by two tonnes. 0 2011 2013 2005 2007 2009 Source: GFMS, Thomson Reuters 2011 2013 GFMS GOLD SURVEY 2015 Elsewhere in Europe, losses were widespread, although limited in magnitude. The largest decline was seen in Finland, where production fell by one tonne due to the suspension of operations at Laiva in the first quarter of 2014, and the bankruptcy of Lappland Goldminers early in 2014. Greek output contracted by half a tonne, due to a drop in output at the Olympias tailings retreatment operation. Turkish output also fell by one tonne, attributable to Çöpler, where output contracted due to a 12% drop in processed grade. Production in Sweden, Spain and Poland was virtually flat last year, with the largest movement a near halving of output at Svartliden in Sweden, as the operation transitioned to processing lower grade stockpiles after underground mining ceased at the end of 2013. from the Cadia East Panel Cave 2. Tanami recorded a one tonne increase from improved mill throughput, while combined gold output from the Prominent Hill and Olympic Dam copper mines, added one tonne. However, a number of the other established operations recorded slight declines in production with St Ives, Telfer, Jundee, Ravenswood, Mount Monger and Cowal contributing a combined six tonne loss. Adding to the year-on-year decrease, a suite of smaller operations including Bronzewing, Coolgardie, Laverton, Wiluna, Meekatharra and Coyote were placed on care and maintenance during the prior period, contributing to a five tonne decline. In 2014 the Mount Murchison operation was also placed on care and maintenance due to disappointing production and unit costs achieved from the lower grade open pit reserves. OCEANIA & OTHER Production at the largest gold producer in Australia, Boddington, was almost unchanged at 22 tonnes. Likewise the Kalgoorlie Superpit contributed a steady 21 tonnes. The Cadia Ridgeway operation recorded a one tonne increase after the continued ramp up of Panel Cave 1 and the commencement of commercial production 300 250 Tonnes 200 150 100 50 2005 2007 2009 Source: GFMS, Thomson Reuters; BREE Gold production in New Zealand declined by one tonne to a total of 11 tonnes. Lower grades at Macraes and Reefton contributed to a combined two tonne decrease. However, countering part of the drop, Waihi recorded a one tonne increase, where higher mill throughput more than offset a decline in milled grades. Elsewhere, production in Fiji fell due to operational issues at Vatukoula; while in the Solomon Islands production fell one tonne due to the suspension of mining at Gold Ridge. TOP TEN MINE SITE COMMISSIONS AND RAMP UPS AUSTRALIAN MINE PRODUCTION 0 Production in Papua New Guinea fell by 4% to a total of 58 tonnes. At Lihir, the country’s biggest producer, an increase in mill throughput was more than offset by a drop in milled grade resulting in a three tonne drop in output. Production at Porgera was steady while continued ramp up at Hidden Valley produced a one tonne increase. (tonnes) Mine name Production Change Country 2013 2014 yoy 1Kibali DRC 2.8 16.4 13.6 2 Mongolia 4.9 3Tropicana Australia 2.9 15.9 13.0 4Akyem Ghana 5 Pueblo Viejo Dominican Rep. 6 Detour Lake Canada Oyu Tolgoi 7Peñasquito Mexico 8 Mount Milligan Canada 9 Cerro Negro Argentina 10 Agbaou 2011 2013 Côte d'Ivoire 18.3 13.4 4.0 14.7 10.7 25.3 34.2 8.9 7.2 14.2 7.0 10.6 16.8 6.2 0.6 5.5 - 4.7 4.9 4.7 0.2 4.6 4.4 Source: Company Reports 43 MINE SUPPLY Output in Oceania was steady at 344 tonnes. Gains in Australia were offset by losses in the smaller producing countries. In Australia, the region’s largest gold producer, output increased by five tonnes to 273 tonnes. This represents the highest gold production in Australia since 2003. Gains were largely driven by strong contributions from the ongoing ramp up in production from recently commissioned mines including Tropicana, Tomingley, Andy Well and Mount Carlton. Together these operations contributed an additional 17 tonnes. Of this, the majority can be attributed singularly to Tropicana, which saw an increase of 13 tonnes year-on-year, having achieved first production during September 2013. GFMS GOLD SURVEY 2015 CORPORATE ACTIVITY IN 2014 2014 TOP 10 GOLD PRODUCERS Over the last year, corporate activity in the gold mining sector Rank 2014 2013 Output (t) 2013 2014 continued along a downward trajectory. The aggregate value 1 1 Barrick Gold of completed deals reported during 2014 was US$7.3 billion, 2 2 Newmont Mining 157.5 150.7 approximately 9% lower than in 2013 according to data from 3 3 AngloGold Ashanti 127.7 138.0 ThomsonOne Investment Banking. 44 Goldcorp 222.9 194.4 82.9 89.3 5 5 Kinross Gold 77.782.2 On the M&A front, major gold miners generally refrained 6 6 Newcrest Mining 73.5 from engaging in aggressive takeovers. Priorities tended 7 7 Navoi MMC 1 70.573.0 towards rationalising existing portfolios and strengthening 8 8 Gold Fields 1 58.163.6 balance sheets by reducing debt levels. As the sentiment in 9 9 Polyus Gold 51.3 52.8 10 10 Sibanye Gold 44.5 49.4 the gold industry deteriorated, the focus to run more efficient operations became pivotal. The largest transaction of the year was the acquisition of Osisko Mining, a Canada-based gold 1 1 72.4 Estimate Source: Company Reports; GFMS, Thomson Reuters producer, jointly by Yamana Gold and Agnico-Eagle Mines for US$3.7 billion. The duo out-bid Goldcorp’s US$3.6 billion Coeur Mining, the largest US silver producer, announced plans hostile offer through a ‘white knight’ takeover. Yamana Gold to acquire Paramount Gold and Silver Corp in an all-stock and Agnico-Eagle Mines now jointly operate Canadian Malartic, agreement valued at US$146 million. The merger would expand one of Canada’s largest gold mines. In April 2014, talks of Coeur’s mining presence in Mexico, and potentially create a potential merger between Barrick and Newmont, the two opportunities for synergies between its Palmarejo silver-gold largest gold producers in the world, fell through for the third mine complex and Paramount’s adjacent San Miguel project. time in seven years. Some commentators suggested this deal The transaction remains pending at the time of writing. could have provided both companies with operational synergies to reduce costs, most notably in Nevada where Barrick and As the appetite for M&A among shareholders remained in the Newmont both manage a substantial portfolio of operations. doldrums, divestment continued to be a strategic move for many Goldcorp and Kinross Gold, which took the opportunity to divest stance in expanding their portfolios in different regions across either mature or non-core operations over 2014. Barrick’s the globe. B2Gold and Papillon Resources merged in a deal Plutonic and Kanowna mines were acquired by Northern valued at US$570 million; a merger focused on the development Star Resources in an all-cash transaction for A$100 million. of the high grade Fekola project in Mali and the optimisation of Newmont’s Jundee operation was also acquired by Northern B2Gold’s four operating mines. Agnico-Eagle also expanded Star for US$91 million. In early 2014, Goldcorp and Barrick its operations in Mexico, acquiring Cayden Resources and its sold the Marigold joint venture in Nevada to Silver Standard exploration-stage El Barqueño property for C$205 million. Resources for US$275 million in cash. Newmont disposed of its According to Agnico-Eagle, El Barqueño bears several technical 44% stake in the Penmont Joint Venture, which was acquired by similarities to its Pinos Altos during the early stages. the majority owner, Fresnillo plc, for $450 million in cash. GOLD M&A PLUS INITIAL PUBLIC OFFERINGS GOLD EQUITY INDICES AND PRICE 50 30 40 20 20 10 2005 2007 2009 Source: GFMS, Thomson Reuters 44 60 2011 2013 0 Index (2nd January 2013 = 100) 40 0 150 80 Number of deals Aggregate deal value ($Bn) MINE SUPPLY “Tier 1” gold producers. Among them were Barrick, Newmont, This year saw smaller mining companies take a more ambitious S&P 500 100 Philadelphia Gold & Silver Exchange Index 50 0 Jan-13 Jul-13 Jan-14 Source: GFMS, Thomson Reuters Gold Jul-14 Jan-15 GFMS GOLD SURVEY 2015 PRODUCTION COSTS PRODUCTION COST REPORTING • Average Global Total Cash Costs decreased by 3% in Total cash costs and total production costs, as referred to in this report, conform to the Gold Institute standard for cost reporting. Where data reported by miners do not conform, adjustments, and in some cases, estimates have been made. Readers should note that cost analysis undertaken in GFMS Gold Survey 2015 draws on annual data within our Gold Mine Economics service, and incorporates both data for primary gold mines and significant gold producing by-product gold producers (costed on a coproduct accounting basis). Earlier data have been restated to reflect this change, from analysis that in the past has been presented for primary gold mines only. 2014, to $749/oz. • Upward pressure on Total Cash Costs came from labour and power costs, and lower by-product credits. These factors were outweighed by favourable foreign exchange movements and the effects of higher processed grades. • The average total cash margin fell by 19%, to $517/oz, as the gold price decreased by 10% year-on-year. • Total Production Costs (including depreciated capital expenditure) fell by 1%, to $983/oz. • All-in Costs, which include all cash and non-cash costs, sustaining capital expenditures, indirect costs and overheads, decreased by 25% to $1,314oz. • The fall in the average All-in Cost was driven by a substantial decrease in the extraordinary non-cash cost component, as fewer producers reported asset impairment charges during 2014. • Excluding impairments, All-in Costs fell by $34/oz, or Co-product costs are derived by multiplying the total cash cost by the percentage revenue contribution from gold. This is in contrast to by-product costing, whereby non gold revenue is netted off as a credit against the total cash cost. The co-product analysis method has been employed where gold represents 65% or less of a mine’s revenue. Total Cash Cost comprises mine site cash expenses (mining, ore processing, on-site general and administrative costs), refining charges, royalties and production taxes, net of by-product credits. Total Production Cost is Total Cash Costs, plus depreciation, amortisation and reclamation cost provisions. All-in Cost is a proprietary Thomson Reuters GFMS cost parameter, designed to reflect the full marginal cost of gold mining. In addition to Total Production Costs, it includes ongoing capital expenditure, indirect costs and overheads. 3%, in 2014. MINE SUPPLY 3000 3000 2500 2500 2000 2000 1500 2013 Average Gold Price ($1,411.23/oz) 1500 US$/oz US$/oz WORLD TOTAL CASH AND ALL IN COST CURVES 2014 Average Gold Price ($1,266.40/oz) 1000 1000 2014 All-in Cost 2013 All-in Cost 500 500 2014 Total Cash Cost 2013 Total Cash Cost 0 0 10 Source: GFMS, Thomson Reuters 0 20 30 40 50 60 Cumulative Production % 70 80 90 100 45 GFMS GOLD SURVEY 2015 GOLD PRODUCERS’ CURRENCIES AGAINST THE US$ 240 130 Index, 2nd January 2013 = 100 Index, 2nd January 2013 = 100 220 200 RUB 180 160 140 ZAR 120 BRL 100 80 Jan-13 Jul-13 Source: Thomson Reuters Jan-13 Jul-14 110 CAD 100 MXN 90 80 Jan-13 Jul-13 Source: Thomson Reuters Jan-15 YEAR-ON-YEAR COST CHANGES In 2014, the global average Total Cash Cost, which includes mine site cash costs and realisation costs, net of by-product credits, plus royalties, decreased by 3%, to $749/oz. In order to better understand this yearon-year change, the main drivers of changes in $/oz mine production costs can be isolated and estimates quantified, in the form of a year-on-year variance analysis. This is undertaken by utilising the detailed mine-by-mine analysis in Thomson Reuters’ Gold Mine Economics database. The outcome of this exercise suggests that the reduction in annual production costs observed in 2014 cannot be considered an unqualified success story. Although producers have undertaken a range of initiatives aimed at reducing costs, with some evidence of success, our analysis indicates that many gold miners have favourable foreign exchange movements to thank for their improved production costs expressed on a US$/oz basis. The effect of weakening local currencies in many of the major gold mining countries sharply moderated upward pressure from other cost drivers, particularly labour and power costs. Jan-14 Jul-14 In GFMS Gold Survey 2014, we reported that the average grade of ore processed had stabilised in 2013, following a multi-year decreasing trend. In 2014, this downward trend reversed, with the average grade of ore processed increasing by 2%. Although modest in magnitude, this move to processing higher grade ore meant that the combined change in processed grade and volume lent downward pressure to Total Cash Costs in 2014, by an 860 770 700 2013 Source: GFMS, Thomson Reuters 46 -8 -17 -70 FX Fuel -7 Recovery Royalties -2 Grade & Volume 740 Miscellaneous +66 +1 Power Labour 780 By-Product Credits +3 +12 820 Jan-15 The first step in the variance analysis process is to quantify these effects of the changes in exchange rates, by calculating the extent to which mine site production costs would have changed from one year to the next in dollar terms, were exchange rates the only driving factor. Given the weakening of local currencies experienced in a number of the major gold mining jurisdictions, it is perhaps unsurprising that the exchange rate effect on global Total Cash Costs was significant, reducing costs by an estimated $70/oz in 2014. South Africa, Russia, Australia, Canada, Peru, Ghana and Mexico, all major gold producers, saw their currencies depreciate against the dollar in 2014. The Australian dollar fell by 7% during the period, while in Russia, political events contributed towards a particularly marked fall in the rouble during the second half of 2014. TOTAL CASH COST VARIANCE, 2014 VERSUS 2013 US$/oz MINE SUPPLY AUD 120 749 2014 GFMS GOLD SURVEY 2015 estimated $17/oz. This outcome is the consequence of some producers amending mine plans to bring highergrade ore into production sooner, or deciding to defer the processing of lower-grade stockpiles. The average process plant (mill) gold recovery saw a modest increase year-on year; consequently this cost driver reduced costs by approximately $7/oz in 2014. Although many producers continued to reduce mine site headcount during 2014, labour costs saw an overall increase in dollar terms, contributing an additional $12/oz to Total Cash Costs in 2014. This cost component benefited from currency effects outlined on the previous page. The average WTI crude oil price was $93.03/bbl in 2014, a 7% decrease year-on-year. Given that producer fuel costs are often subject to local factors such as tax rates, and the tendency for producers to enter into long-term fuel supply arrangements or hedging contracts, it is reasonable to expect that volatility in global spot prices will not necessarily have a corresponding dramatic effect on producer costs. It does appear that gold miners saw some benefit from the oil price fall however; we estimate that the fuel component contributed a $8/oz decrease to producer costs during the period. In general, royalty payments are linked to the gold price, which saw a year-on-year decrease of $145/oz, or The miscellaneous costs category represents the balance of the difference between Total Cash Costs year-on-year, and amounts to approximately $66/oz of upward pressure. This category includes various cost drivers that cannot satisfactorily be stripped out, such as reagents, other mine site consumables, maintenance costs and strip ratios. Given that not all mining costs are incurred in local currency, there is a propensity for the role of exchange rates to be somewhat overstated, and in turn the miscellaneous balancing item to be magnified. With overall throughput higher year-onyear, usage of consumables will have, in the main, been correspondingly higher. For example, reagent costs at Cortez were higher in 2014, and explosives costs at Peñasquito and Musselwhite also increased year-on-year. In some cases, such as Bulyanhulu and Pueblo Viejo, maintenance costs were higher as producers strove to minimise equipment downtime. The net effect of changes in the amount of stripping undertaken and capitalised will also be reflected in this residual category of the variance analysis. In some cases producers have cited reduced capitalisation of stripping as an upward pressure on costs during 2014, for example at Cortez, Buzwagi and North Mara. 2014 GLOBAL AVERAGE ALL IN COST BREAKDOWN $/oz Au Mining Mining Ore Processing Ore Processing General & Administration 258 123 General & Admin Mine Site Cash Cost 712 Smelting and Refining By-Product Credits Royalties 15 -20 41 Total Cash Cost 749 Depreciation/Amortisation, Inventory Change 234 Total Production Cost 983 Corporate Administration, Interest Extraordinary Costs 107 106 Smelting & Refining Royalties Depreciation/Amortisation & Inventory Changes Corporate Admin & Interest Extraordinary Costs Sustaining Capex Source: GFMS, Thomson Reuters By-Product Credits (-$20/oz) Sustaining Capital Expenditure All in Cost 331 118 1,314 47 MINE SUPPLY The effect of power (electricity) cost increases was to push up Total Cash Costs by $1/oz in 2014. As for some other components of producer costs, currency movements have a significant effect on dollardenominated power costs. For example, in Ghana, the local electricity price saw a steep increase of 25%, which was equivalent to a 15% decrease in dollar terms, due to the 47% year-on-year depreciation in the Ghanain cedi. 10%. This translated to an estimated $2/oz decrease in royalties year-on-year. By contrast, lower commodity prices for by-product metals were a source of upward pressure on gold production costs during 2014, adding an estimated $3/oz. Price trends for the major by-product metals were mixed during the period, with silver seeing the most dramatic decline, of 20% year-on-year, while average copper and lead spot prices decreased by 6% and 2% respectively. On the other hand, the zinc price increased by 13% in 2014, benefiting production costs at a handful of operations including Peñasquito. GFMS GOLD SURVEY 2015 2014 ALL-IN COST CURVE 3000 3000 * Sustaining Capex, Indirect costs, Corporate Overheads & Extraordinary Costs Depreciation & Amortisation 2500 Total Cash Costs 2000 2000 1500 1500 1000 1000 500 500 0 US$/oz US$/oz 2500 0 0 10 20 30 40 50 60 Cumulative Production (%) 70 80 90 100 Source: GFMS, Thomson Reuters *The top 5% of mines in the cost curve have All-in Costs greater than $3,000/oz; the chart has been truncated accordingly. MINE SUPPLY GOLD MINE PROFITABILITY: KEY ISSUES The ‘All-in Cost’ parameter developed by the GFMS team at Thomson Reuters is intended to represent the ‘stayin-business’ capital cost, or the expenditure necessary to maintain production at current rates. In addition to the components included in the Total Production Cost, the All-in Cost also incorporates corporate administration costs (head office overheads), interest charges, exploration expense, extraordinary charges (such as retrenchment costs and asset carrying value writedowns), plus sustaining/on-going capital expenditure. As such, the All-in Cost may be viewed as a measure of ‘real’ industry margins. We estimate that in 2014 the All-in Cost of gold mine production was $1,314/oz, which represented a $427/oz, or 25%, reduction year-on-year. This contraction is not wholly reflective of cost-cutting success in 2014; rather, it underscores the exceptional scale of industry asset impairments reported during 2013, when these extraordinary non-cash charges contributed $499/oz to the All-in Cost. By contrast, both the number and scale of impairments reported for 2014 has been substantially lower, resulting in a contribution of $106/oz to the All-in Cost. Asset write-downs in 2014 were charged for varied reasons; for example at Cortez, a mine plan revision led to a cessation of mining in one of the open pits; at Lihir, the impairment was a consequence of revised operating and capital cost assumptions and Yamana reported write-downs to a number of its assets following a review of life-of-mine plans. Excluding impairments, the trend in the All-in Cost is considerably less volatile, with 2014 seeing a $34/oz, or 3% year‑on‑year decrease. 48 Our analysis indicates that most components of the All-in Cost saw year-on-year reductions in 2014. Corporate administration costs fell by 5%, in line with reports from many producers that they have cut back on corporate spending. Expensed exploration is estimated to have fallen by approximately $8/oz in 2014, as many miners focused on optimisation of existing operations. Depreciation and amortisation has increased year‑on‑year by approximately $17/oz, due to higher production and/or a smaller reserve base (when depreciation is charged according to the unitsof-production method), in some cases because project capital is being depreciated over shortened mine lives. The average gold price during 2014 was $1,266/oz, and of the population of gold mines included in the Gold Mine Economics dataset, 120 mines, representing 64% of costed production, have All-in Costs lower than this. Despite the $145/oz year-on-year decrease in the gold price, the proportion of supply produced at an All-in Cost lower than the gold price increased between 2013 and 2014. This is illustrated in the All-in Cost curve for 2014, which has flattened relative to that for 2013. The shift in the All-in Cost curve reflects factors including lower impairment charges, producers’ efforts to bring down costs, and the closure of some operations that were found in the upper quartiles of the 2013 All-in Cost curve. The lower quartiles of the cost curve feature large, mature operations such as Lagunas Norte ($751/oz), Cadia Hill ($883/oz), Olimpiada-Titimukhta ($886) and Goldstrike ($958/oz), as well as newer mines such as Akyem ($689/oz), Kibali ($897/oz) and Pueblo Viejo ($925/oz), all of which had All-in Costs below the average gold price during both 2013 and 2014. GFMS GOLD SURVEY 2015 GOLD PRODUCTION COSTS REGIONAL TRENDS (US$/oz) 2013 2014 Production costs for the major gold-producing regions can be examined to reveal the trends contributing towards the overall 3% decrease in global Total Cash Costs. This analysis reveals that Australian and South African operations saw decreases in their costs, in South America Total Cash Costs remained stable year-on-year, while in North America Total Cash Costs rose in 2014. In North America, Total Cash Costs increased by 4%, to $711/oz in 2014. Unlike many of their peers operating elsewhere in the world, gold producers based in the United States have not shared in the benefits of a strengthening dollar. The country’s average production cost is also heavily influenced by the very large operations such as Cortez, where unit costs rose in 2014 on lower output due to planned processing of lower grade ore. Mexican Total Cash Costs saw a 4% increase in 2014, as relatively low-cost new production from La India, together with cost reductions at mines such as La Herradura were not sufficient to offset increases elsewhere, such as the impact of the new mining royalty introduced in 2014. Total Cash Costs 686 711 Total Production Costs 906 968 All-in Costs 1,438 1,234 Total Cash Costs 668 668 South America Total Production Costs 930 925 All-in Costs 1,512 1,288 Australia Total Cash Costs 885 809 Total Production Costs 1,163 1,086 All-in Costs 2,015 1,325 South Africa Total Cash Costs 970 931 Total Production Costs 1,154 1,107 All-in Costs 1,576 1,361 Total Cash Costs 775 743 Other Total Production Costs 978 954 All-in Costs 1,964 1,358 World Total Cash Costs 770 749 Total Production Costs 995 983 All-in Costs 1,741 1,314 Source: GFMS, Thomson Reuters continued its ramp-up to full production. Performances such as this were sufficient to balance cost increases elsewhere, such as at Yanacocha and Lagunas Norte. Average Total Cash Costs for South African producers decreased by 4% in 2014. As was the case in 2013, South African gold miners benefited from the weakening rand. At Sibanye’s core mines, comprising Beatrix, Kloof and Driefontein, costs increased in rand terms, but posted a year-on-year decrease when expressed in dollars. The flat year-on-year Total Cash Costs for South America, at $668/oz, saw the region placed as the lowest-cost of the four major gold-producing regions discussed here. South America’s largest producer in 2014 was Pueblo Viejo, where cash costs decreased by 20% as the mine Australian producers saw a 9% drop in their reported Total Cash Costs in 2014. As was the case in a number of other major mining jurisdictions, favourable currency movements were of benefit to Australian producers, with low-cost new production from Tropicana also contributing to the downward trend. COMPANY REPORTED QUARTERLY TOTAL CASH COSTS COMPANY REPORTED ANNUAL TOTAL CASH COSTS 1800 South Africa Australia World 1600 1800 South America North America Gold Price 1600 1200 1000 1000 US$/oz US$/oz 1200 800 600 600 400 400 200 200 0 0 Q1.10 Q1.11 Q1.12 Q1.13 Source: GFMS, Thomson Reuters; Company Reports Q1.14 Total Cash Costs 1400 1400 800 Gold Price 2004 2006 2008 2010 2012 Source: GFMS, Thomson Reuters; Company Reports 2014 49 MINE SUPPLY Higher costs in the United States and Mexico outweighed an overall decrease in cash costs for Canadian operations, which fell by 7% in 2014. Canadian production costs have benefitted from new lower-cost operations including Canadian Malartic, the country’s largest producer in 2014, as well as cost reductions at more established mines such as Meadowbank. North America GFMS GOLD SURVEY 2015 WEIGHTED AVERAGE STRIKE PRICES OF CONTRACTS GLOBAL HEDGE BOOK HOLDERS*, END-DECEMBER 2014 (weighted by number of contracts, end-December 2014) Contract Type Trigger USD AUD Polyus Gold International 24% Fresnillo Bought Puts - $1,122 $1,381 5% OceanaGold Sold Calls - $1,489 $1,677 3% Evolution Mining Forward Sales - $1,348 $1,475 3% Sumitomo Metal Mining $1,680 $1,519 - 2% B2Gold Corp $925 $1,195 - 2% Industrias Peñoles 2% Regis Resources 2% Carpathian Gold 2% Torex Gold Knock-in Barrier Sold Calls Knock-out Barrier Bought Puts Source: GFMS, Thomson Reuters PRODUCER HEDGING 18% • The volume of delta-hedging grew by 103 tonnes in 2014, Source: GFMS, Thomson Reuters Others *Numbers on a nominal (number of contracts) basis COMPOSITION OF THE DELTA-ADJUSTED HEDGE BOOK the largest volume of net hedging since 1999. Last year saw the largest volume of net hedging, and only the second year of net hedging (the other being 2011) since 1999, the year in which the hedge book peaked. Net hedging was seen in all quarters except the third, with volumes very much skewed to the second and fourth quarters, due to relatively large positions entered into by Polyus Gold International and Fresnillo plc respectively. In the second quarter of 2014 Polyus entered into price protection arrangements covering 88 tonnes of production, using a combination of zero cost Asian barrier collars and forward sales, in order to de‑risk cash flow through to 2018 while the company invested in the Natalka project. Including the maturity of the company’s 2014 contracts, this resulted in a net 55 tonne increase to the delta‑hedge book. In the fourth quarter Fresnillo entered into what was then the first stage of a hedging programme to manage the cash flow from its acquisition of the remaining 44% of the Penmont Joint Venture. The contracts cover 47 tonnes of production between 2015 and 2019 using a collar option structure. We calculate that the delta-hedge against these contracts at end‑December was 30 tonnes. (tonnes, end-period) 2014 13.Q4 14.Q1 14.Q2 14.Q3 14.Q4 yoy Forward Sales 77 83 91 86 100 Options 14 16 119 117 143 928% Total 91 99 157 150 195 29% 113% Source: GFMS, Thomson Reuters Aside from these two companies, which held a combined 62% of all hedge contracts recorded at end-year, hedging remains confined to mid-tier and smaller gold miners. In total we recorded increases to the deltahedge positions of a further 25 companies. Notably a majority (16) of these companies were Australian, taking advantage of the weakening local currency, and included Northern Star Resources (+6 t), OceanaGold (+6 t), Evolution Mining (+4 t), Norton Gold Fields (+4 t), Troy Resources (+2 t), Regis Resources (+2 t) and Independence Group (+2 t). Together the Australians represented an additional 32 tonnes of delta‑hedging. This can be contrasted with the fact that just four of the hedged Australian companies saw their positions decline over 2014; a clear skew towards additions. Excluding Fresnillo and Polyus, the population of companies from other jurisdictions such as Canadian, Mexican and London listed entities were net de-hedgers last year. GLOBAL DELTA HEDGE BOOK VOLUME AT END-DECEMBER 2014 3300 3300 300300 1999 Peak 3000 3000 Global Hedge Book (tonnes) 2700 2700 Global Hedge Book (tonnes) delta-adjusted MINE SUPPLY 38% 2400 2400 2100 2100 1800 1800 1500 1500 1200 1200 900 900 600 600 300 300 00 94 96 98 Source: GFMS, Thomson Reuters 50 00 02 04 06 08 10 12 14 Non-Vanilla Options 270 250 240 Vanilla Options Forward Sales 210 200 180 150150 120 100 90 60 50 30 00 Q1-10 Q4-11 Q4-12 Q4-13 Q4-14 GFMS GOLD SURVEY 2015 The additions from Polyus reintroduced more exotic options to the hedge book composition, not seen since the mid-2000s, meaningfully altering the makeup of the global book. When combined with the Fresnillo hedge, within the space of one year the previous dominance of forward sales has been reversed; on a nominal (number of contracts) basis, forwards have been diluted from 59% of the global hedge book to just 26%. The balance of the book is arranged almost entirely in collar structures, with a near equal number of bought puts and sold calls. We therefore estimate the level of mine production covered by some form of price protection or cap to be a more modest volume than the nominal hedge book suggests, with around 250 tonnes of output protected over the period 2015-2019. That constitutes less than 2% of projected total global production over the same time frame. The volume of delta-hedging outstanding at end‑2014 stood at just 195 tonnes. While this is a more‑than‑doubling of the level of the hedge book since the multi-decade low of 91 tonnes at end-2013, it nevertheless represented only 6% of the total of just under 3,100 tonnes at end‑1999, when producer hedging was in its heyday. The level of outstanding hedging does, therefore, remain limited by comparison to historical standards. TOP HEDGING ACTIVITY IN 2014 (delta-hedging) Company % of Gross Hedging Change (tonnes) Polyus Gold International 41% 55 Fresnillo plc. 22% 30 Torex Gold 5% 6 Northern Star Resources 5% 6 % of Gross De-hedging (tonnes) Petropavlovsk plc. 17% -5 Veris Gold Corp. 16% -5 Beadell Resources 13% -4 St. Barbara Limited 9% -3 Company Note: Delta-adjusted volumes are calculated on the basis of published company data. As such disclosures are not exhaustive, the GFMS calculated position may not exactly correspond to the delta position reported by the company. In addition, GFMS values the contracts on a spot delta basis, whereas some companies report positions on a forward delta basis. This can lead to minor discrepancies between the calculated and reported delta-adjusted volumes. Where published data was unavailable, an estimate based on the scheduled expiry of contracts has been made. Source: GFMS, Thomson Reuters CHANGING COMPOSITION OF THE GLOBAL HEDGE BOOK. DELTA-ADJUSTED DELIVERY PROFILE AT END-DECEMBER 2014 Forwards Vanilla Puts End-2013 Nominal Volume: 4.20 Moz (131 t) Vanilla Calls Barrier Puts Barrier Calls 30 Non-Vanilla options End-2014 Nominal Volume: 12.53 Moz (390 t) 25 Tonnes 20 Vanilla Options Forwards 15 10 5 0 Source: GFMS, Thomson Reuters Q4-15 Q4-16 Source: GFMS, Thomson Reuters Q4-17 Q4-18 Q4-19 51 MINE SUPPLY Excluding the activity from Polyus and Fresnillo, the volume of net hedging each quarter was much closer to neutrality throughout the year, indicating more of a balance between new hedging and the maturity of existing positions. We noted earlier that 27 companies’ positions grew over 2014; 20 companies saw their positions decline. These numbers are only representative of a mild skew to hedging, considering the still limited volume of the hedge book, and the population of active gold companies, which number in the hundreds. We therefore would suggest that despite this being a relatively strong year for hedging, we do not think that 2014 has provided evidence enough for a “turning point” to have been reached regarding the practice of producer hedging. It remains confined to a subset of producers, with (excluding outliers such as Fresnillo and Polyus) an almost neutral market impact. The delivery profile indicates there is approximately 50 tonnes of hedging due to unwind in the first half of 2015. We expect that, with a continuation of a thin undercurrent of fresh project hedging and the renewal of cover by established hedgers, net producer hedging will persist into 2015, at similarly modest volumes. It will remain relatively insignificant to the supply‑demand balance this year in comparison to other market drivers, such as physical demand and scrap recycling. GFMS GOLD SURVEY 2015 4. SUPPLY FROM ABOVE-GROUND STOCKS • During 2014, total above-ground stocks, by definition cumulative historical mine production*, increased by 2% to 183,600 tonnes. • The stock of fabricated products (excluding coins) reached 112,300 tonnes by end-2014, a net gain of 1,800 tonnes. This was equivalent to 61% of total aboveground stocks. • The largest component of fabricated products, jewellery, rose by a net 1,100 tonnes and amounted to 87,000 tonnes at year-end, representing 47% of total above-ground stocks. • Private and official bullion holdings ended 2014 at 67,700 tonnes, equal to 37% of above-ground stocks. Just over half of that was held by private bullion holders. • Net official sector purchases accounted for 466 tonnes last year. However, net producer hedging of 103 tonnes means that net official stocks rose 363 tonnes, or 1%. • At 36,800 tonnes, and valued at $1,400 billion by end-2014, privately-held bullion stocks were up by 1,300 tonnes from their end-2013 level. • When including ETF sales and hedging supply, the visible supply of gold to the market from above-ground stocks was 1,388 tonnes, equivalent to 31% of demand in 2014. This comprised 1,125 tonnes of scrapped, 103 tonnes of hedging supply and 160 tonnes of ETF sales. *Some material has been lost from the market over time; the estimate for this is carried as “unaccounted” in the chart below. OVERVIEW Supply of gold into the market can be sourced either from new mine production or from the recycling or mobilisation of the existing, and substantial, aboveground stocks of metal. The former (as well as producers’ hedging activities) is discussed in detail in Chapter 3 of this Gold Survey, while the latter topics are covered in this chapter. At present, the official sector is a source of significant net demand in the gold market and is accordingly not detailed in this chapter but instead in a separate following chapter. In this chapter, we examine the recycling of scrapped fabricated products. Another possible source of supply from above-ground stocks of gold, namely bullion held by private individuals and non-official institutions, is discussed in more detail in Chapter 2. As was the case in 2013, some areas of the investor side of the market were again a source of supply last year, with substantial ETF sales, albeit far less than compared to 2013. The table on the next page provides a summary of annual supply to the market from mine production and above-ground stocks over the 2012-2014 period. Also, in addition to hedging supply, we have incorporated the supply of metal from ETF sales, which prior to 2013 had not been an annual source of supply to the market. Indeed, gold ETFs have enjoyed steady inflows for years until the start of 2013, driven by adoption among the retail and institutional sectors. However, since 2013, that robust uptake came to an abrupt end and gold ETF sales became the embodiment of the strong correction in the gold price that followed. SUPPLY FROM ABOVE-GROUND STOCKS GOLD TRANSFERS (NET) TO AND FROM GLOBAL ABOVE-GROUND STOCKS, 2014 Above-ground Stocks, end-2014 = 183,600t Jewellery (87,000t) Official Holdings* (30,900t) Private Investment** (36,800t) Other Fabrication & Unaccounted (28,900t) Jewellery (2,213t) Official Sector Purchases (466t) Industrial Fabrication (400t) Private Investment* (1,283t) Total Stocks (4,362t) Transformed/Transferred (4,362t) Old Scrap (mostly jewellery) (1,125t) Mine Production (3,133t) Changes in lending*** (103t) * Excluding gold lent or supplied ** Includes bar investment, coin investment and physical deficit *** Includes changes in lending from both the official and private sectors Source: GFMS, Thomson Reuters 52 GFMS GOLD SURVEY 2015 Mine supply increased by 2% to 3,133 tonnes, a record high, in world mine production, despite lower prices. Much of the increase was due to various producers mining higher grades in order to contain costs and as well as the ramp up of mines which started in prior years. VISIBLE SUPPLY OF GOLD TO THE MARKET 2012 2013 2014 tonnes share tonnes share tonnes share Mine Production 2,875 63% 3,061 78% 3,133 69% Above-Ground Stocks 1,677 37% 2,167 22% 1,388 31% - Scrap 1,677- 1,287- 1,125- - Hedging Supply ---- 103- - ETF Inventory Drawdown - - 880 - 160 - 4,552 5,228 - 4,521 - Total 1-month % 1.5 1.0 AVERAGE GOLD LEASING RATES 0.5 0.0 -0.5 2002 2004 2006 2008 Source: GFMS, Thomson Reuters 2010 2012 2014 1-mth 3-mth 6-mth 12-mth 2012 -0.15%-0.02% 0.17% 0.45% 2013 0.10% 0.15%0.24%0.44% 2014 0.15% 0.19%0.25% 0.41% Source: GFMS, Thomson Reuters 53 SUPPLY FROM ABOVE-GROUND STOCKS Supply from above ground stocks, on the Source: GFMS, Thomson Reuters other hand, dropped by 36% compared to Note: This is “visible supply” and therefore for the purposes of this table, the 2013, mainly driven by a strong decline in withdrawal of metal via ETF growth or via de-hedging has been treated as zero. scrap supply in combination with reduced ETF sales. Scrap supply significantly the year before. The diversity, liquidity, easy access retreated in all regions but China in 2014, pushing the and therefore robust uptake by retail and institutional global total by 13%, or 162 tonnes, down to 1,125 tonnes. Despite the drop last year, the contraction in scrap supply investors of the various gold ETF’s in the market was been a strong supporter of the price during the twelve was significantly lower compared to 2013, which can be year bull run; the massive liquidation in 2013, however explained by a variety of reasons. First, due to the slight meant that ETFs were as much price makers as they were improvement in the global economic sentiment, distress price takers and they continue to command attention. selling fell. Second, the continued low prices deterred ETF net-sales slowed to 160 tonnes, or $6bn, last year consumers from selling their old jewellery or coins back from 880 tonnes in 2013. In summary, visible supply of to the market. Some regional differences did occur, gold (other than from mine production) in 2014 fell by however, mainly due to currency fluctuations. Third, we 707 tonnes (-14%) year-on-year to 1,388 tonnes. estimate that near market stocks in many countries have fallen substantially following gold’s price boom over the The absence of official sector supply on the above table past 12 years. is a function of the shift to net purchases earlier this decade. The tiny level of sales remains dwarfed by Net hedging turned positive again in 2014 and to the purchases from emerging markets, as discussed in detail tune of 103 tonnes; the highest level of annual hedging in the next chapter. since 1999. A few producers increased hedge cover last year, predominantly through the use of options, led by Finally, another aspect that involves strong focus on Polyus Gold. This specific example used exotic options, central banks in the gold market is the lending market, something which typically still engenders substantial although this has materially declined over the last shareholder aversion, as complicated structures are still decade. The gold lending market spent much of 2014 viewed as non-transparent. in a relatively becalmed fashion with exceptionally low lending rates particularly for the 1- and the 3-month As already briefly outlined, the final component of the timeframes. However, the end of last year saw a above ground stocks component is ETF sales, which spectacular escalation in short term lending rates which continued in 2014, at a far less pronounced level than was fuelled by an upturn in physical demand from the Middle East and Asia, driven by another dip in the gold LEASING RATES price. Although the spike was short lived, leasing activity 2.5 in China has significantly increased in 2014 due to tighter 12-month liquidity (see focus box in Chapter 7). 3-month 2.0 GFMS GOLD SURVEY 2015 SCRAP SUPPLY ——Global scrap supply fell 13% last year to a five-year low of 1,125 tonnes due to a continued weak price environment and reduced distress selling. Last year, global scrap supply continued to slide across all major regions to 1,125 tonnes. Much of the 13% decline was driven by a combination of factors. First, the persistent low price environment motivated fewer consumers to liquidate their holdings. Second, due to the slightly less precarious state of some, particularly European, economies, distress selling fell. Third, the high US dollar prices of 2010-2011 brought record amounts of material back to the market and consequently near to market stocks have depleted in various regions in 2014. EUROPE SUPPLY FROM ABOVE-GROUND STOCKS Scrap supply in Europe continued to slide last year, falling by another 17%, to a seven-year low of 289 tonnes. This was one of the largest percentage declines among all the major regions, only giving way to the Americas. It is interesting to observe that, despite marked declines in the past couple of years, the continent’s share of the global total remained elevated by historical standards. To put this in perspective, Europe’s portion of the world total stood at 26% last year, compared to an annual average of 20% for the pre-crisis period between 2000 and 2007. This is thanks to spectacular growth rates seen during the years of financial crisis, when many countries suffered economic recessions and consumers took the opportunity of elevated gold prices to sell their gold assets to pay down debts or to meet other immediate expenditure needs. volumes in the first half of the year, when the price averaged €30.3/g, down by 19% year-on-year, compared to a less marked drop of 12% in the latter half, when the average gold price for the period was only marginally lower year-on-year. This also suggests that there were other factors that pushed scrap volumes lower last year. Among such drivers were gradually improving economic sentiment in the region, which saw a drop in distress selling, at least, in some countries, as well as reduced stocks of old pieces available for selling, as large volumes were sold previously at higher prices. Electronic scrap also failed to show much growth last year, on the back of lower gold prices and shrinking margins. NORTH AMERICA North America generated 116 tonnes of scrap in 2014, a 22% decline from the previous year. This rate of decline was an improvement over the 30% fall in scrap generated in 2013. The smaller decline in the annual average gold price of 10% in 2014 against 15% in 2013 helped curb the drop in scrap last year. Scrap from price-sensitive sources, namely jewellery, dental, and coins, fell last year. Dental scrap continued to decline at an aggressive rate due to dwindling aboveground stock. Gold use in the dental lab industry continues to decline to the benefit of metal-free alternatives. An improved economy, higher disposable incomes, and lower unemployment weighed on jewellery and coin scrap. In contrast to previous years, electronic scrap volumes fell in 2014 due to lower precious metals content in material returned to recyclers. While the European scrap market tends to be less price sensitive than most other markets, the lower gold price in euro terms was integral to the 2014 decline. This was evidenced by a noticeable decline of 21% in scrap US scrap fell to 84 tonnes in 2014, down 21% from the previous year when scrap volumes dropped 29%. The US economy continued to improve, with the unemployment rate falling from 6.7% in December 2013 to 5.6% in December 2014. Per capita disposable incomes rose 3% last year compared to a 5% decline in 2013. While ABOVE-GROUND SCRAP STOCKS BY REGION 2004 ABOVE-GROUND SCRAP STOCKS BY REGION 2014 Asia Asia 3% 1% Europe Europe 8% North America Africa 7% 2% 1% North America Africa 10% South America South America Oceania Oceania 10% 54% 59% 19% 26% Source: GFMS, Thomson Reuters 54 Source: GFMS, Thomson Reuters GFMS GOLD SURVEY 2015 this boost in disposable income helped push jewellery purchases higher, it was negative for scrap supply. US households fared better financially last year, resulting in fewer people liquidating gold assets for cash. In addition to lower scrap from jewellery sources, gold recovered from electronic scrap declined last year. Although electronic scrap feedstock increased, the volume of gold recovered declined due to lower gold content. Material turned in to recyclers last year contained around 15% less gold than the previous year. Electronic waste returned last year, given the average life cycles of the most common gold-bearing electronics, was likely to be material from years in which more aggressive thrifting was occurring within the electronics industry due to rapidly rising gold prices. Scrap collected in Mexico fell to 27 tonnes in 2014, down 27% from the previous year. Mexico accounted for 23% of North American scrap last year, up from 10% a decade earlier. Mexico’s scrap supply has increased significantly over the past decade due to weak economic conditions and limited access to credit driving households toward gold’s liquidation value. Last year, the Mexican economy expanded 2.1%, up from 1.1% growth in 2013. With a slight improvement in economic conditions, households liquidated less gold assets. Canadian scrap supply fell 15% to 5.7 tonnes in 2014, which is a significant improvement from the 32% decline in 2013. Similar to the US and Mexico, improved economic conditions slowed the volume of old jewellery sales from households last year. The decline in scrap, however, was more muted than in Mexico and the US because of the Canadian dollar’s depreciation against the US dollar. Gold prices in Canadian dollars, as a result, only declined 3.7% in 2014, compared to the 10% decline in US dollar terms. Gold Price Scrap Share of Total Supply 100 1000 20 500 10 Source: GFMS, Thomson Reuters 2001 2006 2011 0 2.5 Jewellery Stocks Scrap 90 2.0 80 1.5 70 1.0 60 0.5 50 2004 2006 2008 2010 2012 2014 Scrap return rate (%) 30 Above-ground Jewellery Stocks (000 tonnes) 1500 1996 Going forward, industry participants expect that the scrap market in Turkey has reached its nadir with volumes well below the peaks seen in the financial crisis. Turkish scrap volumes peaked in 2008 and 2009 at 199 and 217 tonnes respectively before quickly falling back below 80 tonnes in 2011. To some degree the past two-years have seen stocks of available scrap in the market increase and the beginning of 2015 demonstrated how dynamic and price sensitive the Turkish market really is. Indeed, due to the local market discount and excess gold in the 2000 40 0 1991 Scrap volumes have also been undermined by two additional trends in the Turkish market. First, it is increasingly common in Turkey to use old jewellery scrap directly in the fabrication of new designs. As such, no additional scrap is generated and no new gold consumed. Volumes, therefore, net off, and the activity in both instances will not be captured in our data. Likewise, the increase in bar demand in Turkey over the past years has also seen more of this material coming back to the market. The bar market (minted and cast) is tracked on a net-consumption basis so this material moving around the system also doesn’t show in the scrap figures. Fees for exchanging bars, however, are lower compared to exchanging 22-carat jewellery (due to the design and labour cost) which encourages bars to be the first material to come back to market when sales are made. ABOVE-GROUND JEWELLERY STOCKS & % RETURN OF SCRAP Gold Price US$/oz Scrap Share of Total Supply (%) 50 Scrap volumes continued to suffer in Turkey in 2014, with prices stuck in a 85-90 lira/gramme range for most of the year. We estimate that volumes fell by a quarter to 41 tonnes in 2014. However, towards the end of the year, the trend turned with volumes significantly increasing in the early part of 2015 on the back of the local gold price rise towards 100 lira/gramme. As a result, for a short period, the Turkish market even traded at a $4-5/oz discount to the London price. 0.0 Source: GFMS, Thomson Reuters 55 SUPPLY FROM ABOVE-GROUND STOCKS Ch5 Scrap Share of Total Supply SCRAP SHARE OF TOTAL SUPPLY MIDDLE EAST GFMS GOLD SURVEY 2015 system in January saw gold become Turkey’s number one export for the month. Old scrap supply entering the system in Egypt is estimated to have dropped 8% in 2014, to 40 tonnes. This reflects the fifth consecutive decline and was the lowest level of recycling since the start of the millennium. Aside from 2009, when scrap flows surged over 80%, the supply from old scrap has been receding as a large proportion of close to market gold assets has already found its way back to market. An improved economic and political backdrop has also reduced distress selling which was a feature in recent years. A softer gold price, not surprisingly, also contributed to the decline; the weaker domestic currency limited the drop in the average gold price in local terms to just 7%. Prices within the country were relatively high at the beginning of 2014, encouraging an increased level of liquidation, especially when gold passed through EGP 300 in late-February. loans, which has been a factor deferring the motive to sell at time of distress. Our discussions with co-operative banks and private money lending institutions revealed that 1-2% of total gold loans disbursed has been declared as a non-performing asset (NPA). Since NPA’s eventually reach the open market through auctioning, they get included in our scrap numbers. In addition, defaults on agricultural gold loans also add to scrap supplies, however, such NPA’s occur less frequent due to their lower interest rate. Looking ahead, poor crop yields are forecast and with falling gold prices this is more likely to see increases in loan defaults. In addition, banks tend to prefer to oppose populist measures introduced by the state heads Andhra Pradesh and Telangana in regards to waiving defaulting agriculture gold loans, which could result in increased gold jewellery reaching the market for auction. EAST ASIA In Saudi Arabia, scrap volumes declined broadly in line with the global average, slipping 12% to around 21 tonnes. The extent to which the volume of gold being returned to market has fallen in recent years has been quite extraordinary. Our estimated volumes for 2014 are 85% or 113 tonnes below the level in 2006 when consumers first rushed to take advantage of the rise in the price (dollar gold peaked at $725 that year). This initial wave of liquidations coupled with a declining consumption market has left a depleted supply chain and led to the current declining trend. With the domestic price pegged to the US dollar, scrap flows largely mirrored movements in the dollar gold price last year, rising in the first quarter as gold trended higher (breaching SR165 per gramme), but tailing off thereafter. SUPPLY FROM ABOVE-GROUND STOCKS INDIAN SUB-CONTINENT For the second consecutive year in a row, Indian scrap supply declined by 26% to 74 tonnes, the lowest level in three years. As a result, the share of global scrap that is Indian fell 1% to 7% in 2014. Sales of gold scrap, however, did increase in the first and the fourth quarter, driven by higher prices for the former and a rise in delinquency-driven collateralised gold auctions in case of the latter. Direct sales from consumers, however, continued to be prevalent. Research conducted in tier three towns and discussion with jewellers revealed a significant decline in consumers willingness to exchange jewellery for cash. This can be explained by a stronger presence of financial institutions in the market, offering gold collateralised 56 Scrap supply in East Asia rose 1% in 2014 to an estimated 359 tonnes. In what would appear at first glance to be counter intuitive, given the 10% fall in the dollar gold price last year, the annual increase was entirely due to a 12% jump in scrap supply from China where significant supply chain destocking, due to weak consumer demand, drove scrap receipts materially higher. Meanwhile, the remaining region, excluding the Chinese contribution, was more broadly in line with the global average, retreating 11% year-on-year. Despite weaker currencies that limited the impact of the softer dollar gold price, and in some instances pushed gold higher in local terms, scrap supply was largely muted. A rising price profile in the first quarter, combined with a recharged supply chain after the demand strength in 2013 helped limit the fall in the first half to 5%, while supply in the second half was less price responsive, slipping 8% year-on-year. Turning firstly to Indonesia, scrap supply was almost unchanged at 36 tonnes in 2014. This represents the first year since 2009 that scrap has not retreated. Indeed, scrap flows emanating from the Indonesian archipelago have slumped 55% from the 2009 peak. A weaker domestic currency that saw the average gold price in rupiah terms rise 3% last year, encouraged an increase in recycling, with supply most abundant in the first quarter and in mid-June when gold pushed through 500,000 rupiah per gramme. Thailand, in contrast, saw a further reduction in scrap supply last year, falling 16% over 2013 volumes, the third successive drop that has now seen Thai scrap decline over 60% from the 2009 peak. GFMS GOLD SURVEY 2015 SUPPLY OF GOLD FROM FABRICATED OLD GOLD SCRAP (tonnes) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Europe Italy 46.7 53.5 57.1 61.0 78.0 98.0 116.5 122.6 85.5 75.4 Turkey 67.7 82.5 71.5 199.0 217.2 122.0 78.0 72.3 56.3 41.4 41.0 4.5 10.7 Germany 7.6 11.4 France 12.118.616.821.224.929.240.333.526.721.5 Spain 3.7 United Kingdom Russian Federation 18.9 6.1 19.3 11.7 18.8 5.8 20.7 38.7 59.4 69.8 76.0 69.0 24.4 32.7 44.1 45.5 40.3 31.1 31.2 23.8 10.6 20.1 31.9 32.7 35.9 23.5 21.1 21.4 28.7 26.4 19.2 23.5 24.2 18.6 Portugal 0.6 1.0 0.9 1.1 1.5 8.6 15.5 16.0 11.2 9.1 Belgium 1.3 2.7 2.6 3.7 6.1 8.2 9.1 8.6 7.8 6.7 Austria 3.43.93.74.76.47.98.07.66.76.1 Poland 2.02.82.82.8 3.13.9 7.7 7.5 5.1 4.1 Sweden 2.0 4.14.64.76.46.66.76.44.54.0 Switzerland 3.84.84.85.36.56.36.56.24.33.5 Finland 0.3 Other Countries 11.7 15.3 14.5 16.023.628.732.9 32.122.4 18.3 Total Europe 2.2 1.8 2.1 2.6 6.0 6.1 5.8 3.6 3.2 186.2 238.9 238.1 416.6 517.1 497.6505.0488.0348.2 288.7 North America United States 60.4 81.0 84.5 93.5 124.0 143.0 159.9 149.4 105.8 83.5 Mexico 7.212.0 17.628.140.845.647.654.137.227.2 Canada 5.0 7.5 6.3 6.9 9.2 11.1 10.8 9.8 6.7 5.7 Total North America72.6100.5108.4128.5 174.0 199.7 218.3 213.3 149.7 116.3 South America Brazil 4.3 Colombia 3.84.14.35.16.68.18.79.51.41.4 6.8 Venezuela 3.7 4.3 6.4 5.7 7.5 6.0 11.4 7.1 16.1 8.3 22.2 8.7 24.6 8.1 16.0 6.2 9.8 5.6 Dominican Republic4.04.24.24.34.25.05.9 6.1 1.4 1.2 Argentina 3.6 5.14.44.45.95.65.8 6.10.50.6 Other 4.6 South America 6.1 7.9 9.2 16.1 21.9 20.7 20.4 7.0 7.1 24.030.632.936.5 51.265.072.074.832.525.6 Asia China 41.7 44.6 41.6 70.3 116.3 133.2 143.6 165.6 176.3 197.7 India 94.0 80.0 73.0 89.5 115.5 81.0 58.5 113.0 100.8 74.2 UAE 28.2 34.0 43.8 59.4 70.6 110.0 71.4 73.4 57.0 51.4 Pakistan 30.9 33.4 31.7 35.5 53.9 50.4 42.7 47.2 37.2 28.8 Indonesia 67.0 71.9 68.0 72.5 79.9 64.9 58.3 49.0 36.2 36.3 Japan 24.5 27.0 25.9 53.6 35.3 43.9 55.1 42.2 36.2 26.1 Thailand 12.4 19.1 37.4 51.7 66.0 44.7 52.4 43.6 30.6 25.7 7.8 8.3 9.0 12.2 51.5 49.8 41.1 36.4 28.2 26.2 Iran 16.1 21.9 23.1 26.0 32.2 32.7 32.4 32.9 24.3 22.1 69.4 57.3 44.1 33.5 23.6 Saudi Arabia Syria 92.5 133.7 56.4 37.1 20.8 10.1 17.413.614.515.3 17.719.0 17.814.5 5.1 Malaysia 11.0 19.1 16.4 18.4 19.3 22.2 19.2 16.7 13.3 Taiwan 13.0 18.4 18.5 33.6 34.9 27.5 19.5 15.4 12.0 11.1 4.3 6.5 5.4 7.4 20.3 19.1 17.1 15.3 10.8 10.4 Iraq 12.4 Lebanon 6.69.94.96.215.119.714.912.79.68.5 17.5 S Korea 30.7 10.2 9.2 18.1 17.4 12.7 10.8 13.9 10.4 8.5 7.7 9.7 9.5 9.4 7.2 7.4 6.5 7.1 7.58.08.48.0 7.36.86.06.4 9.8 5.6 21.3 Hong Kong 21.8 7.0 20.5 4.6 12.4 8.7 13.7 Jordan Kuwait SUPPLY FROM ABOVE-GROUND STOCKS Vietnam 6.2 5.0 4.5 Singapore 3.34.25.05.4 6.15.88.9 7.44.84.5 Israel 5.2 Bahrain 1.83.83.83.84.74.54.03.52.62.5 Oman 2.23.8 3.13.84.54.43.4 3.12.42.2 11.4 5.0 6.1 6.6 8.3 7.0 5.6 4.4 4.5 57 GFMS GOLD SURVEY 2015 SUPPLY OF GOLD FROM FABRICATED OLD GOLD SCRAP (tonnes) 2005 Bangladesh 2006 2007 2008 2009 2010 2011 2012 2013 2014 2.12.52.52.73.02.72.62.72.31.8 Qatar 0.9 Philippines 1.51.51.51.92.72.32.11.91.51.4 Other Total Asia 2.3 2.6 2.5 2.8 2.4 2.0 1.8 1.5 1.4 9.511.011.412.413.713.813.613.011.410.4 527.6654.0 541.4 703.0 876.6 852.1 769.0 790.1669.0 612.9 Africa Eqypt 72.7 77.5 56.5 35.8 65.0 48.0 47.6 53.6 43.2 39.9 Morocco 5.96.36.36.49.79.312.011.39.49.0 Libya 4.6 Algeria 2.72.83.43.65.86.17.97.66.86.6 Other 9.7 9.5 10.4 13.4 15.8 16.6 14.4 8.8 8.2 4.5 11.0 8.5 8.912.212.714.714.212.2 11.6 Total Africa 90.4107.3 84.1 65.0106.1 91.8 98.8101.0 80.4 75.2 Oceania Australia 1.9 1.5 1.52.0 3.16.812.010.2 7.36.6 1.91.51.52.0 3.16.8 12.0 10.27.36.6 Total Oceania World Total 902.6 1,132.8 1,006.3 1,351.6 1,728.0 1,712.9 1,675.0 1,677.5 1,287.0 1,125.3 …of which:- Middle East* 325.3435.2306.3449.8 531.1453.8 352.3 341.4262.4222.0 East Asia* 208.2254.2 246.7350.2 444.1423.5 427.9 401.1356.5358.8 23.524.025.4 26.7 35.332.8 30.1 31.225.025.2 CIS* Indian Sub Continent*129.8 119.8 111.7 132.5 176.9 138.3 107.7 166.5 143.3 107.4 Source: GFMS, Thomson Reuters * The key regional bullion markets Elsewhere, Japan experienced a sizeable fall in scrap supply last year, despite a 3% drop in the average yen gold price. The GFMS team at Thomson Reuters estimates recycling volumes fell 28% last year to just over 26 tonnes, the lowest level since 2007. An uncertain economic environment, coupled with a lack of volatility reduced profit taking for much of the year, only picking up in the final quarter as gold in yen terms breached the 5,000 yen per gramme level. Vietnam and Malaysia both recorded an annual fall of 7% while scrap supply from South Korea retreated just 2% on an annual basis. tonnage accordingly, as Chinese scrap is largely dependent on jewellery recycling. China’s scrap total in 2014 rose 12% year-on-year, to 198 tonnes. Despite weaker gold prices, the uptick in scrap supply did not necessarily stem from typical end-user liquidation. Indeed, last year the increase was largely attributable to an unusual phenomenon in the jewellery sector with jewellery fabricators clearing out their jewellery inventory (usually older designs and slow moving stock) to refineries to boost liquidity on their balance sheet, and counter sluggish jewellery demand in China. As we have made a major upward revision on Chinese jewellery fabrication, we also revised up the scrap LARGEST SUPPLIERS OF GOLD SCRAP 2000 Gold Price Oceania 2000 200 1500 150 Africa South America North America Tonnes Asia 1000 800 500 400 0 Source: Thod 2004 2006 2008 Source: GFMS, Thomson Reuters son Reuters GFMShomson Reuters GFMS 58 2010 2012 2014 0 Gold Price US$/oz 1200 Europe Tonnes 1600 Gold price Italian Scrap Chinese Scrap Indian Scrap US Scrap 2000 1500 100 1000 50 500 0 2004 2006 2008 Source: GFMS, Thomson Reuters 0 2010 2012 2014 US$/oz SUPPLY FROM ABOVE-GROUND STOCKS WORLD SCRAP SUPPLY GFMS GOLD SURVEY 2015 Almost 49 million tonnes of electronic waste (e-waste) were generated in 2012, according to StEP (Solving the E-waste Problem), an international e-waste solutions initiative. This amount compares to 19.5 million tonnes generated in 1990. Only a small portion of e-waste, however, has potential for precious metals recovery. Cell phones, computers, and telecommunications equipment are among the most sought after waste streams in terms of precious metals value. Additionally, a large portion of e-waste generated does not feed into the recycling circuit, but is refurbished for re-use or not collected at all. As an example, the United States, the largest source of e-waste today, generated 9.3 million tonnes of e-waste in 2012. Four million, or 43%, of this total was actually collected. Of this four million, 70% was recycled, while the remaining 30% was refurbished and re-used. As such, only 25% of e-waste generated enters the recycling circuit. The e-scrap recycling market is a stark contrast to the high-grade gold scrap market in which nearly 100% of the scrap generated is collected and recycled. Findings of the GFMS team at Thomson Reuters suggest that of the 49 million tonnes of e-waste generated, 5%, or 2.5 million tonnes, is in the form of cell phones and computers. The most valuable components in these electronics are printed circuit boards and memory cards. To demonstrate, one metric tonne of printed circuit boards contained about 250 grams of gold in 2013. This yield compares to 1.3 grammes per metric tonne of ore treated at mines. Work on other electronic waste streams is ongoing. Another major factor that has weighed on growth has been increased thrifting and substitution among electronics manufacturers. The high and rising gold price in recent years pushed manufacturers to use less gold and other precious metals in order to maintain costs. This thrifting activity actually is expected to weigh on refined gold output from e-scrap recycling over the next five years, more so than during the period of rising prices due to the lag time between production and end-of-life. By our estimates, 41 metric tonnes of gold are contained in computer and mobile phone scrap expected to be generated in 2014, up 3% from a year ago. Gold contained in these electronic waste streams is expected to decrease by 0.2% per annum over the next five years, through 2019. This is a stark change from the 7.8% compound annual growth rate seen since 2000. Much of the slowdown can be attributed to thrifting of gold in newer generation computers, as mentioned earlier. Indeed, recyclers and smelters have seen declines in gold contained in e-waste feedstock of between 5% and 20% in 2014. GOLD USAGE IN ELECTRONIC APPLICATIONS 150 140 SUPPLY FROM ABOVE-GROUND STOCKS It may be prudent at this point to describe the e-scrap value chain. When an end-user disposes of an electronic product, e-scrap has been generated. The scrap must now be collected; collectors will source e-waste from a variety of sites, such as retail stores and office buildings. Collectors then typically sort through the e-waste and transport it to relevant treatment facilities, often by the type of electronic product and/or its relative value profile. At the treatment stage of the value chain, e-scrap is dismantled and/or shredded. This material will then either be shipped to landfill, recycled for valuable resources, or used for refurbishment/re-use. Those who recycle material are most often international in scope, collecting e-material from all over the world then smelting and refining it to produce precious metals and other raw materials. The main drivers behind precious metals recovery growth from e-waste are commodity prices, thrifting of metals among electronics manufacturers (mostly in response to commodity prices), regulations, and the development of the e-waste supply chain. The biggest factor behind e-waste volumes in recent years has been gold prices, which have boosted the collection and recycling of precious metals-intensive e-waste. To illustrate, we estimate that smelter feedstock volumes increased at a 15% compound annual rate between 2008 and 2013 to 408,000 tonnes. Index, 1st January 1996 = 100 E-SCRAP SUPPLY Computers Cell Phones 130 120 110 100 90 80 70 60 1996 1999 2002 2005 2008 2011 2014 Source: GFMS, Thomson Reuters 59 GFMS GOLD SURVEY 2015 5. OFFICIAL SECTOR significant source of net demand in the gold market in 2014. Net purchases by the official sector were 466 tonnes last year, up by 14% from 2013, reaching the second highest annual total since the end of the gold standard. • Heightened geopolitical tensions in 2014 resulted in Russia and several CIS countries increasing their gold holdings, with gold being held as a means to diversify their reserves. Russia was the largest reported purchaser for the third consecutive year, with a record of 173 tonnes. • Sales rose in 2014 by 280% year-on-year, to 54 tonnes. Ukraine was responsible for the largest transactions with sales concentrated in the final quarter of the year. OVERVIEW The estimates derived by the GFMS team at Thomson Reuters for official sector transactions are based on a combination of publicly available information, such as the statistics regularly published by the IMF and information extracted from individual central banks’ websites, plus our own proprietary data on undeclared central bank activity, compiled using information collected through field research. Due to the lag that often exists between activity taking place and being identified, it is possible that our estimates will be revised in the future. The official sector witnessed another year of strong central bank interest in gold in 2014. After buy-side activity reached a 48-year peak in 2012, the pace of gold acquisitions from central banks slowed in 2013, albeit staying at historically high levels. Last year, however, central bank buying actually recovered with net official sector purchases at 466 tonnes, up by 14% year-onyear. This increase in gold holdings portrays the fourth consecutive year of substantial purchases, which are rapidly becoming the industry norm. Indeed, net central bank purchases from 2011 to 2014 inclusive amounted to almost 1,880 tonnes. To put this in context, this is equivalent to approximately seven months of global annual mine production. This is a fundamental change to the market, as it was preceded by more than two decades of persistently heavy selling. As recently as 2005 net official sector activity was equivalent to a sixth of supply. Over 2014 as a whole, net official sector purchases were responsible for 11% of gold demand, a swing of over 1,100 tonnes in just nine years. The shift in central bank activity has in our view been a key element in supporting cyclically higher gold prices. Central to this has been not just the direct impact on supply and demand dynamics, but also the influence on investor confidence. The substantial private investor selling in 2013 was the first such onslaught for many years, overwhelming any price impact from official sector activity. Central bank purchases increased in 2014, but the overall fundamental dynamics of the market meant that prices declined by 10% on average year-on-year. Emerging economies continued to dominate the purchases, as has been the case since the market returned to net purchasing (on an annual basis) in 2010. In 2014, these economies had accounted for over 90% of the total volume of gross purchases and activity chiefly came from CIS countries and Iraq. GOLD AND OTHER RESERVES (END - 2014) WORLD OFFICIAL SECTOR SALES AND PURCHASES 600 Net Purchases 400 200 Tonnes OFFICIAL SECTOR • For the fifth successive year, central banks were a 0 -200 -400 -600 Net Sales -800 2004 2006 2008 Source: GFMS, Thomson Reuters 60 2010 2012 2014 Gold Reserves (tonnes) Total Reserves (US$ bn)* % Held in Gold* United States 8,134 434.4 72.6% Germany 3,384 193.5 67.8% IMF 2,814 n/a n/a Italy 2,452 142.8 66.6% France 2,435 144.0 65.6% Russian Federation 1,208 385.4 12.1% China, P.R.: Mainland 1,054 3,900.0 1.0% Switzerland 1,040 545.8 7.4% Japan 765 1,260.7 2.4% Netherlands 612 43.1 55.2% Source: IMF *Gold valued using market prices GFMS GOLD SURVEY 2015 This was demonstrated most clearly by the activity by Russia, and to a lesser extent by Kazakhstan, which seem to have been buoyed by geopolitical tension given the events in Ukraine. We view this as not only reinforcing the desire to diversify away from US dollars but also to attempt to provide support to faltering domestic currencies. In a similar vein, the purchases by Iraq were also driven by a desire to support the dinar. Overall sales almost tripled in 2014 but this was from an exceptionally low base and as demonstrated by the net figure is dwarfed by the scale of acquisitions. Meanwhile, sales from the CBGA signatories continued, as they have for a number of years, inconsequential but this did not prevent the same entities announcing a fourth CBGA deal on 19th May and it came into effect on 27th September. Indeed, more media attention was actually focused on the (ultimately) unsuccessful Swiss referendum on 30th November which if passed would have seen its gold holdings have to rise to 20% of its official reserves, and a potential repatriation of gold. This theme also garnered focus as the Netherlands announced on 21st November that it had repatriated 122.5 tonnes, and as a result they now have the same amount of its gold reserves held domestically as in the Federal Reserve (at 31% each). In a similar vein, in January 2015, the Bundesbank announced that “In 2014, 120 tonnes of gold were transferred to Frankfurt am Main from storage locations abroad: 35 FOUR LARGEST CUMULATIVE PURCHASERS IN 2014 200 Russia Iraq Tonnes 150 Kazakhstan Azerbaijan 100 50 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: GFMS, Thomson Reuters tonnes from Paris and 85 tonnes from New York”. This marked a substantial acceleration from the 37 tonnes that was transferred in 2013, of which only five tonnes had come from the Federal Reserve. The Bank also stated “The Bundesbank took advantage of the transfer from New York to have roughly 50 tonnes of gold melted down and recast according to the London Good Delivery standard”. There are also growing movements in a host of other western European countries attempting to persuade their authorities to also repatriate central bank holdings from traditional custodians. Turning to the prospects for 2015, we see little appetite for central bank sales activity, discouraged by low gold prices. However, we do not rule out the potential for Ukraine to further reduce its holdings on a faltering economy; although with a bailout already agreed from the IMF, we expect sales to be at a reduced level compared to 2014. Meanwhile, we expect central bank buying to remain strong in 2015, again dominated by emerging markets, fuelled chiefly by the diversification rational. Looking to Russia, we expect to see continued net purchases over the year, albeit at a substantially reduced level against last year, while much media attention will continue to focus on the repatriation of gold to central banks, especially in Europe. Gold will therefore remain a useful means of reserve diversification and a hedge against currency debasement. Overall, we therefore expect gold purchases by the official sector to remain elevated, at roughly 75-100 tonnes per quarter, throughout this year. SALES The year 2014 was the fourth consecutive year in which gross sales from the official sector remained minimal, despite recording an increase of a seemingly impressive 280%, to reach 54 tonnes. Ukraine was responsible for just over one third of the transactions, selling 19 tonnes of gold over the year, with 17 tonnes occurring in October and November alone. The contraction in holdings developed as a reaction to the continued conflict with Russian-backed separatists, weighing down on the economy, resulting in the hryvnia almost halving in value over 2014 to a historic low, and it then tumbled by a further 60% in the first two months of 2015. The second largest seller in 2014 was Ecuador, which undertook a swap transaction with Goldman Sachs and hence its holdings dropped by 14 tonnes in the second 61 OFFICIAL SECTOR Underpinning the strong buying has been the continued desire of the emerging nations to diversify their foreign exchange reserves away from US dollars, regardless of an appreciating greenback and weakening gold prices. However, while diversification remained crucial for many countries the specific timings and scale of buying by the largest acquirers appear to have been fuelled by other drivers. GFMS GOLD SURVEY 2015 quarter. (This technically shows up as a sale, because a swap is a simultaneous sale and repurchase transaction, with title passing for the duration of the exercise). ANNUAL NET OFFICIAL SECTOR PURCHASES (TONNES) 2010 2011 2012 2013 2014 77 457 544 409 466 Consistent with the previous couple of years the difference with the prior period is the absence of large scale selling from countries within the CBGA. Germany continued its regular pattern of small scale sales as part of its official coin program, of roughly three tonnes, with the transactions taking place within the first half of the year, while Latvia, (which became a member of the Euro on 1st January), sold one tonne in January, the country’s first contraction in holdings since 2006. Additionally, Belarus sold just over five tonnes in 2014, however this was largely swap activity and it is notable that the fourth quarter saw the country purchase just over three tonnes. PURCHASES After a multi-decade high of 571 tonnes in 2012, gross official sector purchases are estimated to have totalled 520 tonnes in 2014, an increase of 23% year-on-year. It is important to emphasise that our gross figure does not include the reported net increase in Turkish official reserves (as was also the case in the last four years) as this is reflected in changes in local commercial banks’ gold deposits with the central bank. In 2014 this showed as an increase of nine tonnes in Turkey’s gold reserves. For the third successive year, Russia was the largest announced buyer in 2014, raising its official gold holdings by a reported 173 tonnes. While Russia is a long term regular purchaser of gold, this level of buying was markedly higher than previously and was more than double the level achieved in 2013, with purchases concentrated in the last three quarters of the year, (with 37 tonnes bought in September alone). Underpinning the substantial upturn was clearly, in our view, the geopolitical events in Ukraine and accompanying sanctions. As a result of this, there was a further hardening of the view by Russian authorities that it wanted to move its central bank holdings away from US dollars, while the rouble lost half its value over 2014 as the economy suffered. Substantial buy-side interest was also apparent from other CIS countries. In particular this came from Kazakhstan, which bought 48 tonnes chiefly through regular purchases of domestic gold output over the year. It is also noticeable that, just like in Russia, the pace of purchases accelerated with almost 25 tonnes bought in August alone. Furthermore, Azerbaijan purchased 10 tonnes over August, September and October, while Tajikistan also bought four tonnes in 2014. The third largest purchaser in 2014, however, came from outside this region, with Iraq purchasing just over 47 tonnes in the first third of the year, in order to help defend the dinar. While this is somewhat out of the blue as the country had not reported any purchases for over 12 months, it is worth remembering that it is also made a purchase of almost 24 tonnes in August 2012. Elsewhere, modest purchases were also reported by a number of countries, including Mauritius, which bought four tonnes in 2014. In addition, shortly before publishing this document, the government announced that it plans to buy more gold in 2015 from the Perth Mint to defend the country’s currency from volatility. In 2014, additional purchases of between one and two tonnes were each recorded for Jordan, Nepal, Philippines and Serbia. HISTORICAL NET OFFICIAL SECTOR PURCHASES & SALES 900 700 Net Purchases 500 300 100 -100 Tonnes OFFICIAL SECTOR Source: GFMS, Thomson Reuters -300 -500 -700 Net Sales -900 -1100 -1300 -1500 1948 1953 1958 1963 Source: BIS; IMF; GFMS, Thomson Reuters 62 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013 GFMS GOLD SURVEY 2015 CUMULATIVE 2014 TRANSACTIONS RUSSIA VS UKRAINE 200 Many of the themes of central bank activity continued tried Ukraine Tonnes 150 100 OFFICIAL SECTOR and tested patterns in 2014, with substantial net buying from emerging markets and virtually no sales from the traditional holders such as CBGA signatories. However, events in Ukraine and the geopolitical fall out from them were arguably behind the key changes in central bank activity in 2014. We will not dwell here on the political and social implications of events in Ukraine but instead focus on what happened and why from the perspective of the economy in general and the central banks in particular. Russia 50 0 -50 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Political instability and economic problems existed in Ukraine before 2014 but events escalated in the first quarter of last year. As can be seen in the charts at the bottom of this page this started to have a major impact on the exchange rate of the hryvnia and total central bank reserves (particularly European and US government bonds). That said, from a purely gold perspective the first quarter saw very little activity from either of these countries; indeed Russia purchased less than usual, possibly due to higher gold prices, arguably sparked in part by the same geopolitical events. However, March was also the first month in which sanctions towards Russia were introduced by many western governments. This was then tightened in late April and a third round of sanctions was introduced from July onwards (the exact timing depended on different countries decisions). The impact of this can be seen in the charts on this page, although we would readily acknowledge that the slump in the oil price also had a significant role. Focussing on Ukraine first, the depth of the recession due to the fighting has led to central bank reserves plunging and by January 2015 they were barely one fifth of the level just two years previously. Given this backdrop and the inadequacy of an Finally we would note that in addition to this move by Russia the same period has seen Kazakhstan buying its record annual total of 48 tonnes. $US Bn 40 20 Jul 14 80 Jan 15 Total Central Bank Reserves US$ / Hryvnia Spot Rate (Inverted) 5 10 15 15 10 Exchange Rate 25 Exchange Rate 30 70 Source: IMF; GFMS, Thomson Reuters Underpinning this upturn in the regularity and scale of acquisitions was clearly the geopolitical events. This was fuelled by two factors. First, a desire to try and support the ailing rouble - a policy which has proved unsuccessful. Second, a growing belief that the Russia does not want to buy US dollars (or other western currencies and assets). 30 60 400 Jan 14 central bank which every month from May onwards made purchases of at least seven tonnes and every quarter they acquired at least 54 tonnes. As a result, Russia was the largest official sector purchaser of gold in 2014 at 173 tonnes. Even though Russia had been a regular purchaser of gold for many years this was the highest since the inception of the Russian Federation. 20 50 Jul 13 This was dwarfed however by the actions of the Russian US$ Bn Total Central Bank Reserves US$ / Russian Rouble Spot Rate (Inverted) 500 300 Jan 13 IMF bailout it is unsurprising that the authorities sold a total of 19 tonnes in 2014, with almost 90% of this taking place in the final quarter of the year. UKRAINIAN CENTRAL BANK RESERVES RUSSIAN CENTRAL BANK RESERVES 600 Source: IMF; GFMS, Thomson Reuters 5 0 Jan 13 Jul 13 Jan 14 Jul 14 20 Jan 15 Source: IMF; GFMS, Thomson Reuters 63 GFMS GOLD SURVEY 2015 6. GOLD BULLION TRADE • India’s gross bullion imports increased by 5% to 822 tonnes, a result of the 80:20 rule leading to forced exports. The permission for trading houses to import helped to lift volumes in the second half of the year. • Bullion flows to East Asia retreated significantly from the record levels of 2013 as weaker jewellery and investment demand across the region reduced fresh bullion purchases. • In the Middle East, bullion imports were materially • Turkish bullion imports fell 47% to 178 tonnes in 2014 as high local prices saw more scrap come into the market and dissuaded purchases of physical bullion. On a net basis Turkey imported just over 102 tonnes in 2014. • Relative normality returned to European bullion trade after an extraordinary year in 2013. The pattern of bullion moving from the west to east continued, however. The UK, Switzerland and Italy posted strong declines in imports and Switzerland and Italy saw much reduced exports. • North American imports rose to 318 tonnes in 2014, up 14%, after declining at a double-digit pace in the previous two years. Exports fell 11% to 740 tonnes, due to a 21% decline in US exports. Whilst official trade statistics are quoted in our analysis, these figures should not be taken at face value. Our assessment of trade flows also incorporate substantial research with market participants. INDIAN SUB CONTINENT Gross imports increased by 5% from 2013 to 822 tonnes. Nearly 80% of the metal originated from Switzerland (60%), UAE (11%) and US (8%). That said, the share of UAE exports dropped from 20% in 2013, largely in favour of direct shipments from Zurich. The increase in imports is a reflection of the 80:20 rule, which mandated 20% of imported metal to be exported. Also to note was the shift in point of exports from Special Economic Zone (SEZ) to Export Oriented Unit. This change was primarily due to restrictions on export of medallions and coins from SEZ. According to our sources, nearly 60 tonnes equivalent of gold medallions with purity of 995 were exported from India, destined to Sharjah due to lower duty at that port compared to Dubai. These were then re-melted and returned to the supply chain. Gold doré was another key source of supply; total volume is estimated to be 91 tonnes against 53 tonnes in 2013 on a net purity basis, registering growth of more than 70%. Higher premia have proved to be a key benefit for refiners last year. Refining activity increased despite the fact that refiners had to pay customs duty on the 20% of gold that was to be exported eventually, tying up funds until the export materialised. This is evident in the number of refiners with licence to import, which increased from 13 in 2013 to 21 in 2014. While the source of gold doré largely originated from the United States, Brazil and Tanzania, Ghana has taken a major spot catering for 12 to 15% of INDIAN BULLION NET IMPORTS AND EXPORTS* 500 ——India’s gross bullion imports increased by 5% to India’s net gold imports for 2014 are estimated at 591 tonnes, after deducting the 20% of required exports as stipulated under the 80:20 scheme. This includes gold refined from doré supplied to domestic market. This number also nets off the quantity imported for export 64 35 400 30 Net-Imports 25 300 20 15 200 10 100 5 0 Q1-10 Q1-11 Q1-12 Q1-13 Source: GFMS, Thomson Reuters *Exports include bars, jewellery medallions and coins 0 Q1-14 Rupees/10g (thousands) 822 tonnes, a result of 80:20 rule leading to forced exports. ——Allowing trading houses to import helped lift volumes in second half of the year. Gold Price Exports Tonnes GOLD BULLION TRADE weaker in 2014 as consumer demand across most of the region retreated, despite the near 10% drop in the dollar gold price. purposes. Compared to 2013, imports were down by 9% from 647 tonnes. The official hand-carried trade, which is not part of the above numbers, was 5 tonnes, although that activity eased later in the year due to lower premia and a crackdown on agents carrying kilo bars on behalf of others, to discourage the circumvention of law for financial gains. GFMS GOLD SURVEY 2015 GROSS INDIAN BULLION IMPORTS* (tonnes) 2007 2008 2009 2010 2011 2012 2013 862 760 779 1,123 1,208 969 781 877 9,378 12,319 15,310 18,386 24,003 29,730 29,310 28,278 Gross Imports* Local Price (Rs./10g) 2014 *including Direct Imports (imports by premier trading houses), NRI Imports, Export Replenishments; 2012 to 2014 also includes unofficial imports. Source: GFMS, Thomson Reuters EAST ASIA & OCEANIA ——Bullion flows to East Asia retreated significantly from the record levels seen in 2013 as weaker jewellery and investment demand across the region reduced demand for fresh bullion. Bullion flows to mainland China retreated last year, driven lower by weak domestic demand. Demand last year was limited by the range-bound gold price performance, excessive purchase in 2013, and a lacklustre economic environment, while investment demand was further impeded by anti-corruption policies from the government. We estimate that gold imported into mainland China was 1,136 tonnes in 2014, 24% lower than in 2013. As expected, the proportion of imports into Shanghai increased significantly last year compared to Hong Kong. Among the reasons are improving logistics, the establishment of the Shanghai Gold Exchange (SGE) International Board, and encouragement by the PBOC to use the alternative port. However, most of the importing banks still use Hong Kong as the prime conduit for Meanwhile, the prevalence of gold leasing business in China, which was originally aimed to help lower the risk of using gold as collateral for borrowing, has been abused by some Chinese companies as a way to gain cheap finance. This business not only largely inflated the domestic trading volumes by a 28% year-on-year increase, but also partially explained the high level of import volumes, as banks had to build stocks to support the gold lending business. We estimate that 2014 alone saw over 400 tonnes outstanding for fresh leasing business. The round-tripping mechanism has been in the market for arbitrage purposes in the past few years to take advantage of the floating yuan against the U.S. dollar. Although the Chinese government attempted to eliminate this problem during and before last year, more diverse forms of the practice developed, with gold jewellery export volumes, a rough indication of the level of round-tripping, reaching a new high of 580 tonnes last year, a 29% increase from 2013. Our conservative assumptions put total volumes for round-tripping last year at 370 tonnes. Excluding this volume from imports and factoring in specific bullion export quota and imports HONG KONG BULLION IMPORTS AND EXPORTS* 700 Imports Exports 600 500 400 300 200 100 0 Q1-10 Q1-11 Q1-12 Source: GFMS, Thomson Reuters Q1-13 Q1-14 *Calculated quantites based on reported export and import values. 65 GOLD BULLION TRADE India’s bullion trade discussion is incomplete without touching upon unofficial imports. We estimate crossborder smuggling of gold into the country was at an average rate of 2.7 tonnes a week in 2014, 13% less than 2013. Cross-border smuggling was at its peak when premiums exceeded $100, and continued in greater volumes until premier and star trading houses were allowed to import gold. Smuggling activity had reduced significantly by the end of the year as markets traded at a discount following the circular on relaxation of gold imports. Notable volumes were also registered from export zones due to unchecked pilferage of metal from these zones. A total of 35 agencies imported gold last year. Premier and star trading houses led the market share at 51% despite only importing from June onwards. This was followed by banks at 39% and government nominated agencies at 10%. bullion imports owing to logistic convenience as well as lower costs. We believe Hong Kong will continue to be the major hub for imports unless there is a breakthrough solution with logistics companies to reduce the cost of shipping directly to Shanghai, and more sophisticated cargo handling systems to compete with Hong Kong. Tonnes the requirement at any given month, with gold purity averaging more than 90%. GFMS GOLD SURVEY 2015 from Shanghai and Hong Kong, we estimate that net bullion imports in 2014 totalled 766 tonnes. Calculating Vietnam’s bullion flows in recent years has become an arduous task given the tight control the State Bank now has on both the import and export of bullion and scrap supplies. The domestic market in 2013 featured a series of auctions whereby gold imported by the State Bank was auctioned and released into the market. Last year the market tightened even further with no officially-sanctioned imports of gold. This meant that fabricators have had to source gold in the domestic market which is now largely unofficially imported from neighbouring countries. We estimate these combined volumes from Cambodia, Laos and Thailand surged last year to exceed 75 tonnes. An acute drop in investment demand, coupled with a double-digit decline in jewellery fabrication in Thailand last year, accounted for the bulk of the 52% fall in gold bullion imports. On a calculated basis, imports slumped to an estimated 164 tonnes with flows from the largest supplier Switzerland reduced by over 60%. Elsewhere, shipments from the U.S., South Africa and Australia retreated by 26%, 60%, and 33%, respectively. Turning to exports, bullion flows (which includes scrap deliveries) slipped 5% in 2014. Switzerland again featured as the main destination for Thai exports at close to 40% of the THAI BULLION IMPORTS* Reviewing Australia’s bullion flows can often provide an indication of demand trends across Asia as historically the majority of bullion exports are destined for these key markets. In recent years flows to China have dominated bullion exports while the tightening of the import regulations in India has seen shipments to this market 150 60 20 15 40 20 0 Q1-10 Q1-11 Q1-12 Q1-13 Q1-14 Source: GFMS, Thomson Reuters *Calculated quantities based on reported import values 10 5 Singapore UK Others Rupee 200 India 150 100 Tonnes 80 125 China RMB 75 100 50 50 25 0 Q1-10 Q1-11 Q1-12 Source: GFMS, Thomson Reuters 0 Q1-13 Q1-14 Gold prices (Index, Q1 -10 = 100) Gold Price Gold Price (Baht per 15.244g, thousands) 25 66 Singapore’s bullion imports surged 19% in 2014 to an estimated 284 tonnes. This may appear somewhat counterintuitive, given that demand in the region last year was considerably weaker than in 2013, but this market is increasingly being used for vaulting and has become a terminal market for supplying to China. Imports were dominated by flows from Switzerland (47% of the total) and Australia, which at 25%, increased over 250% to an estimated 70 tonnes. We believe exports jumped nearly 30% in 2014 to 250 tonnes, driven predominantly by a surge in flows to China (at a touch over 100 tonnes), although deliveries were also augmented by a healthy rise in shipments to Malaysia, Taiwan and Hong Kong. 30 120 100 A weaker jewellery market and a return to net disinvestment, as higher domestic prices encouraged profit taking, saw Japanese bullion exports gain 7% in 2014 to an estimated 80 tonnes. Outward flows were dominated by shipments to Hong Kong (47% of the total) with Thailand the second largest destination at 20%. Both markets recorded a modest rise over 2013 volumes. Large bar shipments to the UK also rose by almost a quarter to just over seven tonnes. Bullion imports remained modest at just 12 tonnes, although in percentage terms they fell by 48%, with significant falls in supply from Canada and Switzerland. AUSTRALIAN GOLD EXPORTS 140 Tonnes GOLD BULLION TRADE Gold imports into Taiwan exceeded 22 tonnes in 2014, a 13% year-on-year increase and the highest volume since 2002. Among the dominant import regions, volumes from Hong Kong dropped back to 2012 levels, while imports from Japan increased by 130%. Bullion exports rose by 46%, predominantly driven by bars flowing out of the country for refining in Hong Kong. The increase in exports primarily stemmed from the shut-down of some bullion retailers over the year due to weak investment sentiment at home. total, with Hong Kong and Singapore the remaining main official trade routes. One statistic of note was the sharp uptick in shipments to Cambodia last year, which were most likely destined for the closed market of Vietnam. GFMS GOLD SURVEY 2015 Ch6 BULLION Turkey Official Bullion Imports Exports TURKISH IMPORTS ANDand EXPORTS 150 100 75 25 0 Q1-09 Q1-10 Q1-11 Q1-12 Source: Turkstat; GFMS, Thomson Reuters ——In the Middle East, bullion imports were materially Q1-14 Bullion imports into the United Arab Emirates (UAE) were considerably weaker in 2014. A considerable slowdown in jewellery consumption across the region following the price-driven surge in 2013, and a generally weaker sentiment among investors, limited the need for fresh imports. Direct flows from Switzerland (which dominate imports) dropped by almost 50% while flows from the UK and Turkey slipped 22% and 43%. A feature of the UAE market last year, and another explanation as to why genuine bullion imports fell so markedly in 2014, was the Indian influence. Indeed, the introduction of the much discussed 80:20 rule in India, whereby 20% of all bullion imports had to be re-exported in jewellery form fuelled significant flows to the UAE where this “ jewellery” (often very rough and semi finished) was refined into kilobars and sold into the domestic market or exported to India or Switzerland. We estimate that this figure topped 165 tonnes last year. Often sold at a discount, these flows partly negated the requirements for banks and trading houses to import from abroad. In addition to the Indian supply, the UAE remains an important collection point for African scrap and doré, with a handful of new refineries opening in recent years to accept this trade. Dominated by flows TURKISH BULLION IMPORTS SEASONALITY 60 130 50 110 Tonnes 40 Gold Price 30 90 20 Lira/g (thousands) A weaker jewellery market and a hefty drop in investment demand accounted for the 8% drop in Saudi Arabian bullion imports last year. Despite the decline in these key demand segments, bullion shipments remained at historically elevated levels as scrap volumes in the domestic market have fallen dramatically in recent years, falling well short of the fresh supply needed for fabrication. Direct shipments from Switzerland eased just 6% last year while flows from Dubai and South Africa (the two other main conduits) declined by double digits. In contrast, exports (a combination of scrap and bullion) were almost nonexistent, with all gold returned to market consumed domestically. Q1-13 70 10 0 Jan-12 Jul-12 Jan-13 Jul-13 Source: GFMS, Thomson Reuters; Turkstat Jan-14 Jul-14 50 67 GOLD BULLION TRADE Last year was somewhat disappointing for the Turkish bullion market after net imports of 266 tonnes in 2013 and total imports of 337 tonnes. The lack of wild price moves, surging demand and periods of sustained premia to the London price, which had characterised the previous year, saw net imports fall 62% to 102 tonnes and total imports decline 47% to 178 tonnes in 2014. Demand for imported bullion was heavily affected by the weaker Turkish lira, with annual prices increasing 3.5% to 88.9 lira/gramme, this in spite of a 10% decline in the dollar gold price. Over 2013 domestic demand for bullion and investment grade jewellery manufactured from bullion had peaked when prices neared 80 lira/gramme. This was not to be repeated in 2014 with prices only briefly dipping below 85 lira/gramme; this move, however, did stir up imports in November to 53 tonnes, three and a half times the average for the year. Exports 50 MIDDLE EAST weaker in 2014 as consumer demand across most of the region retreated, despite the near 10% drop in the dollar gold price. ——Turkish bullion imports fell 47% to 178 tonnes in 2014 as high local prices saw both more scrap come into the market and dissuaded purchases of physical bullion. On a net basis Turkey imported just over 102 tonnes in 2014. Imports 125 Tonnes contracted significantly. Last year, bullion exports to China still dominated total shipments, at over 50%, although declining by an estimated 10% to 156 tonnes, reflecting the weaker demand in the Asian giant, while flows to India halved according to trade statistics. Elsewhere, deliveries to Thailand slumped by 47%, while in an indication of the general weakness in most regional markets, shipments to the UK jumped 44% year-on-year to 21 tonnes. GFMS GOLD SURVEY 2015 year-on-year on the extraordinary year that was 2013, while against 2012, a more meaningful comparison, it was up 8% year-on-year. Exports were similarly down 37% compared with 2013 to 1,741 tonnes, but up 26% from 2012 indicating continued physical demand. UAE BULLION IMPORTS* 200 150 2000 Gold Price US$/oz Tonnes 1500 100 1000 50 0 500 GOLD BULLION TRADE H1-09 H1-10 H1-11 H1-12 H1-13 H1-14 Source: GFMS, Thomson Reuters *excludes various round tripping and scrap related imports from Ghana, Sudan, Tanzania and Suriname, this supply eased marginally in 2014 on the back of the weaker gold price and increasing competition from Indian refineries. As for exports, we estimate official deliveries to India fell sharply in 2014, declining by almost 50% to an estimated 90 tonnes. However, unofficial flows, which chiefly originated from Dubai, we estimate at 122 tonnes, while shipments to Europe rose by a fifth to around 60 tonnes. Looking briefly at Egypt, bullion imports declined sharply last year as demand for both investment and jewellery dipped from the elevated levels of 2013. In addition, a rise in scrap and supply from the liquidation of gold investment products during the occasional price peaks during the year also lessened the need for fresh bullion flows. Exports dominated the bullion trade in the first quarter as gold in domestic terms breached EGP 300 per gramme for the first time since September 2013, encouraging profit taking. This pattern was repeated in the middle of the year before buying activity and imports returned in the second half as gold trended lower, providing an opportunity to restock. That said, imports from the largest conduit of supply, Switzerland, still retreated by 60% in 2014. EUROPE ——Relative normality returned to European bullion trade after an extraordinary year in 2013. ——The UK, Switzerland and Italy posted strong declines in imports and Switzerland and Italy saw much reduced exports. The year 2014 was the first year since 1980 that a full country-by-country monthly breakdown of Swiss gold bullion imports and exports was released. In addition, country-by-country annual trade back to 1982 has now been released. On a calculated basis, Switzerland imported 1,660 tonnes of fine gold in 2014, a 36% decline 68 Last year, British official import data showed a marked increase of 38% to 439 tonnes. Imports from Canada were up 7% year-on-year to 161 tonnes, but the story of the year in terms of import was the huge increases of metal flowing from the United States and South Africa. Both countries exported 87 tonnes to Britain, a 145% year-on-year increase for the United States and 203% increase for South Africa. As with last year exports far exceeded imports, with the total figure in 2014 at 735 tonnes down 57% from 1,701 tonnes of 2013. The bulk of the bullion (62%), went to Switzerland. From May exports began to flow to the Chinese mainland for the first time, with 112 tonnes in total, more even than the total going to Hong Kong, which was 100 tonnes, down 29% year-on-year. November saw the largest outflows with 119 tonnes going to Switzerland and 30 tonnes to China as ETF and price movements had their effects. Swiss offical statistics indicate that they exported to Germany 90 tonnes of gold bullion on a calculated basis to that country, a 50% year‑on‑year increase. The substantial rise in imports in Germany in 2013 and 2014 ties in with the Bundesbank’s stated policy of repatriating 300 tonnes of its gold from New York and Paris over a period stretching out to 2020. Indeed in early January 2015 the Bundesbank stated publicly that 120 tonnes of gold were transferred to Frankfurt from these locations in 2014. The bank also refers to the upgrading of some of this material to London Good Delivery standard. The surge in imports from Switzerland over the year implies that this is where the work was carried out. Taking this into account, underlying overall German imports actually fell in 2014, which ties in with a 15% year-on-year fall in exports and weaker fabricaton demand. Italian official calculated bullion imports fell in 2014, with the first eleven months of data showing a drop of 3% to 87 tonnes. Shipments to South Africa increased, to represent 25% of imports. This comes despite a rise in total Italian fabrication of 4% to 96 tonnes and a 12% reduction in total scrap to 75 tonnes. The result of these moves was that Italy was a net importer of gold bullion for the first time since 2009. In the first eleven months of 2014, exports were down a third to 81 tonnes, with Switzerland remaining the main destination though much of this comes as a result of imported scrap needing to be re-exported for VAT to be reclaimed. GFMS GOLD SURVEY 2015 SWISS GOLD BULLION TRADE 2014 Imports Imports 2014 Exports Exports Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 250 200 150 Tonnes 100 USA UK 50 Italy 1,660 tonnes 0 0 50 UAE Germany 100 Russia Tonnes Turkey 150 200 250 Others 1,741 tonnes China India Hong Kong Singapore One cm2 is equal to 50 tonnes of gold and each countries’ flag is proportional to it’s trade. The whole rectangle for Source: GFMS, Thomson Reuters; Swiss Impex* imports and exports is equal to the total trade and the grey area denotes trade with a country not represented by a flag. Imports Exports Imports Jan 250 200250 150200 100150 50 100 Tonnes Tonnes UK India Feb Feb Mar Apr Apr May May Jun Jun Jul Jul Aug Aug Sep Sep Oct Oct Nov Nov Dec Dec 0 50 0 0 50 0 UAE UAE Germany Russia 100 50 150100 200150 Tonnes Tonnes Others Turkey Turkey Russia China China Hong Kong Singapore HongIndia Kong Exports Jan Mar USA UK Italy USA Germany Italy GOLD BULLION TRADE 2014 MONTHLY TRADE Source: GFMS, Thomson Reuters; Swiss Impex* Imports Source: GFMS, Thomson Reuters; Swiss Impex* 250200 250 Others Singapore Exports ANNUAL TRADE SINCE 1982 Jan Feb Mar 3000 2500 May Real 2014 Value of Imports Bullion Imports into Switzerland Jun Real 2014 Value of Exports Bullion Exports from Switzerland 120 Jul 2000 Aug 90 Sep 1500 Oct 60 Nov 1000 250 500 0 US$ billion Tonnes 150 Apr Dec 200 150 UK 1982 Tonnes 100 USA 1987 50 Italy India 0 Germany 0 50 UAE Hong 1992 Kong 100 Russia Tonnes Turkey China 1997 Singapore 2002 150 200 250 30 Others 2007 2012 0 Thomson Reuters; Swiss Impex* Source:Source: GFMS,GFMS, Thomson Reuters; Swiss Impex* Imports from the UK were high in the first two months of 2014 towards the festival season. Exports to Greater China were even at 233 tonnes, representing outflow from ETFs in November larger, with Hong Kong imports in February dwarfing any other and December 2013, which saw investment bars re-refined to export at 99 tonnes, as buyers took advantage of lower prices. the kilo bars favoured by China. Exports to India were high In the last quarter more flowed into the mainland, 109 tonnes, from September to November, as fabricators started to stock up than Hong Kong at 104 tonnes. * All tonnages calculated from trade values in Swiss francs. 69 GFMS GOLD SURVEY 2015 Official statistics of Russian gold bullion exports became available for the first time in 2014, showing a 44% fall year-on-year to 76 tonnes, though this is still the second highest level since 2007. Flows to Hong Kong were down 96% year on year to two tonnes. Meanwhile local gold supply, including mine production and scrap, posted a 5% year on year rise to 281 tonnes. The total was comfortably sufficient to cover local fabrication, as well as strong Russian central bank purchases of 173 tonnes. NORTH AMERICA government imposed stricter export rules to curb exports of illegally mined gold. Peruvian exports consequently fell 24%, with exports to the US suffering the steepest decline of 66%. Imports from Mexico fell 10%, in line with the country’s decline in mine production. US exports totalled 467 tonnes, a 24% decrease from the previous year, the heftiest decline in the past decade. The largest export destinations, Switzerland and Hong Kong, saw declines of 34% and 30% respectively. Exports to the UK saw a 185% increase to 76 tonnes. This substantial increase suggests refiners shipped bullion from London vaults due to lack of demand elsewhere. ——North American imports rose to 318 tonnes in 2014, North America imported 318 tonnes from countries outside the region in 2014, up 14% from the previous year. Including imports within the region, North America imported 465 tonnes, a 6% increase. North America is home to over 1,800 tonnes of exchange-approved installed gold refining capacity. The U.S. accounts for 60% of this, while Canada and Mexico account for 37% and 3% respectively. North American imports a significant volume of gold doré from South American countries, capitalising on that region’s surge in mine production over the past two decades and a lack of refining capacity. Indeed, South American countries accounted for 75% of North American imports last year. The U.S. imported 286 tonnes of gold bullion and doré, up 8% from the previous year. The bulk of the increase came from a near tripling of Bolivian imports, an almost doubling of imports from Ecuador, and a 22% surge in Canadian imports. Imports from South America as a whole were nearly flat year-on-year, accounting for 44% of gross imports. Early last year, the Peruvian US BULLION EXPORTS* 1000 800 Canada imported 178 tonnes of bullion and doré in 2014, up 3% from 2013. Contrary to the U.S., Canadian imports from Peru rose 5% last year. Imports from Argentina and the Dominican Republic both increased at a doubledigit pace. South America’s share of Canadian imports has grown from 56% in 2005 to 64% in 2014. Canada exported 333 tonnes last year, a 14% increase over 2013, with exports to Canada’s two largest export partners, the UK and the US, increasing 31% and 28%, respectively. Exports to Hong Kong fell 12% last year. Canada’s reliance on Hong Kong as an outlet for gold output has increased over the past decade. Hong Kong accounted for less than 1% of Canadian exports in 2005. In 2014, Hong Kong accounted for 14% of exports. Mexican bullion and doré imports amounted to 1.3 tonnes in 2014, down 6% from the previous year. Exports fell 8% to 84 tonnes. Mexico produced 118 tonnes of gold last year and has limited gold refining capacity. Mine output fell 1%, which weighed on exports. CANADIAN BULLION EXPORTS* UK Other Hong Kong India 500 Other Hong Kong 400 Switzerland USA 300 400 200 200 100 0 0 2005 2007 2009 2011 2013 Source: GFMS, Thomson Reuters *Calculated quantities based on reported export values. 70 Tonnes UK 600 Tonnes GOLD BULLION TRADE up 14%, after declining at a double-digit pace in the previous two years. ——Exports fell 11% to 740 tonnes, due to a 21% decline in US exports. 2005 2007 2009 Source: GFMS, Thomson Reuters 2011 *Calculated quantities based on reported export values. 2013 GFMS GOLD SURVEY 2015 7. FABRICATION DEMAND CARAT JEWELLERY • Global fabrication declined 12% in 2014 from 2013’s elevated levels, to an estimated 2,834 tonnes. INDIAN SUB-CONTINENT • The bulk of the drop was due to a 9% drop in jewellery fabrication, despite the weaker US dollar price environment, mainly due to a hefty fall in Chinese output. • Jewellery fabrication, excluding the use of scrap, saw a similar contraction, slipping 8%, equivalent to a loss of 141 tonnes of new gold demand. • Following the remarkable surge in 2013, jewellery demand across East Asia retreated 29% last year, chiefly as a result of a 33% drop from China. • In contrast, Indian jewellery fabrication rebounded 14% in 2014 to a five-year high, as weaker rupee prices boosted domestic consumption. • Jewellery fabrication in the Middle East declined 6% in 2014, while an improved economic environment and weaker prices helped lift North American and European demand by 5% and 10% respectively. • Following a record level in 2013, Official coin minting is • A weaker price environment failed to arrest the slide in global dental demand which retreated 7% in 2014 to a record low 34 tonnes. • Other industrial and decorative demand slipped 6% last year, dragged lower by a 24% drop in offtake from the Indian Sub-Continent. 4000 Other Official Coins 2000 Electronics Jewellery Real Gold Price Tonnes 1000 1000 0 500 Source: GFMS, Thomson Reuters 2009 2011 2013 100 2000 Jewellery’s Share Real Gold Price 90 1500 80 1000 70 500 60 50 Constant 2014 US$/oz 2000 Constant 2014 US$/oz 1500 2007 The decline in demand during the first half though can be attributed to the higher base level in 2013. Indeed the import restrictions introduced on the 22nd July 2013 to import under the 80:20 scheme continued to weigh heavily on the market. Lofty and volatile premia due to supply tightness deferred large scale replenishment by retailers during the first half. Retailers who continued with their expansion plans were largely moving their JEWELLERY’S SHARE OF TOTAL FABRICATION DEMAND 3000 2005 Last year jewellery fabrication in India rose to a record level of 690 tonnes, rising 14% year-on-year and thereby bringing a pause to three consecutive years of declining growth. The rise in offtake, by almost 83 tonnes, is to be viewed in the context of developments in two distinct halves last year. While the first half saw demand decline by 18% on a yearly basis, the second half delivered an annual gain of 60%. Lower prices were one of the obvious triggers as it led to restocking, but the most important was the unplanned replenishment following the closure of advance payment schemes run by retailers to purchase gold through monthly savings; this by itself is estimated to have created 75 tonnes of demand. Jewellery’s Share of Total Fabrication Demand (%) WORLD GOLD FABRICATION 2014, as lower prices and advance purchases under the gold savings scheme helped boost demand. ——A 60% surge in second half demand helped negate an 18% decline in the first half. ——Jewellery fabrication in Pakistan declined by 15%, despite a fall in gold prices as a drop in bullion imports affected fabrication. 0 2005 2007 2009 2011 2013 Source: GFMS, Thomson Reuters 71 FABRICATION DEMAND estimated to have slumped 37% to 173 tonnes, the lowest level since 2007. ——Indian jewellery fabrication increased by 14% in GFMS GOLD SURVEY 2015 WORLD GOLD FABRICATION (INCLUDING THE USE OF SCRAP) (tonnes) Europe Turkey Italy 2006 2007 2008 2009 2010 2011 2012 2013 2014 303.4 242.0276.8 236.7 111.3109.0 136.3 114.2 178.1 155.8 290.2 235.9 228.4 186.7 134.6 126.3 103.3 95.9 92.3 96.0 61.1 65.2 79.4 76.0 57.5 61.0 66.2 72.2 74.3 70.1 Switzerland 55.5 60.7 62.2 58.2 37.5 40.8 47.9 47.8 47.8 46.2 Germany 51.8 51.3 51.5 49.1 38.1 40.8 38.8 36.4 36.8 36.3 United Kingdom 28.6 24.4 16.9 15.6 15.2 13.9 15.5 15.2 13.9 15.4 Austria 8.5 5.7 6.5 26.3 34.6 19.1 22.3 13.7 21.5 14.8 France 16.4 14.4 14.0 13.0 11.0 11.1 10.1 8.4 7.6 7.8 Spain 27.4 24.2 23.6 19.3 13.6 8.4 7.1 6.3 5.8 5.5 Greece 8.6 7.8 8.5 7.4 6.2 6.2 4.5 4.0 3.5 3.9 Poland 4.5 4.5 6.0 6.1 4.6 3.2 3.0 2.7 2.5 2.8 Netherlands 5.5 5.3 4.2 3.3 2.9 3.0 2.8 2.6 2.4 2.3 Czech Republic 2.8 2.7 2.9 2.9 2.6 2.5 2.2 2.1 1.9 2.1 Portugal 7.2 5.3 4.6 3.6 2.9 2.3 1.7 1.4 1.4 1.7 Serbia 1.6 1.5 1.5 1.5 1.3 1.2 1.0 1.0 1.0 1.0 Romania 0.7 0.6 0.5 0.5 0.3 0.5 0.5 0.5 0.7 0.8 Sweden 1.9 1.7 1.3 1.1 0.9 0.9 0.8 0.8 0.8 0.8 13.0 11.5 11.0 10.3 8.1 7.6 7.1 6.5 6.2 6.6 Total Europe 888.7 764.7 799.9 717.4 483.3 457.7 471.1 431.8 498.5 469.8 North America 218.8 210.9 179.0 175.2 173.4 179.1 166.7 146.9 160.0 149.8 26.8 22.0 22.2 40.1 48.4 43.7 44.9 32.4 44.5 31.7 Russia Other Countries United States Canada Mexico Total North America South America Brazil Chile FABRICATION DEMAND 2005 Dominican Republic Other Countries Total South America Asia India 35.4 28.5 25.3 23.0 18.9 18.2 13.2 13.2 7.7 8.5 281.0 261.4 226.5 238.3 240.7 241.0 224.9 192.6 212.2 189.9 25.9 22.623.5 25.5 24.929.8 28.6 30.1 32.9 34.0 4.3 3.9 3.6 3.2 2.8 2.9 2.2 2.2 2.4 2.5 6.1 4.8 4.5 4.3 2.8 2.5 1.9 1.8 1.2 1.3 20.4 18.2 15.9 13.0 9.8 9.2 8.0 7.8 7.6 8.0 56.7 49.6 47.5 46.0 40.3 44.3 40.7 41.9 44.2 45.9 695.2 633.8 684.4 708.1 571.0 783.4 761.0 736.0 715.8 770.6 China 276.7 289.1 345.0 382.7 431.3 522.5 650.7 697.7 1,058.3 732.2 Japan 165.0 175.0 177.8 163.7 140.5 157.5 147.2 126.1 124.2 118.6 South Korea 83.3 82.3 86.1 77.5 65.0 68.1 62.2 54.1 49.1 46.8 Indonesia 86.5 64.8 63.2 61.4 46.0 38.9 39.3 44.1 51.6 44.5 40.7 Malaysia 74.3 58.0 61.0 56.3 45.0 43.7 37.1 34.7 44.6 Saudi Arabia 124.6 89.6 99.6 85.0 53.5 46.6 36.8 32.5 41.4 37.3 UAE 55.0 46.6 49.4 46.3 35.9 32.9 28.4 27.5 37.8 36.0 Iran 40.7 36.2 40.7 41.0 37.6 39.3 37.4 36.9 41.6 31.5 Singapore 30.0 28.7 29.5 27.6 23.3 25.3 23.6 21.8 25.4 26.7 Taiwan 31.9 30.7 29.7 27.5 23.1 26.1 24.0 22.5 22.2 21.3 Pakistan 64.2 53.9 50.4 43.8 29.7 26.1 22.1 20.6 24.6 20.9 Thailand 68.5 52.7 47.5 40.3 25.2 22.0 18.7 17.0 23.7 19.9 Hong Kong 14.6 14.9 15.4 15.6 14.7 15.8 16.5 14.8 14.6 13.9 Vietnam 28.3 22.6 21.6 19.6 14.7 13.5 12.4 10.7 11.4 12.4 Kazakhstan 10.4 11.3 11.9 10.9 8.8 10.4 11.4 10.9 11.1 11.2 Uzbekistan 10.4 11.3 11.9 10.9 8.8 10.4 11.4 10.9 11.1 11.2 Jordan 6.9 4.5 4.7 4.7 5.6 5.9 5.2 4.6 5.5 7.4 Kuwait 12.3 9.7 8.9 9.5 7.4 6.6 6.2 5.6 6.3 7.0 Israel 11.9 9.9 9.0 8.7 7.2 6.3 5.5 5.1 5.9 6.9 72 GFMS GOLD SURVEY 2015 WORLD GOLD FABRICATION (INCLUDING THE USE OF SCRAP) (tonnes) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Bahrain 11.4 9.6 9.9 8.7 6.5 5.7 5.1 4.6 5.8 5.6 Iraq 4.2 4.6 5.3 4.6 3.8 3.7 3.8 3.9 5.0 4.9 Lebanon 7.6 5.4 5.5 4.8 3.4 2.6 2.9 3.7 4.6 4.2 Oman 7.7 6.8 7.1 6.0 4.5 4.1 3.5 3.2 3.8 3.6 Sri Lanka 6.2 5.1 5.2 4.5 3.8 3.7 3.2 3.1 3.5 3.5 Nepal 6.9 5.8 5.3 4.5 3.5 3.5 3.3 3.5 3.9 3.0 Bangladesh 6.7 6.0 6.5 5.8 4.6 4.2 3.8 3.7 4.3 2.7 Syria 17.6 16.0 17.7 15.6 12.0 11.7 8.4 5.4 4.2 2.5 Myanmar 4.3 4.0 4.0 3.5 3.0 2.6 2.3 2.3 2.7 2.4 Qatar 3.7 3.1 3.2 2.7 2.1 1.9 1.6 1.7 2.1 1.9 Other Countries 9.0 8.6 12.3 12.3 8.9 7.7 6.4 6.1 6.8 6.6 1,975.6 1,800.5 1,929.4 1,913.9 1,649.9 1,952.4 2,001.6 1,975.2 2,372.7 2,057.8 Total Asia Africa Egypt 70.8 50.356.5 64.5 44.943.3 30.2 38.7 41.8 41.7 South Africa 10.0 10.3 14.0 16.4 28.3 24.6 27.4 27.2 30.8 24.9 Morocco 13.8 10.6 10.3 9.5 7.6 7.0 6.8 6.6 6.5 6.8 Libya 5.0 4.9 5.2 4.8 3.9 3.5 2.4 2.3 2.5 2.7 Other Countries 13.8 11.6 12.4 11.5 9.9 9.4 9.2 8.8 9.2 9.5 113.3 87.7 98.4 106.6 94.7 87.7 76.0 83.5 90.8 85.5 Total Africa Oceania Australia 9.9 10.310.5 14.0 14.612.0 13.9 13.3 19.6 14.8 Total Oceania World Total 9.9 10.3 10.5 14.0 14.6 12.0 13.9 13.3 19.6 14.8 3,325.2 2,974.1 3,112.2 3,036.2 2,523.6 2,795.2 2,828.2 2,738.2 3,238.0 2,863.8 ...of which:- East Asia* 871.8 830.4 887.8 882.3 837.5 941.31,038.51,050.0 1,432.7 1,083.9 Indian Sub-Continent*779.2 704.6 751.7 766.7 612.5 820.9 793.4 766.9 752.0 800.6 Middle East* 677.7 534.2594.3 538.7 335.5 319.3 311.4 287.5 383.7 346.3 CIS* 82.2 88.7108.4 103.4 78.1 84.2 90.9 95.9 98.5 94.5 inventory from one store to another, thereby maintaining a lean inventory model. As a result, additional gold required for every new store reported a sharp decline when compared to previous years. To put this in perspective, retailers who previously used to increase their gold purchases by 20 to 30% with an expansion in store numbers, estimated that they added just about 5% during the first half of 2014. Aggressive expansions by retailers with a lean inventory and a minimal product range, targeting the mass population, unfortunately did not work well during the first half of 2014, as profit margins were disappointing due to lower volumes. With the non availability of gold on lease the cost of capital for procuring gold after including hedging costs increased by 7% on outright purchases. To keep the funds moving retailers opted to GLOBAL JEWELLERY FABRICATION, 2005 GLOBAL JEWELLERY FABRICATION, 2014 Global Jwl Fab 13 Africa 111t Africa 63t Oceania 5t Europe 730t Europe 331t Oceania 3t North America 79t South America 36t North America 178t Asia 1,645t Source: GFMS, Thomson Reuters South America 52t Asia 1,701t Source: GFMS, Thomson Reuters 73 FABRICATION DEMAND Source: GFMS, Thomson Reuters *The key regional bullion markets GFMS GOLD SURVEY 2015 GOLD FABRICATION IN INDUSTRIAL AND DEVELOPING COUNTRIES (INCLUDING THE USE OF SCRAP) (tonnes) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Industrial Countries* Jewellery Fabrication Electronics 693.7 586.5 550.3 467.3 352.4 339.0 307.6 286.7 294.8 302.7 254.1278.5280.3262.1219.1262.4251.5219.1212.7205.9 Dentistry 59.4 Other Industrial 49.9 51.955.254.2 46.149.8 47.945.444.5 44.5 Official Coin 49.9 51.955.254.2 46.149.8 47.945.444.5 44.5 Medals 54.8 52.7 50.0 45.8 40.3 36.0 33.8 31.5 1.7 1.8 1.8 1.8 1.8 1.9 3.3 2.3 2.4 2.4 1,108.6 1,028.3 997.5 892.4 715.4 748.6 698.5 634.9 632.7 631.5 Jewellery Fabrication 2,028.2 1,715.7 1,875.4 1,840.8 1,466.6 1,693.7 1,726.3 1,721.7 2,144.2 Sub total Developing Countries* 57.7 Electronics Dentistry 40.2 46.4 50.9 55.8 63.9 70.1 78.4 76.0 76.7 1,910.4 73.3 3.03.02.82.92.62.62.62.52.5 2.4 Other Industrial 42.2 42.6 42.8 43.2 40.3 45.0 47.1 46.9 48.3 42.6 Official Coin 70.4 76.0 81.7 81.5 76.3 81.9 121.8 102.8 158.2 91.4 Medals 35.3 57.7 66.7 68.0 57.1 86.5 84.5 111.1 101.5 75.0 Sub total 2,219.2 1,941.4 2,120.3 2,092.1 1,706.8 1,979.8 2,060.7 2,061.0 2,531.4 2,195.0 World Total 3,325.2 2,974.1 3,112.2 3,036.2 2,523.6 2,795.2 2,828.2 2,738.2 3,238.0 2,863.8 Source: GFMS, Thomson Reuters *Industrial and Developing countries consistent with IMF definitions FABRICATION DEMAND JEWELLERY CONSUMPTION * (INCLUDING SCRAP) (tonnes) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 India 573.5 516.4 557.8 599.8 471.4 657.6 618.3 552.0 612.7 662.1 China 241.4 244.7 302.2 340.6 376.3 453.8 550.9 608.7 972.1 633.3 United States 349.0 306.1 257.9 188.1 150.3 121.4 111.5 104.2 122.0 130.9 Russia Turkey UAE Saudi Arabia 64.3 70.185.792.4 56.7 60.1 64.7 69.6 73.3 70.6 194.9 165.3 188.1 153.2 75.2 67.4 70.1 61.5 73.3 96.4 92.4 99.8 100.0 74.6 71.6 62.1 55.5 68.6 68.2 59.9 148.4 106.3 122.0 110.9 81.8 71.6 55.7 47.1 59.0 52.8 Egypt 75.3 60.067.8 74.3 56.753.4 33.8 39.7 45.1 47.4 Indonesia 78.0 57.755.2 55.9 41.032.8 34.2 38.8 45.2 39.8 Hong Kong 16.0 Iran 47.8 41.547.445.8 37.5 37.4 35.1 35.4 39.9 27.7 15.1 18.2 17.0 16.4 20.6 35.8 34.3 UK 59.4 52.5 50.3 Brazil 33.3 29.2 Pakistan 65.1 54.7 Italy 71.0 37.2 31.8 27.3 22.6 21.4 30.7 29.8 26.8 29.4 26.6 51.8 45.5 30.9 27.3 23.1 64.8 57.4 49.1 41.4 34.9 27.6 53.7 38.9 23.4 27.6 26.7 32.6 26.0 21.4 24.6 19.2 22.3 20.2 18.8 Canada 30.1 27.4 24.7 22.3 18.6 17.5 16.3 15.7 17.1 18.1 Japan 33.5 32.8 31.7 31.2 22.3 21.3 16.6 16.7 17.6 16.0 Vietnam 26.9 22.121.4 19.6 15.114.4 13.0 11.4 12.2 12.7 France 35.1 30.7 28.9 26.1 23.6 20.2 18.2 14.2 12.6 12.1 Mexico 42.4 37.1 34.9 28.5 26.4 23.8 19.9 15.1 6.6 8.0 Source: GFMS, Thomson Reuters *Fine gold content of all new jewellery sold at the retail level (excluding the exchange of old for new jewellery), calculated by taking jewellery fabrication, plus imports less exports and adjusting for retail stock movements. 74 GFMS GOLD SURVEY 2015 go soft on margin, offering discounts, hoping to churn high volumes. While some were successful others lost the race. As a result, retailers started facing credit delinquency issues; the fall out of this was that the industry slipped to a category of high risk lending by banks. These developments were in contrast to what we observed during 2012 and early 2013 when these large retailers were outgunning the smaller retailers, which form the majority of stores in the Indian jewellery retailing industry with in store inventory of between 10 to 50 kilogrammes. However both formats were losing market share to the new versions of otherwise traditional family jewellers, who have over the years moved to a midrange category (per store inventory of more than 50 kilogrammes) and large sized retailers (store inventory of more than 120 kilogrammes) focused in a specific region with a deeper understanding of local fashion and culture. That said, the latter two could more easily wade their way through procuring unofficial gold and still keep the books clean. Also to note was the loss of gold trading income which otherwise was a part of cash flow for most retailers; here again, those dealing with unofficial gold had an edge over the rest. INDIAN GOLD JEWELLERY CONSUMPTION Q3-14 Q4-14 161.0 187.0 207.0 Consumption 145.6 154.5 182.9 179.1 30,042 28,587 Average Price (Rs./10g) resulting in volume growth for each sector. This advanced the consumption which would otherwise have developed during the final quarter of 2014 or early 2015. The scheme had been so popular that outstanding customer deposits were often in a range of 10% to 30% of the annual turnover of the companies involved and in tonnage terms it was estimated near 75 tonnes. However, under the new regulation that came into effect from 1st April 2014 through the Companies Act 2013, retailers had to tweak the scheme such that annualized returns were not more than 12%. This was against 12 to 18% offered by retailers. The pricing through this new scheme has not been attractive for customers, and, as a result, consumers are not renewing savings accounts. Also customers can in practice no longer use their savings to redeem investment coins. The key reason for this is that it is not profitable for jewellers, given that the gross margin on a coin is only 3%, whereas for jewellery it is at least 20%. Low ticket instalments for a short term are therefore nonbeneficial to retailers, but, monthly instalments of Rs. 100,000 are acceptable if the end purchase is going to be a minted coin. As a result liquidity tightness emerged as customer deposits which otherwise was a low cost funding for their business was no longer available. Thus it would take years until customers are enticed to the new scheme with volumes similar as seen earlier. Scrap used in Fabrication 1000 250 Fabrication Excluding Scrap 30 15 50 10 5 Q1-12 Source: GFMS, Thomson Reuters Q1-13 Q1-14 GDP 200 600 150 400 Index 2005 =100 20 100 Agricultural Production 800 Rupees/10g (thousands) 150 Q1-11 27,830 26,680 Source: GFMS, Thomson Reuters 35 Gold Price 25 Tonnes Q2-14 135.0 TOTAL INDIAN FABRICATION DEMAND 200 0 Q1-10 Q1-14 Fabrication Tonnes 250 (tonnes) 100 200 0 50 2005 2007 2009 2011 2013 Source: GFMS, Thomson Reuters; Indian Ministry of Agriculture 75 FABRICATION DEMAND The second half of 2014 was a turning point for the industry with respect to supplies, thanks to the relaxation on 21st May whereby premier and star trading houses were allowed to supply to the domestic market. As a result premia dropped sharply and the availability of metal eased, unofficial trade declined and it created a more level playing field. This also coincided with the requirement to end all the monthly gold savings schemes promoted by retailers that were giving an annualised return of more than 12% for consumers. Eventually this resulted in early redemptions and was for mainly 22-carat plain jewellery, investment coin or medallion, INDIAN JEWELLERY FABRICATION AND CONSUMPTION GFMS GOLD SURVEY 2015 CARAT JEWELLERY (INCLUDING THE USE OF SCRAP) (tonnes) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Europe Turkey 251.1 184.9 219.7 183.2 80.0 73.0 77.0 73.8 87.1 114.8 279.0 224.4 215.3 172.6 123.3 116.0 93.8 86.2 82.6 86.2 Russia 44.4 47.6 58.5 53.2 34.9 39.4 45.1 49.2 51.9 49.8 Switzerland 32.2 35.8 36.0 35.0 20.1 21.1 29.4 31.1 30.1 28.7 Germany 21.3 19.9 19.9 19.0 14.8 15.1 15.4 14.7 14.7 14.7 United Kingdom 23.8 19.6 12.2 10.0 9.2 8.2 6.9 6.7 7.3 8.9 France 15.3 13.4 13.0 12.0 10.1 10.2 9.2 7.6 6.5 6.3 Spain 25.6 22.4 21.8 17.6 12.3 7.4 6.2 5.4 4.9 4.6 Greece 8.2 7.4 8.1 7.0 5.8 5.8 4.1 3.7 3.5 3.9 Poland 3.9 3.9 5.1 5.4 3.7 2.6 2.3 2.0 1.8 2.1 Portugal 7.1 5.3 4.5 3.3 2.8 2.2 1.6 1.3 1.3 1.5 Serbia 1.3 1.2 1.3 1.2 1.0 0.9 0.8 0.7 0.8 0.8 Italy Other Countries Total Europe 17.1 15.2 14.4 13.2 10.3 9.7 9.1 8.5 8.6 9.1 730.3 601.0 629.7 532.7 328.3 311.6 300.9 290.9 301.1 331.4 North America United States Canada Mexico Total North America 130.0 108.0 94.5 77.0 63.0 66.0 60.3 53.7 61.4 63.8 16.2 13.3 12.8 12.1 9.8 9.3 8.7 8.2 8.7 9.3 32.2 25.9 22.7 18.9 17.3 14.4 11.5 10.6 5.1 6.3 178.4 147.2 130.0 108.0 90.1 89.7 80.5 72.5 75.2 79.3 South America Brazil 21.7 17.5 18.6 19.2 17.7 22.6 19.4 19.3 21.6 25.1 Chile 4.3 3.9 3.6 3.2 2.8 2.9 2.2 2.2 2.4 2.5 Dominican Republic 6.1 4.8 4.5 4.3 2.8 2.5 1.9 1.8 1.2 1.3 Colombia 2.3 1.9 1.6 1.4 1.2 1.1 1.2 1.1 1.1 1.2 FABRICATION DEMAND Costa Rica 1.8 1.7 1.3 1.3 1.1 1.2 1.3 1.3 1.0 1.1 Other Countries 15.6 13.8 12.0 9.5 6.5 5.9 4.4 4.2 4.2 4.7 Total South America 51.8 43.6 41.6 38.8 32.1 36.1 30.3 29.8 31.5 35.9 Asia India 634.0 550.9 594.7 623.2 503.4 685.0 667.0 618.2 607.4 690.0 China 239.0 244.8 297.1 329.6 363.6 444.3 547.4 598.8 958.0 641.4 86.0 64.3 62.7 60.8 45.6 38.4 38.8 43.5 51.0 43.9 Indonesia Malaysia 74.1 58.0 61.0 56.2 45.0 43.7 37.1 34.7 44.6 40.7 124.6 89.6 99.6 85.0 53.5 46.6 36.8 32.5 41.4 37.3 UAE 53.2 45.4 48.1 44.6 34.0 31.0 26.3 24.7 34.4 33.1 Iran 36.5 32.2 36.2 35.7 30.0 29.9 27.8 27.7 31.3 24.0 Pakistan 64.2 53.9 50.4 43.8 29.7 26.1 22.1 20.6 24.6 20.9 Thailand 66.0 50.2 44.8 37.5 22.7 19.3 16.0 14.3 20.9 17.2 11.2 9.9 10.9 10.2 7.9 8.9 9.7 10.4 15.0 16.6 15.9 Saudi Arabia Singapore Jordan 6.9 7.9 8.9 9.9 10.9 11.9 12.9 13.9 14.9 Japan 22.3 21.1 19.0 17.5 14.4 14.3 12.9 13.3 14.5 13.3 South Korea 44.5 36.4 36.1 30.3 23.4 20.3 16.7 13.9 12.9 12.9 Vietnam 28.3 22.6 21.6 19.6 14.7 13.5 12.4 10.7 11.4 12.4 Hong Kong 11.5 11.6 11.8 12.2 11.6 12.2 12.8 11.4 11.3 10.9 Kazakhstan 9.1 10.0 10.6 9.6 7.6 9.2 10.2 9.7 9.9 10.1 Uzbekistan 9.1 10.0 10.6 9.6 7.6 9.2 10.2 9.7 9.9 10.1 Kuwait 12.3 9.7 8.9 9.5 7.4 6.6 6.2 5.6 6.3 7.0 Israel 11.3 9.3 8.4 8.1 6.6 5.7 4.9 4.5 5.3 6.5 Bahrain 11.4 9.6 9.9 8.7 6.5 5.7 5.1 4.6 5.8 5.6 Iraq 4.2 4.6 5.3 4.6 3.8 3.7 3.8 3.9 5.0 4.9 Taiwan 16.1 12.3 10.3 9.1 5.8 5.3 4.6 4.6 4.9 4.5 Lebanon 7.6 5.4 5.5 4.8 3.4 2.6 2.9 3.7 4.6 4.2 7.7 6.8 6.0 4.5 4.1 3.5 3.2 3.8 3.6 Oman 76 7.1 GFMS GOLD SURVEY 2015 CARAT JEWELLERY (INCLUDING THE USE OF SCRAP) (tonnes) Sri Lanka Nepal 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 6.2 5.1 5.2 4.5 3.8 3.7 3.2 3.1 3.5 3.5 6.9 5.85.34.5 3.53.5 3.3 3.5 3.9 3.0 Bangladesh 6.7 6.0 6.5 5.8 4.6 4.2 3.8 3.7 4.3 2.7 Myanmar 4.3 4.0 4.0 3.5 3.0 2.6 2.3 2.3 2.7 2.4 Syria 17.0 15.4 17.1 15.0 11.4 11.1 7.7 4.8 3.7 2.4 Armenia 0.4 0.9 5.1 5.6 3.1 2.5 1.9 1.9 2.0 2.0 Qatar 3.7 3.1 3.2 2.7 Other Countries 8.6 4.2 3.0 1.5 0.5 2.1 -0.8 1.9 -3.3 1.6 -5.1 1.7 -4.6 2.1 -3.9 1.9 Total Asia 1,644.8 1,420.9 1,528.6 1,529.1 1,294.7 1,525.7 1,568.6 1,553.9 1,966.2 1,700.6 Africa Egypt 70.8 50.3 56.5 62.4 44.0 42.1 28.7 37.5 40.7 40.8 Morocco 13.8 10.6 10.3 9.5 7.6 7.0 6.8 6.6 6.5 6.8 8.1 7.5 7.0 7.4 5.1 4.5 3.7 3.5 3.3 3.4 5.0 4.9 5.2 4.8 3.9 3.5 2.4 2.3 2.5 2.7 Algeria 3.9 3.0 3.4 3.1 2.5 2.4 2.1 2.1 2.3 2.3 Tunisia 2.2 1.81.91.81.51.51.61.61.6 1.6 South Africa Libya Other Countries Total Africa 7.7 6.8 7.1 6.7 5.9 5.5 5.4 5.2 5.4 5.6 111.4 84.9 91.4 95.5 70.5 66.5 50.7 58.5 62.1 63.1 Oceania Australia 5.0 4.5 4.4 4.0 3.2 3.2 2.9 2.8 2.9 5.0 4.5 4.4 4.0 3.2 3.2 2.9 2.8 2.9 2.7 2,721.8 2,302.2 2,425.7 2,308.1 1,819.0 2,032.7 2,033.9 2,008.4 2,439.0 2,213.0 Total Oceania World Total 2.7 ...of which:- East Asia* 611.9 Indian Sub-Continent*718.0 Middle East* CIS* 542.7 586.4 593.2 563.0 627.9 715.1 621.7 662.0 681.8 544.9 722.6 699.4 762.1 1151.9 649.1 643.6 820.6 720.1 618.2 470.8 530.1 474.9 292.6269.6 237.6 232.7 276.7 293.3 63.0 68.584.8 78.0 53.160.2 67.4 70.4 73.7 71.9 Source: GFMS, Thomson Reuters *: The key regional bullion markets Jewellery imports last year were a critical source for the domestic market. Imports from the UAE in the 22-carat category were impressive during the early part of the year but it dissipated as premia collapsed. The deliveries on this arbitrage were highest to Mumbai followed by Chennai and Ahmedabad, and were imported from the UAE, and Singapore. This has again re-surfaced, but this time from Indonesia and also includes 24-carat jewellery. Helped by the Free Trade Agreement that Indonesia has with its Asian counterparts, whereby India can import jewellery at a concessional customs duty of 1% as against 15% applicable with other countries, it is now one of the most profitable arbitrage routes. Our estimate is about one tonne of equivalent jewellery was imported during September to December 2014. This trade has only grown over time and has already crossed one tonne in the first quarter of 2015. This is largely delivered to Chennai, Hyderabad and Kolkata. Another category that has found immense interest is the 18-, 14- and 9-carat jewellery; however unlike 22- and 24-carat, which were largely being re-melted and resold in bar form to the local market, this was for genuine consumption. That said, the rise in such imports again was due to a shortage of gold and came largely from Hong Kong, Italy and Thailand. The types of products were mainly gold mountings, findings, plain chain and also diamond studded jewellery. 77 FABRICATION DEMAND Amidst these negative scenarios consumption still clocked growth of 8% last year, rising to 662 tonnes, the highest on record. At such volumes India’s market share to global demand was over 30%, which was a return to levels seen in 2011. Other than the advance purchases that occurred as a result of the gold savings scheme, the decline in prices during the third and fourth quarters led to pent-up demand. The quarterly price average in the third quarter was down by 5% compared to the corresponding period in 2013; similarly, the fourth quarter price was down by 13% on a year-on-year basis. The decline in prices during the fourth quarter to the lowest average since the third quarter of 2011 was an important trigger, both for consumers and for retailers to replenish at the optimum level. GFMS GOLD SURVEY 2015 RMB 358.6 bn ($57.8 bn). The majority of this material is GOLD LEASING IN CHINA INFLATES IMPORTS AND SGE TURNOVER understood to be gold and if we assume 90% of precious metals holdings and a gold price of $1,200/oz this would equate to close to 1,350 tonnes of material. China’s net gold imports from Hong Kong, combined with our estimates for imports into Shanghai and Beijing, reached Our sources indicate that smaller Chinese banks are 1,136 tonnes in 2014, 24% lower than in 2013. This is higher increasingly entering into this sector. The interest rate for than our estimates for consumption at 895 tonnes, itself down borrowing physical gold is usually around 4%-5% per annum, 38% year-on-year, and different again from SGE delivery which is much more than for monetary loans. As liquidity volumes, which fell by only 4% in 2014 to 2,102 tonnes. The tightened last year many corporations, particularly those in the different measures capture different aspects of demand and property development sector, scrambled for funds. As a result we believe it is incorrect to equate SGE delivery volumes several banks shifted some focus away from the traditional directly with demand from Chinese consumers. cash loan transactions towards lending physical gold, as this would not affect the quality of their loan books and the From extensive field research in China is it abundantly clear borrowing rate is of course more attractive to the client. that Chinese demand for gold at the retail level, for bars, coins and jewellery fell by more than 4% in 2014. Nor were these Moreover, several gold fabricators are also increasingly acting numbers inflated by growth in pipeline stock that had helped as credit providers, whereby they borrow gold from banks, and to boost demand in 2013, indeed, for most of 2014 China then lend the metal to companies in other industries, to pocket was dealing with a stock overhang. The situation regarding the difference in the interest rates. Field research findings demand was further exacerbated by the government’s would suggest these funds are finding their way to higher increased focus on corruption and the scrutiny of the so-called risk projects, such as property development, where access gifting segment. The softer economy and a fall in sentiment, to traditional funding is limited in the current climate. This according to our sources, has seen jewellery fabrication for the practice is common in India and the return on this could be local industry decline further, by between 15% and 20% year- close to low double-digits and above. on-year, for the first two months of 2015. FABRICATION DEMAND Coupled with gold’s increased role in leasing, and although The higher levels of imports, and SGE deliveries, are boosted weaker than in 2013, was the round tripping flows between by a number of factors, but most notably by gold’s use as an Hong Kong and the Chinese mainland, which also inflates the asset class and the requirement for commercial banks to hold SGE turnover and withdrawal figure. While the SGE data is a physical gold to support investment products. China began very good sign of the health of China’s gold market, it blurs the the 21st century with very low gold holdings in comparison to lines between demand for gold and the use of gold in financing countries with developed financial markets or a cultural affinity and the movement of above-ground stocks; as such we do not toward gold, of which China now has both. An indication of believe that it is comparable to annual supply to a market. the size of Chinese commercial banks holdings can be seen by the value of total precious metals holdings as reported by just China’s four largest banks, which as of December 2014 totalled Exports also played a role in the increase in fabrication volumes in 2014, thanks to linking imports to export volumes under the then 80:20 rule. Though, importantly, a large part of the exports were sent on arrival for re-melting in the destination country, while others working in the true spirit of law, expanded their presence in foreign markets like the UAE, Singapore, and Malaysia. Pakistan’s jewellery fabrication is estimated to have declined by 15% in 2014 to 21 tonnes. This was due to a supply shortfall resulting from an import ban in the first three months of the year followed by volume restrictions placed on every importer. These stipulated that a maximum amount of gold imported under any 78 transaction should not exceed 10kg. Also checks were put in place that stopped unofficial exports of jewellery to India as the new rule framed by the Economic Coordination Committee indicated that it would cancel the import authorisation if exporters failed to honour export commitments. In addition, the processes of exports were brought under more scrutiny, which led to a reduction in fake exports. Finally, Pakistanis employed in GCC regions are increasingly willing to purchase gold in the country they are working in than at home, which is also playing a role in driving down domestic consumption. GFMS GOLD SURVEY 2015 EAST ASIAN TOTAL DEMAND* 700 300 East Asian GDP** 600 500 Tonnes 300 GDP (US$bn) 200 400 100 200 100 0 Q1-10 Q1-11 Q1-12 Source: GFMS, Thomson Reuters 0 Q1-13 Q1-14 *The sum of total fabrication (including scrap) and physical bar investment **Weighted average: Indonesia, South Korea, Thailand EAST ASIA Looking at intra-year developments, following a robust 2013, the momentum was carried forward to the start of 2014, with jewellery fabrication seeing an 11.5% yearon-year increase for the first quarter. The increase was mostly stimulated by the Chinese New Year sales, but the buying pattern changed as consumers favoured smaller gold pieces. Consumers also stocked up jewellery pieces, as in Chinese culture, the Year of the Horse was an auspicious year in which to get married. The end of the Chinese New Year holiday season saw a swift cooling in demand, however, and this was represented by a decline in fabrication fees. The softness extended into the second quarter, and the first quarter actually marked the best quarter for the year. The local gold price, quoted on the Shanghai Gold Exchange (SGE), traded at an average of a 0.5% premium compared to the international benchmark, which also marked the highest quarterly premium in 2014. ——Jewellery fabrication in East Asia last year gave up a significant proportion of the 2013 gains, retreating 29% year-on-year to an estimated 821 tonnes, as weaker consumer sentiment drove down investment related purchases. ——Chinese jewellery fabrication saw a remarkable reversal from the record levels of 2013, retreating 33% iast year to 641 tonnes. Despite the material fall, 2014 represented the second highest level ever recorded in China. Despite a weaker gold price in 2014, poorer demand was widely expected throughout the industry, as no one in the trade would expect 2014 to be a repeat of 2013. The further slowdown of the Chinese economy, which saw sentiment weaken, along with forward-consumption of gold in 2013 that still needed more time for consumers to digest, both contributed to weaker demand. Jewellery fabrication, to give a sense of perspective, was still up by 7.1% against 2012. The third quarter also remained lacklustre, and despite a slight improvement compared to the second quarter, total jewellery offtake still retreated by 51% year-onyear, compared with exceptionally strong third-quarter sales in 2013. Poor market sentiment sparked a price war among fabricators, with markups slashed to levels not seen since 2011. Unfortunately for them, production costs, such as labour costs and rental costs, were still on an uptrend. Based on this, industry insiders generally believed that there should not be much further downside for fabrication fees, even if demand continues to falter. Jewellery fabrication in the last quarter of 2014 remained weak and despite a better year-on-year performance during the October National Day holiday, demand still retreated by 23% on an annual basis. Market sentiment 79 FABRICATION DEMAND After the extraordinary demand in jewellery seen in 2013, China’s jewellery fabrication fell back to 641 tonnes, equivalent to a 33% year-on-year decline in 2014. It is worth highlighting that our fabrication number in 2013 has undergone a major upward revision since the previous GFMS Gold Survey was published. This is due to new information gathered during extensive field research this year, which has necessitated a thorough review of the previous estimate. Specifically, feedback from the local jewellery trade indicated that our estimates for domestic consumption may have been overly conservative, as many independent and small-scale jewellery fabricators entered the market in 2013, making it more difficult to gather an accurate estimate for the period. Traditionally, the second quarter is usually a weak period of jewellery sales across China, and 2014 returned to normal after a strong second quarter in 2013, when the acute gold price drop stimulated bargain hunters rushing into the market. Although there was some signs of life in the market during the Labour Holiday in May, the rest of the second quarter remained quiet and weak. Compared to the already high base in 2013, the decline in the second quarter of 2014 was dramatic, registering a 54% year-on-year drop. Fabrication fees continued their downward movement during the second quarter, and more than 100 small-scale fabricators in Shenzhen were put out of business by the end of first half. The second quarter was the weakest of 2014. The local SGE gold price was trading at an average of 0.1% premium, and was accordingly the lowest premium recorded out of the four quarters. GFMS GOLD SURVEY 2015 CARAT JEWELLERY FABRICATION (EXCLUDING THE USE OF SCRAP) (tonnes) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Europe Turkey 197.9 117.4 164.7 100.2 24.8 18.5 29.0 30.8 51.4 88.5 Italy 232.3 170.9 158.2 111.6 90.3 70.0 49.8 46.2 58.6 66.2 Russia 36.0 38.8 49.0 43.2 21.2 27.4 34.6 38.2 43.9 41.3 Switzerland 32.2 35.8 36.0 35.0 20.1 21.1 29.4 31.1 30.1 28.7 Germany 16.3 13.9 14.2 13.3 9.8 10.0 10.4 9.7 11.6 12.7 United Kingdom 21.2 14.1 7.1 4.4 4.8 3.4 2.4 1.7 4.3 6.8 France 12.8 11.4 11.0 10.0 8.1 7.7 6.2 4.6 4.5 5.0 Greece 6.9 5.8 6.7 5.1 2.8 2.5 0.8 0.6 2.1 2.8 Spain 21.9 16.3 16.3 11.1 3.7 0.5 0.5 0.2 1.9 2.0 Poland 1.9 1.6 2.5 2.8 1.5 0.2 0.1 0.5 0.7 1.3 Portugal 6.6 4.4 3.7 2.5 1.5 0.6 0.3 0.4 0.8 0.9 Other Countries 11.3 7.3 7.6 7.0 4.1 2.4 1.3 0.7 4.2 6.0 597.3 437.7 476.9 346.0 192.7 164.3 164.7 164.6 214.0 262.1 Total Europe North America United States 106.6 84.0 72.0 57.0 41.0 39.5 34.4 27.3 33.4 Canada 12.2 7.8 8.3 7.6 5.3 4.6 4.2 4.6 5.3 6.3 Mexico 25.0 19.4 14.1 7.8 4.5 1.3 0.4 2.0 4.7 4.8 143.8 111.2 94.4 72.4 50.8 45.4 39.0 33.9 43.4 46.4 Total North America 35.3 South America Brazil 17.4 12.2 13.0 12.6 8.1 9.3 6.7 6.5 6.4 Chile 3.8 3.3 2.8 2.3 2.1 2.1 1.3 1.3 1.6 1.7 15.6 16.6 17.6 18.6 19.6 20.6 21.6 22.6 23.6 24.6 36.8 26.8 23.6 20.2 13.0 13.3 10.0 9.7 10.4 20.8 Other Countries Total South America 16.2 FABRICATION DEMAND Asia India 540.0 470.9 521.7 533.7 387.9 604.0 608.5 505.2 506.6 615.8 China 198.0 201.6 257.0 264.9 262.7 334.6 438.4 468.1 818.1 480.8 35.6 Malaysia 68.3 49.4 53.5 48.6 36.0 35.2 29.9 28.3 39.0 Indonesia 34.5 26.0 25.8 29.5 16.8 15.6 16.5 26.0 38.3 31.8 Saudi Arabia 47.6 30.0 55.2 38.8 22.4 21.1 14.5 12.5 27.6 24.6 UAE 39.3 33.0 36.8 32.0 19.3 9.4 11.2 13.0 24.6 24.0 8.7 6.6 6.8 5.8 3.4 5.0 5.5 6.9 12.8 14.5 Singapore Iran 24.0 14.0 17.9 15.3 10.7 12.1 10.3 11.7 19.0 12.8 Thailand 54.5 36.7 28.8 21.0 6.1 6.1 3.5 4.0 14.6 11.6 Kazakhstan 7.8 8.7 9.4 8.3 5.9 7.6 8.7 8.1 8.5 8.8 Uzbekistan 7.8 8.7 9.4 8.3 5.9 7.6 8.7 8.1 8.5 8.8 Vietnam 20.5 14.3 12.6 11.1 3.3 3.3 5.5 4.8 6.4 7.5 South Korea 33.8 24.2 24.3 18.3 7.6 7.3 5.0 4.7 7.0 7.5 Pakistan 36.7 24.5 23.6 14.8 3.9 6.3 6.0 3.8 11.7 6.9 Japan 11.8 9.7 6.4 4.2 3.1 0.7 2.4 6.2 6.6 Jordan 5.4 2.6 2.9 3.0 4.7 4.5 3.8 3.2 4.5 6.2 Hong Kong 5.6 5.3 5.2 5.2 4.4 5.5 7.0 6.1 6.5 5.7 5.3 - Kuwait 4.2 2.7 3.4 4.1 2.9 3.0 3.1 3.1 4.5 Bahrain 10.0 6.4 6.7 5.5 3.0 2.8 2.5 2.5 4.2 4.1 Israel 6.1 3.9 3.4 2.2 1.7 1.0 0.9 1.0 2.6 3.6 Taiwan 6.7 1.8 2.7 2.9 1.1 1.2 1.5 2.7 3.6 3.5 Iraq 0.9 0.3 0.7 0.2 0.2 0.7 1.3 3.2 3.2 Oman 6.2 3.8 4.6 2.8 1.8 1.6 1.5 1.4 2.4 2.4 Myanmar - 3.1 2.8 2.9 2.4 1.8 1.6 1.4 1.5 2.1 1.9 Nepal 5.8 4.3 3.7 2.8 1.6 1.7 1.7 2.2 2.8 1.8 Bangladesh 4.6 3.5 3.9 3.1 1.6 1.5 1.2 1.0 2.0 0.9 Other Countries Total Asia 80 29.4 21.2 27.5 22.8 14.1 13.1 9.4 8.6 11.2 11.4 1,221.2 1,016.6 1,156.6 1,111.3 833.4 1,113.3 1,206.8 1,141.9 1,598.1 1,347.3 GFMS GOLD SURVEY 2015 CARAT JEWELLERY FABRICATION (EXCLUDING THE USE OF SCRAP) (tonnes) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Africa Egypt 12.1 7.8 18.0 28.4 6.5 15.1 3.9 5.1 17.2 19.6 South Africa 7.0 6.2 5.8 6.0 3.8 3.2 2.1 2.0 2.2 2.4 Other Countries 20.9 14.7 14.6 11.4 5.8 6.1 4.8 4.7 6.6 7.9 Total Africa 40.0 28.7 38.4 45.8 16.1 24.4 10.8 11.8 26.0 29.9 Oceania Australia 4.3 3.8 3.7 3.3 2.2 1.7 0.6 0.4 1.2 1.1 Total Oceania 4.3 3.8 3.7 3.3 2.2 1.7 0.6 0.4 1.2 1.1 2,043.4 1,624.8 1,793.5 1,599.0 1,108.2 1,362.3 1,432.0 1,362.1 1,893.0 1,748.4 World Total ...of which:- Indian Sub-Continent* 591.6 505.9 555.2 555.7 396.0 614.8 618.3 513.0 524.6 627.5 East Asia* 451.8 383.1 430.4 418.0 349.0 418.8 516.2 557.4 957.4 609.8 Middle East* 372.1 234.8 330.1 244.5 105.2 96.1 86.5 89.9 166.2 199.1 51.8 56.8 72.5 64.9 35.7 44.6 53.3 55.7 62.4 60.4 CIS* Source: GFMS, Thomson Reuters *The key regional bullion markets 24-carat segment. This trend began to reverse in 2014, as some fabricators saw the benefit in switching from the tottering 24-carat sector to the more vibrant 18-carat segment. However, this transaction takes time as it needs investment in the appropriate machinery. Thus, although the number of K-gold fabricators increased in 2014, the number of players was still relatively low in comparison with other major producing countries. Unlike the downward trend experienced in the pure gold fabricated pieces, fees for fabricating 18-carat material were able to maintain high levels due to lax competition. Turning to trends within the gold jewellery sector, although the 24-carat (pure gold or “Chuk Kam”) segment continued to dominate the market, 18-carat (K-gold) was growing fast and sales certainly more than doubled in 2014. In 2013 when bargain hunters were rushing for pure gold pieces with simple designs, many jewellery manufacturers chose to reallocate some of their capacity from PGMs and 18-carat gold jewellery to the Demand for 18-carat gold jewellery was so robust that sales more than doubled in 2014, despite the huge drop in demand for pure gold jewellery. However, the impressive growth was compared to a low base in 2013, when demand for pure gold jewellery sky-rocketed. We estimate total tonnage involved in the K-gold sector reached close to 50 tonnes or 8% of the whole gold jewellery industry. The growth in demand for K-gold can CHINESE AND INDIAN JEWELLERY CONSUMPTION CHINESE FABRICATION & HONG KONG BULLION IMPORTS 1000 2500 China 400 Bullion Imports Fabrication India 800 2000 600 1500 350 Gold Price Tonnes 400 250 1000 RMB/g Tonnes 300 200 200 500 0 150 0 2005 2007 Source: GFMS, Thomson Reuters 2009 2011 2013 100 2005 2007 2009 2011 2013 Source: GFMS, Thomson Reuters 81 FABRICATION DEMAND cooled off again after the National Day holiday, and as industry participants were all cautious towards the outlook for the market, the 2014 year-end restocking ahead of the 2015 Spring Festival did not start until late December, which reveals a lot about market sentiment as normally year-end restocking takes place during midDecember. The local gold price traded at an average premium of 0.2% over the final quarter of the year. Although the slide in fabrication fees halted during the quarter, further industry consolidation is still expected in 2015 and beyond. GFMS GOLD SURVEY 2015 CONSUMPTION AND PER CAPITA DEMAND (EXCLUDING BANK ACTIVITY) banks to back paper products (a legal requirement in China) and some double counting of gold that was involved in roundtripping to Hong Kong. Demand from India was also impacted The tables below outline demand by country and consumption for much of the year by import restrictions that were gradually per capita GDP including the following: jewellery consumption; reduced. electronics; medical and dental; other industrial; coin fabrication and bar hoarding. The data does not include any In terms of per-capita consumption, city states, entrepôts and purchases, holdings or transfers by central or commercial markets that serve a wider area naturally dominate the list. banks. The UAE, via Dubai, and Kuwait both serve not just domestic markets but also the wider Gulf region and often see volumes It should also be noted that opaque institutional investment inflated due to hand-carry trade to India. This was especially or disinvestment is not tracked in these figures and that evident in the first half of 2014 when Indian premia were at this particularly under-reports US and European tonnage elevated levels. movements and their impact upon the gold price. Meanwhile, China and India’s appetites for holding physical bullion, rather Hong Kong and Singapore have both fallen down the list than allocations in a London bank, help to inflate the figures. this year, a reflection of the lower buying levels in the Asian It is also indicative of smaller scale investors looking to enter bar and jewellery markets. Indeed, average per capita the market; often individuals or families looking to store value consumption saw a sharp fall globally over the course of 2014, outside the financial system. falling from 0.66 grammes per person to 0.51 grammes per person. FABRICATION DEMAND Looking at demand by country China tops the list for the second year running; however, the gap to India has closed Outside the city states the remainder of the top 20 are considerably, falling from almost 450 tonnes in 2013 to just bolstered by a number of factors including: volatile local 43 tonnes in 2014. Chinese demand, as defined above, currencies; fear of inflation; cultural reasons such as wedding totalled 895 tonnes compared to India at 852 tonnes and the gifting; coin fabrication; political instability and higher tax USA in a distant third at 242 tonnes. Chinese imports of gold, rates in neighbouring countries. Many of these factors will and deliveries from the Shanghai Gold Exchange (SGE) were also help to underpin gold’s role as a safe-haven investment also considerably higher than the consumption number owing even as the risk of systemic instability in financial markets to growth in gold leasing, increased holdings by commercial subsides. CONSUMPTION (EXCLUDING BANK ACTIVITY) CONSUMPTION PER CAPITA (SELECT COUNTRIES) Country 2014 Demand % of Global Total Country Rank Grammes/Capita 2014 China 89524.2% UAE 18.54 India 85223.1% Kuwait 28.09 United States 242 Hong Kong 3 6.5% 6.14 Germany 1293.5% Singapore 44.94 Japan 1193.2% Qatar 52.43 Turkey 1193.2% Saudi Arabia 6 2.25 Thailand 932.5% Belgium 71.97 Russia 932.5% Canada Iran 792.1% Germany 91.60 UAE 711.9% Turkey 81.64 101.55 Vietnam 691.9% Thailand 111.40 Saudi Arabia Taiwan 67 1.8% 121.22 Indonesia581.6% Australia 131.21 Egypt 581.6% South Korea 14 Canada 581.6% Iran 151.02 South Korea 55 1.5% Japan 160.94 Hong Kong 44 1.2% Vietnam 170.77 United Kingdom 41 1.1% United States 18 Brazil 351.0% India 190.69 Pakistan 330.9% Egypt 200.68 Source: GFMS, Thomson Reuters Source: GFMS, Thomson Reuters 82 1.10 0.76 GFMS GOLD SURVEY 2015 Another reason why 18-carat gold jewellery was so popular in 2014, was because industry participants amended their selling strategies. Margins were minimal selling pure gold jewellery when demand was soft, so sellers allocated more shelf display to 18-carat gold pieces, which commanded better margins. This trend was particularly noticeable in the second and third tier cities. There are also an increasing number of fabricators looking to introduce 9-carat gold pieces to the market in 2015. Gold jewellery continued to be dominant in the local jewellery industry, but unlike some emerging markets, pure gold pieces only commanded a small market share in South Korea, and sales might only constitute around 5% of total gold jewellery sales last year. The 18-carat and 14-carat segments were the mainstream in the country, and combined should have held roughly 90% of jewellery market share in 2014. In the case of wedding rings, Koreans tend to use gold or white gold, as platinum is still a relatively unpopular metal in the local jewellery segment. INDONESIAN JEWELLERY CONSUMPTION 80 12 Exchange Rate 10 60 8 40 6 4 20 2 0 0 2005 2007 2009 2011 2013 Source: GFMS, Thomson Reuters 83 FABRICATION DEMAND Looking at Hong Kong, jewellery consumption declined by 28% to 39 tonnes in 2014. Although the number of foreign visitors to Hong Kong increased by 12% last year, average spending per visitor actually decreased, especially spending on luxury goods and jewellery items. Despite the several huge protests in Hong Kong and rising politically instability, there was relatively little impact on travellers or their spending last year. Unfortunately, with further cultural clashes between the South Korean jewellery fabrication remained flat in 2014, at 13 tonnes, while the gold price in Korean won rose by a mere 2.7% for the year. We consider this as a relative success, as the state of the Korean economy was quite fragile, especially after the sinking of the MV Sewol in April 2014, which discouraged discretionary consumer spending as sentiment weakened. Indeed, unlike most of the other markets in the region, gold jewellery demand in Korea is more sensitive to the local economic environment than simply to movements in the gold price, as shown in 2013 when gold purchasing shot higher in China, India, the Middle East and other emerging markets, jewellery fabrication in South Korean actually decreased. The local jewellery sector continues to shrink, even though the pace of that decline has fallen, with the number of participants in the market, from fabricators to wholesalers to retailers, down a total of 20% in the last ten years. Rupiah/US$ exchange rate (thousands) Looking at this year, our feedback from research contacts points to a much softer demand picture in the first two months of 2015. Local gold premia reflected this position, as the average Chinese premium was at $11.13 per ounce for the first two months of 2014, compared to just $4.72 per ounce covering the same period of 2015. The softer demand could be attributed to the increasing numbers of Chinese residents travelling overseas during the Spring Festival holiday, a weaker local economy that negatively impacted spending, and more importantly, a lack of belief that gold prices could be sustained at high levels when the gold price was testing the $1,300 level. On the other hand, with the Chinese government introducing all sorts of stimulus boosting the local economy, huge amounts of money flowed into the local stock market, and the Chinese stock market was the best global performer in 2014, with this momentum swinging into 2015. Although in the long run, any decent return from the local stock market should benefit gold demand, in the short run they are competing against each other for capital. Overall, barring any significant downfall in the gold price, we expect another annual decline for total gold jewellery demand in 2015, even though demand for K-gold will continue to enjoy another year of robust growth. locals and the Mainland Chinese escalating, statistics showed that Chinese visitors dropped dramatically in February and March this year. As a large portion of the local jewellery consumption depends on Chinese tourists, we are not optimistic over Hong Kong’s consumption figure in 2015. Tonnes largely be attributed to the younger middle class; this consumer segment, assisted by increasing income levels and attracted by fashionable designs, is looking to buy gold primarily for its adornment qualities rather than as a simple investment option. GFMS GOLD SURVEY 2015 Net gold jewellery imports rose 14%, showing modest growth in consumption demand. Jewellery shipments to the United States, Switzerland and Singapore were notably stronger, while jewellery imports from Italy more than doubled. A feature of the Indonesian gold market last year was the lack of price response. Even when prices dipped below 450,000 rupiah per gramme in the fourth quarter (the lowest level since August 2013) there was only a muted response from consumers compared to 2013 when any price retracement saw consumers rush in to take advantage of the perceived discounted price. Demand in the rural regions was marginally stronger than in the major cities, with economic growth in the commodities-focused provinces of Kalimantan and THAI JEWELLERY FABRICATION 80 Fabrication for the Domestic Market Exports to the United States Other Exports 60 Tonnes FABRICATION DEMAND Indonesia’s jewellery fabrication industry is believed to have consumed an estimated 43.9 tonnes of fine gold in 2014, a 14% year-on-year fall. Field research during the year revealed several factors that pushed offtake lower across the archipelago last year. The weakness in the domestic currency saw gold in local terms increase 3% year-on-year, which limited bargain hunting opportunities. Similarly, a range bound trading pattern for much of the year kept investors on the sidelines, with expectation of weaker prices causing many prepared to wait before replenishing gold stocks. Indeed, with gold viewed as having limited upside potential many shifted their focus to higher yielding assets such as the equities markets. Adding further pressure to retail sales was the softer Indonesian economy, which expanded at its slowest pace in five years in 2014, weighed by a tight monetary stance, a weak global economy, and a prolonged parliamentary and presidential election campaign which contributed to further uncertainty. The Indonesian economy grew by 5.0% in 2014, slowing from 5.6% in 2013. 40 20 0 2005 2007 Source: GFMS, Thomson Reuters 84 2009 2011 2013 Sumatra outperforming the urban centres where a soft economy dampened consumer sentiment and delivered a decline in discretionary spending. After the resurgence of higher purity styles in 2013 (driven chiefly by investment motives), the market returned to trend last year with demand for low carat items (9- and 10-carat) returning to dominate market share. Aside from the domestic slow down, demand for jewellery export orders also declined significantly last year, following an encouraging start in the first quarter when wholesale orders from the Middle East (chiefly Dubai) and Hong Kong (for the Chinese market) was robust. Demand slowed thereafter and was at best spasmodic, as diminishing expectation of a return to higher prices suppressed demand for the investment grade plain jewellery that Indonesia typically produces for exports. Last year, jewellery fabrication in Thailand was unable to repeat the extraordinary growth of 2013, falling by 18% to an estimated 17.2 tonnes. Despite the fall, offtake last year was still 20% higher than in 2012, which, given the exceptional growth in 2013 (46%), is perhaps a better benchmark for the state of the industry. Like many markets in the region last year there appeared to be a notable shift in sentiment with consumer price expectations shifting. The plain 965 purity gold market (23-carat), which dominates offtake across the country, is predominately investment driven and with prices largely range bound, and weak price expectations, consumers were reluctant to replenish gold assets. In contrast to 2013, a drop in price did not necessarily instigate a rush on demand. On several occasions during the year there was almost no consumer response to price movement. This was no more evident than in the fourth quarter when gold in domestic terms dipped below 19,000 baht per baht bar (the lowest level since June 2013), with the drop providing only a moderate lift in retail activity as consumers waited for gold to fall further. There were a number of factors last year that also contributed to market weakness. The violent protests that have plagued the country for a number of years finally erupted in early 2014, with the army seizing power in May in attempt to end the turmoil. The uncertainty, impacting on consumer spending across the country, also led to a devastating impact on tourist visitors to the region. The military junta struggled to spur Southeast Asia’s second-largest economy as exports remained weak and domestic demand subdued. In 2014, the Thai economy grew only 0.7%, its weakest pace since flood-hit 2011. GFMS GOLD SURVEY 2015 Another underlying feature of the market last year was the migration away from gold as an asset class. Middle class consumers have been shifting their focus to trading domestic equities and even US equities and offshore banking products in search of higher yields. As regards jewellery exports, these also faltered in 2014, concentrated on the US, and to a lesser extent Europe and Hong Kong, as Thai fabricators felt the impact of weaker demand globally for gold jewellery and underperforming economies. Gross exports declined 14% last year, with shipments to the US down 38% and France weaker by almost a third, while deliveries to the UK and Hong Kong both recorded double-digit gains. In the second quarter, demand from export markets started to soften and this led to a sizeable drop in fabrication demand; estimated to have slumped by 25% year-on-year, though it should be noted that demand during this period of 2013 reached a multi-year high. Of particular note was the drop in demand from Dubai, stimulated by the decline in the domestic Indian premium which saw the levels of jewellery shipped (largely via unofficial channels) drop away markedly. Aside from the declining Indian flows, demand across the Asian region generally remained subdued for much of the year as consumer sentiment and price expectation were muted; the lack of wholesale export demand largely affected the Penang-based fabricators. Following the healthy recovery in 2013, Malaysian jewellery fabrication returned to trend, declining by 9% to an estimated 41 tonnes. This marks the seventh annual drop over the last decade and was despite a On the domestic front, demand in the final quarter registered healthy gains, helping to offset what for many was a difficult year. Reports from the retail trade suggested domestic consumption jumped by as much as a third as the period encompassed several important gift giving occasions, which helped lift sales volumes. These included the wedding season for Chinese consumers, the Indian Diwali festival, and a leap month of September in the lunar calendar (which falls mainly in October in the Gregorian calendar), which is considered an auspicious occasion by the Chinese and an important time to JAPANESE JEWELLERY FABRICATION MALAYSIAN JEWELLERY FABRICATION 15 80 Platinum Domestic Exports White Gold Yellow Gold 60 Tonnes Tonnes 10 40 5 20 0 0 2005 2007 2009 Source: Japan Chain Makers Association 2011 2013 2005 2007 2009 2011 2013 Source: GFMS, Thomson Reuters 85 FABRICATION DEMAND Despite a healthy start to the year, Japanese jewellery fabrication is understood to have declined by 8% in 2014 to an estimated 13.3 tonnes. The rise of 3 percentage points in the consumption tax in April generated a healthy rise in demand in the first quarter as consumers rushed in ahead of the tax change to front load purchases. However, demand thereafter faltered as the economy slipped back into recession, impacting on consumer sentiment and discretionary spending. In the final quarter, as the economy was showing the first green shoots of a recovery the industry was dealt another blow with the weaker yen driving gold in domestic terms to over 4,700 yen per gramme; a level not seen since May 2013. This again impacted retail sales as consumers, no longer looking for significantly higher prices, were prepared to wait for a retracement in price. While the overall jewellery market was weaker last year the branded and high-end segment did not lose as much ground, with sales reportedly only marginally weaker. 7% year-on-year fall in the ringgit gold price. Demand was stable in the early months of 2014 as offtake was boosted by healthy export demand (primarily plain chain and destined for Dubai/India) while the domestic market initially remained subdued due to the lack of volatility in the gold price, which left many waiting for a clearer indication of where gold may be tracking. A solid economic footing (Malaysia’s GDP expanded 6% last year) helped to boost retail spending though the drop in price expectation impacted investment driven purchases, mainly influencing demand for 22- and 24-carat items. GFMS GOLD SURVEY 2015 FABRICATION DEMAND Jewellery fabrication in Taiwan reversed 2013’s upward trend and declined 8% to 4.5 tonnes in 2014. The drop, however, was less pronounced than when compared to most Asian countries, such as mainland China which slipped 33% in 2014. The major reason for the better than average performance in Taiwan was the predominance of gold jewellery buying associated with wedding demand. Here demand for gold jewellery is price inelastic compared to other countries in the region where large amounts of gold jewellery are purchased for investment purposes. The number of marriages in Taiwan actually increased by 1.1% in 2014, bringing with it a positive impact on jewellery consumption, while overall gold jewellery demand was offset by a gradual, but continuous trend, to move away from 24-carat jewellery to lower purity material. Following a 7% rise in 2013, Vietnamese jewellery fabrication recorded another increase last year, rising 8% year-on-year, to a three-year high of 12 tonnes. The healthy gain at first glance may indicate a robust retail market; however demand for most jewellery segments was actually weaker in 2014. This outcome was largely a function of softer demand for gemset and low-carat designs being offset by plain 24-carat jewellery (predominately rings), which is increasingly being purchased as a simple investment tool. Access to investment bars is still tightly controlled by the State Bank so consumers wishing to invest in gold have shifted their attention to the jewellery market. The major retailers are now offering encapsulated rings, which have the item weight and purity stamped on the packaging, to cater to this expanding. Moreover, these items are offered at a lower premium than official bars so many investors have migrated to this uncomplicated method of saving, effectively enhancing jewellery fabrication and consumption demand last year. While the Vietnamese economy grew at a stable pace throughout 2014 (GDP rising 6% last year) the growth rate remained well below the trend of between 7% and 8% in the pre-global financial crisis years. During field research visits last year it was the weak “real” economy that traders suggested was dragging down demand and constraining retail spending. Demand for branded items, which generally carry a hallmarked purity stamp, continued to win market share over generic designs, with consumers prepared to pay a premium for the guaranteed purity and more intricate designs. Last year 86 the Vietnamese government stepped into to control how jewellery is sold, stipulating that all items must be accompanied by a purity certification, which, to some degree, where the trade has adopted these measures (mainly in urban areas), has reduced the sale of under-carated jewellery, which had been increasingly accepted as gold prices have risen. EUROPE ——European jewellery fabrication continued to recover in 2014, growing by 10% to an estimated 331 tonnes, the highest since 2008. The recovery was thanks to a strong rebound in Turkey and a return to growth in Italy. Following a decade or so of consecutive losses, Italy’s export-focused gold jewellery market began to recover towards the end of 2013. The recovery continued through to last year, which saw jewellery fabrication offtake rise by 4%, to an estimated 86 tonnes, a level similar to 2012. This was primarily down to buoyant export growth, particularly in the first half of the year, when jewellery demand posted a 7% year-on-year increase, hitting 45 tonnes, the best first-half result since 2011. It should be emphasised, though, that despite a modest recovery, last year’s figure remained well below pre-crisis levels. To put this in perspective, the 2014 figure was as little as 17% of the volumes going through at the beginning of the millennium. Exports to Dubai, Italy’s largest regional market accounting for approximately a quarter of total jewellery exports in weight terms, posted a strong increase in the first quarter; however, a lot of contacts (and this has also been confirmed by the trade statistics) reported a sales plunge in the following quarters on the back of slowing demand from the Middle East. Another EUROPEAN HALLMARKING AND FABRICATION 120 UK* Swiss** 100 Index 2008 = 100 purchase gifts, especially for the elders. Despite the strong finish to the year we believe Malaysia’s domestic consumption volumes retreated by 9% last year. Italy - Domestic Italy - Export 80 60 40 20 2008 2009 2010 2011 2012 2013 2014 Source: GFMS, Thomson Reuters; BAO; Swiss Confederation; ISTAT. *Index based on number of gold items fabricated and imported into the UK. **Index based on hallmarked unit of watches GFMS GOLD SURVEY 2015 sizeable increase was recorded in exports to the United States, where improving economic conditions, along with lower gold prices in US dollar terms, resulted in higher jewellery demand. In addition, sustained euro weakness, which made Italian jewellery a bit more price competitive compared to other major partners, helped to lift shipments to that destination. German jewellery fabrication remained flat year-on-year with some fabricators performing better than others. Demand for gold jewellery from Eastern Europe remained robust as was consumption in the domestic bridal sector, particularly for 18-carat pieces. However, demand for the more standardised rings and chains remained fairly muted compared to 2011-2012 levels with many small jewellery outlets not benefiting from the lower raw material costs. In a similar vein, demand for semi-finished products remained under pressure yearon-year with no detectable trends towards more usage of either yellow, red or white gold pieces. Jewellery fabrication in France continued to decline last year, falling by approximately 3% over 2013 levels. The major trend was the absence of further growth in 9-carat jewellery sales, which had grown at the expense of other Following a period of uninterrupted gains between 2009 and 2013, Russian jewellery fabrication is estimated to have fallen by 4% last year, recording a year-on-year decline for the first time since the 2008/09 economic crisis. While the gold jewellery market performed as ‘normal’ in the first half of 2014, demand started to wane in the latter part of the year, particularly in the last few months. This was to a large extent attributable to worsening economic conditions, battered by falling oil prices, geopolitical tensions, Western sanctions and massive capital flight from the country. The reality of economic downturn and surging inflation saw consumer confidence fall to record lows, hitting retail sales of gold jewellery. In addition, a sharp depreciation of the local currency fuelled panic buying in December ahead of the ITALIAN JEWELLERY FABRICATION ITALIAN OFFICIAL JEWELLERY EXPORTS BY REGION 300 Europe* 250 N. America Tonnes 200 S. America 150 Middle East 100 East Asia 50 Others 0 2005 2007 Source: GFMS, Thomson Reuters 2009 2011 2013 *incl Russia and Turkey 0 5 10 15 Source: GFMS, Thomson Reuters; 20 25 Tonnes 30 35 40 Calculations based on Italian export data.Shows only the direct flow of finished pieces. 87 FABRICATION DEMAND It is also interesting to observe that Europe was another region to enjoy gains, where the majority of key countries, including Switzerland, France, United Kingdom, Germany and Spain, saw a healthy increase in the volume of shipments from Italy. While this could be attributable to gradually improving economic sentiment and the euro weakness, there were also some country-specific factors that could help to explain last year’s growth in Italian exports. For instance, jewellery consumption in Spain appears to have improved last year, while stronger flows to Germany and France could be due to restocking in light of the lower price environment. And last, but not least, a rebound in shipments to Switzerland, which is deemed as a distribution centre for international upmarket brands, tends to confirm that Italy continues to maintain its strong position as a fine and luxury jewellery producer. Meanwhile, domestic jewellery consumption continued to slide last year, on the back of protracted economic and financial difficulties. Field research also continues to indicate that prolonged economic weakness and a decade of rising gold prices have affected consumption habits and tastes of the Italian society, in the sense that more consumers, particularly among the younger generation, give preference to branded accessories and other consumer goods. higher caratage segments in the previous years. This trend was triggered by a continued rising gold price that motivated retailers to switch to cheaper caratage pieces in order to maintain sales. However, increased volatility in the gold price has resulted in a shake out of retailers who find themselves exposed to the gold price but on the other hand too small to hedge against price risks. Plain gold has seen increasing substitution towards diamond, costume and silver jewellery. GFMS GOLD SURVEY 2015 New Year holidays. Consumers rushed to spend their weakening roubles, purchasing everything from vehicles to household appliances, before prices went up. FABRICATION DEMAND A markedly lower rouble saw the local currency gold price soar to record levels towards the end of the year. While this, without a doubt, impacted gold jewellery demand, it is worth stressing that this was not considered as the major driving force behind the decline, for there was little time for an immediate adjustment of retail prices and some retailers were still selling old inventories that were acquired before at lower prices. In terms of various segments, demand for luxury pieces fell sharply, while that for the middle-class jewellery recorded a more gradual decline. Another interesting observation is that the December to January period saw an unusual spike in wedding ring sales. This is related to heightened rouble volatility and price uncertainty, which pushed consumers to bring forward purchases of wedding rings well before the wedding season. Swiss watch hallmarking data show that the number of gold watches hallmarked in 2014 rose by 5% year-onyear. However, we believe that despite this, gold demand from this sector, and hence Swiss jewellery fabrication, as a whole had actually fallen last year, by approximately 5%. This is not due to a shift to lower caratage, with the predominant sector for watch demand continuing to be for 18-carat, but instead it is a continued shift to lighter pieces. This is not a new phenomenon, as it was initially encouraged some years back by the sharply higher price of gold. However, it is interesting to note that rather than reverse as the price has tumbled it continued and indeed in our view accelerated in 2014. Underpinning this change is a combination of fashion trends and, even more importantly, the desire in China to appear less ostentatious, following the government crackdown on corruption. The UK jewellery market was buoyant in 2014 with the total number of gold items hallmarked up 23% yearon-year to just over five million pieces. Indeed it is the first year since 2001 that the number of gold pieces hallmarked has actually increased; having said that, the number hallmarked in that year was some 27 million. As such, although these figures are not a return to the glory days of British jewellery consumption and fabrication, it is most definitely a halt of the more than a decade long decline. The largest section of this is the 9-carat sector, which scored even more impressive results, up 25%. This reflects not only increased consumer confidence, but a shift from sterling silver, which was up only 7%. However it should be noted that many of the pieces, 88 especially 9-carat pieces, are under the one gramme minimum weight for hallmarking so the total figures are likely to be considerably higher. The 18-carat sector was up, but by 13% year-on-year and 22-carat was up 25%. Consequently, we estimate UK jewellery fabrication rose by 23% to just shy of nine tonnes in 2014. Demand for jewellery fabrication in Portugal was up 12% year-on-year to 1.5 tonnes as it formally exited its eurozone bailout; indeed 2014 was the first year of significant growth in that country this century. However to put this in perspective, Portuguese fabricators used over 20 tonnes in the last year of the 20th century. The use of gold in jewellery manufacture in Poland was up 15% year-on-year to 2.1 tonnes, the highest figure since 2011, helped by lower gold prices in the local currency. This pattern of increased fabrication in 2014 has been seen in much of non-eurozone Europe; however, it is unclear how the increase in gold price in many minor European currencies will affect jewellery offtake in 2015. NORTH AMERICA ——An improved economy, lower prices, better manufacturer margins and favourable fashion trends pushed US gold jewellery fabrication demand up 4% in 2014. North American gold jewellery fabrication amounted to 79 tonnes in 2014, a 5.5% increase over the previous year. Retail jewellery demand increased at a faster rate of 8% to total 157 tonnes. The US, Mexican, and Canadian economies expanded by 2.4%, 2.1%, and 2.4%, respectively. These economic growth rates compare to other advanced economies, which grew at a 1.8% rate, and South American countries, which grew at a mere 1.2%. These relatively stronger rates of growth, combined with declining gold jewellery sticker prices at retail stores, boosted discretionary spending on jewellery last year. The United States accounted for 80% of North American gold jewellery fabrication last year. Gold jewellery fabrication increased to 64 tonnes in 2014, up 4% from the previous year. Domestically fabricated jewellery accounted for 49% of retail sales, up from 43% in 2013 and a low of 35% in 2006. The lower gold price improved domestic manufacturer margins. The average manufacturer percentage markup over the price of gold increased 12% last year. US manufacturers also have been increasingly investing in 3D printing technology, helping to generate consumer interest. Marketing of 3D printing technology appeals to consumers interested GFMS GOLD SURVEY 2015 in custom made pieces. Greater interest in wearable technology also has benefitted jewellery demand in the US, although this emerging segment is more silverintensive. US retail jewellery consumption increased 7% to 131 tonnes of fine gold. This faster rate of growth relative to fabrication was driven by a 13% increase in imports and a 40% decline in exports of fine gold jewellery. Imports rose for the second year in succession in 2014, after declining for eight years in a row. The 40% decline in exports was mainly due to increased purchases of manufacturer output from domestic retailers, which diverted output away from export partners. Global jewellery demand also was lower last year, which weighed on exports and fabrication demand growth. Jewellery fabrication demand for gold in Canada increased by 6.5% to total nine tonnes in 2014, against 6% growth in 2013. An improved economy buoyed fabrication last year. According to the Moneris Spending Report, holiday spending on Black Friday increased 5% and spending on the days leading up to Christmas increased 7%. This growth exceeds holiday spending in the US, which rose an average 3%. In the first quarter of the year, jewellery store sales increased 5% yearon-year. Sales fell 3%, however, in the third quarter. Consequently, jewellery retail consumption increased a modest 6% last year. SOUTH AMERICA ——We expect gold demand for jewellery fabrication in South America to decline considerably in 2015 as deteriorating economic conditions dampen demand. Gold jewellery fabrication in Mexico rose to six tonnes in 2014, a 22% increase over the previous year. This doubledigit increase was in part due to a shift from a door-todoor sales model to distribution via jewellery centres and chainstores. Dedicated store fronts tend to hold larger inventories than single door-to-door sales people. Continuing the momentum from 2013, jewellery fabrication in South America grew by 14% to reach an estimated full year total of 36 tonnes. Brazil, the largest gold fabricator in the region, saw demand reach 25 tonnes in 2014, a 16% increase from the previous year. While economic growth has boosted consumers’ purchasing power, the meteoric rise in the gold price in the past ten years has priced gold jewellery beyond the affordability of the masses. As tastes and preferences are still strongly rooted in the appearance of gold, the inability to afford carat jewellery has prompted a substitution trend towards gold plated designs, UNITED STATES FABRICATION UNITED STATES JEWELLERY IMPORTS 160 140 Jewellery Fabrication Dentistry Other Industrial & decorative Official Coins 200 Others East Asia Electronics 120 South America 150 Turkey Tonnes Tonnes 100 80 Italy 100 60 40 50 20 0 0 2005 2007 Source: GFMS, Thomson Reuters 2009 2011 2013 2005 2007 2009 2011 2013 Source: GFMS, Thomson Reuters 89 FABRICATION DEMAND Yellow gold became increasingly popular last year and the market continued to move back toward 14-carat and away from 10-carat. The lower gold price pulled gold back into lower sticker price brackets, commanding market share from silver. Store space allocated to fine jewellery increased last year as well, boosting gold demand volumes. According to the US Census Bureau, jewellery store sales fell 1.1% in 2014. However, companies like JC Penney, Macy’s, and Tiffany’s, reported healthy sales increases in the region. Additionally, although jewellery store sales were down, the decline in gold prices lowered jewellery retail prices. This decline in sticker price resulted in the decline in sales, even though the volume of fine gold purchases increased. Jewellery retail consumption increased last year to eight tonnes, up 21% from a year ago. The Mexican economy has steadily improved over the past few years, with GDP growth clocking in at 2.1% in 2014, a faster rate than the 1.1% growth in 2013. Mexico accounted for 8% of North American gold jewellery fabrication last year. GFMS GOLD SURVEY 2015 MIDDLE EAST SOUTH AMERICAN JEWELLERY CONSUMPTION 80 ——Jewellery fabrication in the Middle East increased by Other almost 6% last year to a five-year high, boosted in part by the high premia in India, which encouraged increased exports of 22-carat jewellery. Brazil Tonnes 60 Fabrication in the Turkish market saw its strongest year since 2008 as domestic production rose by 32% over 2013. This rapid increase in gold content was brought about by a number of factors, most notably a rapid expansion of exports in the 18- and 22-carat markets. 40 20 0 2005 2007 2009 2011 2013 Source: GFMS, Thomson Reuters Entering 2015, field research in the region earlier this year indicated that gold sales to the jewellery fabrication sector in Brazil have declined sharply, by almost 30% on a year-on-year basis. This is largely a function of a weak domestic economy and real depreciation. The real has declined by 28% against the dollar since June last year, resulting in the real-denominated gold price reaching a record-high. As the government seeks to raise interest rates to quell soaring inflation, consumers’ purchasing power will be curtailed further. While fine gold jewellery exports may benefit from the effect of a weaker real and mitigate waning domestic consumption, we expect gold demand for jewellery fabrication to contract this year, aggravated by the shift towards plated jewellery. MIDDLE EAST JEWELLERY CONSUMPTION 400 Others Turkey Egypt GCC* This had a large impact upon consumption in the second, third and fourth quarters of the year with a partial repeal from October allowing purchases to be split into four payments. Total jewellery consumption in the Turkish market in 2014 is estimated at just 68 tonnes, down from 73 tonnes in 2013. The divergence between fabrication and domestic consumption is not only down to the strong export performance from Turkey but also a weakening currency slowing domestic demand faster than in export markets; a shift in sentiment away from gold amongst some retail investors; growth in domestic demand for 18-carat versus 22-carat pieces; and also a substantial increase in inventory in the marketplace. MIDDLE EAST JEWELLERY FABRICATION Gold Price 1800 700 1500 600 500 600 100 300 0 H1-06 0 H1-08 H1-10 H1-12 *GCC: Saudi Arabia, UAE, Oman, Bahrain, Kuwait, Qatar Source: GFMS, Thomson Reuters 90 H1-14 US$/oz 900 Tonnes 1200 200 Others Egypt Turkey 300 Tonnes FABRICATION DEMAND especially in Brazil, where plated jewellery industry has expanded rapidly. For those that can afford it, 18-carat jewellery is the purity of preference in South America. In the domestic market the year was heavily influenced by changes in credit restrictions. Soon after Valentine’s Day purchases had died down in 2014 the government banned the purchase of gold and jewellery on an installment basis on credit cards. Previously consumers had been able to divide purchases into as many as 12 monthly payments. This scheme had been widely misused, however, with many effectively using the purchases as a way of raising short-term capital. With the government increasingly worried about levels of personal debt the practice was banned, subject to review. GCC* 400 300 200 100 0 2005 2007 2009 2011 2013 *GCC: Saudi Arabia, UAE, Oman, Bahrain, Kuwait, Qatar Source: GFMS, Thomson Reuters GFMS GOLD SURVEY 2015 The domestic market is always price sensitive in Turkey and to understand 2014’s demand side moves it is important to consider the local price. While average USD prices for gold fell by 10% in 2014, average prices in Turkey actually increased 3.5% year-on-year due to a weakening lira. Importantly the price also only twice dipped briefly below the 85 lira/gramme level that had prompted buying surges in 2013. All-in-all sentiment towards the yellow metal as an investment fell over the year and this has been further weakening in the first quarter of 2015 with another bout of currency weaknesses pushing prices above 100 lira/gramme on two occasions - to put this in perspective gold prices peaked at only 108 lira/gramme in September 2011. the impressive gains posted in 2013 which resulted from the acute drop in the gold price. In contrast, last year the double digit fall in the domestic gold price had little impact at the retail level with consumer expectation of higher prices diminishing, which dampened investment driven purchases. Field research in Turkey suggests that consumers and retail investors consider prices above 98 lira/gramme a good opportunity to return gold to the market, and indeed there has been a large increase in scrap supply towards these levels. On the purchasing side it’s expected a pick up will ensue below the 92-93 lira/gramme range. While the lack of investment interest in gold certainly played a part in the drop in sales volumes, changing consumer tastes have also played a role in reducing the fine gold consumed in this segment. Indeed, most of the major branded fabricators in the country have been aggressively promoting lightweight gemset (chiefly cubic zirconia, though diamond jewellery is also expanding) 21-carat items and increasingly 18-carat items for a number of years as they attempted to generate higher margins to offset dwindling sales volumes. Finally, many fabricators had chosen to increase production in 2014 after experiencing growth in demand in 2013. The beginning of 2014 had also seen healthy exports to the UAE, the United States, Iraq, the exSoviet Republics and North Africa. The prospects both domestically and for many of these key export markets have been eroded over the course of the year, however. Lower energy prices, sanctions and a sharply weaker currency have not just impacted Russia but have also seen other central Asian export markets decline amid currency devaluations. The key Iraqi market also saw a hiatus in purchasing after the fall of Mosul to ISIS in June 2014 and its rapid advance elsewhere in the country. The stock overhang that persists in the Turkish market is likely to see fabrication levels begin to fall over the course of 2015 unless further export market share can be won in increasingly competitive markets. Recent field research would point to a 10% year-on-year drop in Saudi Arabian jewellery fabrication volumes in 2014 to an estimated 37 tonnes, in turn giving up some of Moreover, item weights have fallen dramatically during the elevated price environment and this has compounded the decline in fine gold consumption. To this end, domestic fabrication has fallen by more than two-thirds in the last decade. For example, a wedding set which typically includes a necklace, bracelet, earrings, and rings has seen total weights drop by some 75% in just the last decade. What was previously 250 grammes is now often offered at 50-70 grammes, using more intricate stone set designs (5-7% of the item weight is often stones in the case of 18-carat), hollow tubing, and electro-casting which can deliver large light weight items. The Saudi fabrication industry continues to face difficulties in obtaining skilled labour with several contacts indicating they were struggling to import foreign workers at the level they require for expansion. The Saudisation Policy, which stipulates that 15% of all staff should be Saudi nationals, is not always feasible when applied to such a specialised field. A number of the larger fabricators have started to introduce local women into their workforce in attempt to alleviate the labour issues (and to meet the government’s regulations) and while they are making a difference, it is the skilled goldsmiths (which typically originate from India, Pakistan, and Bangladesh) that are required. 91 FABRICATION DEMAND Currency impacts and a degree of political instability brought about by elections (both during 2014 and upcoming in June 2015), slowing economic growth and the conflict on Turkey’s southern border have also helped to undermine sentiment in the market. Gold appears less popular as an investment than in 2013 and consensus appears to be that the US dollar is the best medium-term bet to maintain wealth in Turkey. Despite the drop in offtake, the Saudi market remained quite buoyant at times with retailers reporting moderate sales activity across the year. However, during the key gifting periods of Ramadan, the wedding season (summer months), and Hajj, consumption was generally weaker year-on-year, which dragged down annual consumption volumes. GFMS GOLD SURVEY 2015 FABRICATION DEMAND Demand stalled in the second quarter and failed to recover thereafter, driven lower, in part, by the closure of trade routes into northern Iraq due to the rising control of ISIS. This key market, one of the more robust in the region in recent years, had been offsetting declines elsewhere in the Middle East. A return in demand for gemset and particularly diamond jewellery was a feature of the market last year as investment motives, which were the chief architect for the surge in 2013 offtake, were largely absent from the market in 2014, impacting predominately offtake for plain 21- and 22-carat items. Branded jewellery continues to win market share as consumers look to well known brands - this is especially the case for the Indian Sub-Continent tourists who tend to migrate to the well known brands from home. This trend has borne a prolific expansion of largely Indian retailers across the region, boosting jewellery demand as they stock the new showrooms, but importantly, this has not always translated to genuine retail sales. In contrast to many markets in the region, jewellery fabrication demand in Kuwait managed to build on the healthy recovery seen in 2013, registering an 11% yearon-year rise last year to an estimated seven tonnes. Domestic consumption picked up sharply, by over a fifth, buoyed by the expansion of several international brands into the Kuwaiti market which offered consumers a greater range of imported designs. 92 Egyptian jewellery fabrication appears to be benefiting from weaker gold prices and a more optimistic outlook after years of economic stagnation, with the market stabilising in 2014 to an estimated 41 tonnes. Egypt suffered a severe economic crisis after the 2011 uprising that toppled Hosni Mubarak, ushering in a period of turmoil, leading to the election of a Muslim Brotherhoodled government that was subsequently toppled by the military in July 2013. President al-Sisi, who led the military takeover, was elected head of state last year. While the increase was less than 1%, this represents the third successive rise in a market that has been deeply affected by the political turmoil impacting the country in recent years. The increase last year has seen domestic fabrication recover 42% from the 2011 crisis volumes, though importantly, it remains 42% or 30 tonnes below the level witnessed a decade earlier. While Egypt has dealt with an anaemic growth rate over the past five years that did not exceed 2% in any one year, GDP growth is reported as reaching 3.5% last year (well below the pre-2011 rate of about 6%), as Egypt’s leadership has taken several steps to bring about some structural and fiscal changes. These measures, coupled with improving consumer sentiment, a slowly improving tourist market, and a return of foreign jewellery fabricators should see Egyptian offtake rebound strongly in 2015. EGYPTIAN JEWELLERY FABRICATION 80 350 EGP Gold Price 60 280 210 40 140 20 0 70 0 2005 2007 Source: GFMS, Thomson Reuters 2009 2011 2013 Egyptian Pound/g Turning to Iran, fabrication demand is estimated to have declined by a hefty 23% in 2014 as the Islamic Republic continues to be weighed down by the raft of economic sanctions imposed by the west. Coupled with these measures, which has driven down spending across all retail segments, has been the further increases to the VAT rate (now set as 8% with a further hike planned for 2015) which has significantly impacted consumer demand for the yellow metal. In contrast to most markets, where VAT is applied only to the labour component of the selling price, Iran has levied the tax on the total cost of the item, which has inflated the purchase price substantially, and has encouraged a parallel trade to emerge. Tonnes Following an impressive rise in 2013, jewellery fabrication in the United Arab Emirates (UAE) experienced just a 4% decline last year. Looking back, the domestic market initially benefitted from the elevated premium level in India that stimulated UAE fabrication demand for investment-grade jewellery (chiefly 22-carat), especially in the first half of 2014. The modest decline may point to a healthy market; however, this, in fact, was not the case, with jewellery consumption in the UAE falling broadly in line with the global average, sliding 13% to an estimated 60 tonnes as demand across the region retreated from the heady levels of 2013, driving imports sharply lower. GFMS GOLD SURVEY 2015 ELECTRONICS GLOBAL BILLINGS (semiconductor billings, millions US dollars) ——Gold used in electronics declined 4% in 2014, dragged down by softer economic conditions and ongoing substitution. Global electronics demand fell for the fourth year in succession in 2014, slipping a further 3.5% to 279 tonnes. The drop has left gold demand in this segment 16% or 53 tonnes below the historical peak recorded in 2010. While there has been a robust recovery in consumer demand for electronics on the back of an improving economic environment, globally it is far from uniform. Economies within the Eurozone, China, and Japan, all major markets for the production of electronics, have felt the impact of sluggish economic growth. The impact of the economic slowdown was widespread, with falls registered in almost all key markets. Japan, the largest market in this group, declined 4% year-onyear, while South Korea and Taiwan retreated by 9% and 3% respectively. The US market, benefiting from an improving economic environment, saw offtake largely unchanged compared to 2013 volumes. 350 Other Asia/Pacific 303.3 60.5 34.5 35.1173.2 2014 Americas Europe Japan Asia 333.6 68.3 37.4 35.0 192.9 Change 30.2 7.8 2.9 0.0 19.6 Change % 10% 13% 8%-0.1% 11% Source: SIA with silver and aluminium also being used widely in commercial applications. In addition, fabricators are also looking to alternatives in the area of gold salts used in the electronics field. With life expectancy of electronics appliances just a few years these days compared to longer life cycles just a decade ago, longevity and performance is becoming less important as fabricators look to lower the ticketed price. Global demand for semiconductors reached a record high in 2014, rising by 10% according to the Semiconductor Industry Association (SIA). As was the case in 2013, the market was led by the Americas, which enjoyed an impressive 12.8% annual rise. Elsewhere, European sales improved considerably, while Japan, falling back into recession last year, saw new sales stagnate. Turning to this year, we expect this broad trend to continue, with rising demand for finished goods, resulting from stronger economic growth, being more than offset by further substitution losses for the yellow metal across the sector. Last year, gold used in Japanese electronics fabrication declined 4% from the previous year, slipping to an estimated 83 tonnes. This represents the lowest level since 2002. Domestic demand was impacted by the fragile economy which fell back into recession during the middle of the year following a robust start to the year. Coupled with the decline in local offtake, further WORLD FABRICATION OF GOLD BONDING WIRE Europe 200 Americas 120 Japan 160 210 120 Tonnes 280 140 OECD Industrial Production 100 80 80 70 0 40 2005 Source: SIA 2007 2009 2011 2013 0 Industrial Production (2010 = 100) Global Semiconductor Billings (millions of USD) GLOBAL SEMI-CONDUCTOR BILLINGS World 2013 60 2005 2007 2009 2011 2013 Source: GFMS, Thomson Reuters; OECD 93 FABRICATION DEMAND While underlying electronics demand is expanding, the use of the gold in this industry is retreating, largely as a result of substitution losses. Gold used in bonding wire production, which is widely used in semiconductor fabrication and consumes a significant portion of total offtake in this sector, has seen its market share fall from above 90% in 2008 to an estimated 42% last year as fabricators looked to lower the cost of production in a rising gold price environment. Copper wires (both bare and palladium-coated), which were initially only used in the most basic electronic appliances, is now commanding a combined 45% market share (and is being increasingly used in main stream applications), GFMS GOLD SURVEY 2015 ELECTRONICS (INCLUDING THE USE OF SCRAP) (tonnes) Japan 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 112.4 123.6128.4 116.0 94.5 115.0 108.0 88.0 85.7 82.5 China 22.9 28.732.6 37.5 47.152.5 60.7 58.4 59.0 56.2 United States 55.2 57.4 50.2 52.1 46.2 55.8 58.3 55.7 55.4 55.5 South Korea 28.0 32.9 35.6 33.3 28.8 33.4 31.6 27.0 23.5 21.4 Taiwan 14.6 Germany 12.2 14.315.3 14.5 9.812.6 12.0 11.2 12.5 12.1 Russia 12.0 12.112.6 13.1 12.312.4 12.5 12.6 12.7 12.0 Singapore 18.5 18.518.3 17.2 15.116.3 13.8 11.3 10.3 9.9 17.1 18.1 17.1 16.119.4 18.1 16.7 16.2 15.6 Switzerland 7.3 8.9 9.1 7.5 4.75.9 5.6 5.4 5.3 5.2 India 2.2 2.62.52.11.92.62.52.42.4 2.4 CIS (ex. Russia) 2.1 Hong Kong 1.7 1.9 2.01.91.71.92.01.81.8 1.7 Other Countries 5.1 4.8 4.4 3.6 2.7 2.8 2.8 2.7 2.8 3.0 294.3 324.9 331.2 317.9 282.9 332.5 330.0 295.1 289.5 279.3 World Total 2.2 2.2 2.2 2.0 2.0 2.1 2.0 2.0 1.9 FABRICATION DEMAND Source: GFMS, Thomson Reuters losses were experienced due to ongoing thrifting and substitution, chiefly in the area of bonding wire production where the migration to copper continues to erode gold’s market share. According to Semiconductor Industry Association statistics, Japanese semiconductor sales fell only at the margin last year (the fourth consecutive fall). It was not all bad news for the industry, with a stronger auto sector delivering modest expansion and the upturn in the U.S. economy, coupled with the weaker yen, supporting export growth. However, the demand for gold potassium cyanide (mostly for electroplating) dropped at a much faster pace in 2014. Korean electronics manufacturers are migrating some of the local factories to other Southeast Asian countries for cost reasons. For example, Samsung is spending billions to build new factories in Vietnam. The reallocation of producing facilities will continue and we expect that gold demand from the South Korean electronics sector may continue to decline in the coming years as production is offshored. Gold for Chinese electronics demand saw a setback in 2014, after experiencing modest growth in 2013. The GFMS team at Thomson Reuters estimates that demand for fine gold used in electronics decreased by almost 5%, to total 56 tonnes last year. It is worth highlighting that our fabrication series has undergone a upward revision since the previous GFMS Gold Survey was published. This revision is due to new information gathered during extensive field research in the past year and, specifically, feedback from industrial players indicating that our estimates may have been over conservative. The 5% drop in gold used in electronics last year was due to a downward trend in demand for white goods and home appliances in China due to the softer economy and increased use of palladium-coated copper bonding wires in the sector. Gold used in electronics fabrication in the United States was broadly flat at 55 tonnes in 2014. Thrifting continued to stem growth in demand from this industry last year, despite 7% growth in US vendor PC shipments, 12% growth in semiconductor sales in the Americas, and 3% growth in US consumer electronics shipments. According to Gartner, US PC shipments increased 7% compared to a 2% decline globally. Semiconductor sales also saw stronger growth in the Americas relative to the global total, of 12% against 9%, according to Semiconductor Industry Association statistics. The US Consumer Electronics Association twice revised its 2014 forecast for shipments. The last revision in January 2015 suggested a 3% growth, up from its July 2014 forecast of 2%. Retail electronics demand was driven higher by improved economic conditions and a stronger domestic employment environment. Demand from the South Korean electronics sector declined for the fourth year in succession, retreating 9% year-on-year to an estimated 21 tonnes. The migration away from gold used in bonding wire continued, though the pace slowed, and the drop was modest in 2014. We expect the migration to continue, but at a steadier pace. 94 Electronics demand in Europe fell by 4% in 2014, back to levels seen in 2012. Last year’s fall was broadly in line with global trends, and, despite the lower price environment, was largely attributable to continued thrifting and substitution away from gold to cheaper GFMS GOLD SURVEY 2015 DENTISTRY (INCLUDING THE USE OF SCRAP) (tonnes) 2005 World Total 2006 2007 2008 2009 2010 2011 2012 2013 2014 62.460.757.655.752.7 48.442.938.636.333.9 Source: GFMS, Thomson Reuters alternatives such as copper and silver. This was particularly prevalent within the bonding wire production, which accounts for a larger portion of the total offtake in this sector. DENTISTRY In addition, prolonged economic weakness also helped to explain last year’s decline. It should be emphasised, though, that continued losses from substitution and thrifting were somewhat mitigated by a slight recovery in end-use demand in the automotive industry. After six consecutive years of decline, European car sales returned to growth in 2014, with all major markets contributing to the overall expansion. However, a word of caution needs to be added as the jump in car sales was primarily driven by state-backed incentives and a shift to cheaper brands, rather than a genuine recovery in consumer confidence. Demand for gold used in dental applications continued its secular retreat in 2014, sliding 7% to a record low of 33.9 tonnes. The decline, which started a decade ago, was initially driven by the price increase of the yellow metal. Higher prices triggered a migration to cheaper metal alternatives and porcelain-fused-metal (PFM) before aesthetic concerns ushered the trend to ceramics. The modest fall marked the eleventh consecutive annual decline that has seen demand in this sector almost halve over the last decade. Unlike the bonding wire industry where gold enjoys an unparallel functional advantage in certain fields, gold in dental applications is losing favour to the improving quality of ceramics in terms of biocompatibility, chemical stability, flexural strength, and life span, especially after the invention of zirconia ceramics. DENTAL GOLD FABRICATION 80 United States Other Japan Germany Tonnes 60 40 20 0 2005 2007 2009 Source: GFMS, Thomson Reuters 2011 2013 the lower price environment, with global offtake retreating a further 7%. In previous generations alloys used in dental applications contained as much as 65% to 70% gold whereas today gold’s share has fallen to 35% to 40% on average (and as low as 12% in Japan) in a bid to lower the cost to the consumer. According to US industry data, in 2005 over 80% of crown and bridge work was metals-based, compared to a figure closer to 40% last year. While price has indeed had a notable impact on the level of gold consumed in dental applications, structural changes in the developed world have also accelerated the decline of the industry. Rising income levels and access to the more cosmetically pleasing ceramic applications is expected to drive the use of gold into a niche industry. Looking more closely at regional demand trends, there were falls across all the major markets last year. Japanese demand declined 8% in 2014, after only a modest fall in 2013. Offtake of Kinpala 12, the alloy used in dentistry, is the key driver of gold (and palladium and silver) demand across the industry. There were a couple of additional factors last year that contributed to the annual decline. First, the economic impact, as the country slipped back into recession during 2014, may have seen consumers delay dental work, and secondly, 95 FABRICATION DEMAND Gold usage in electronics in Taiwan dropped 3% in 2014 to 16 tonnes. The slide may seem strange as the domestic economy expanded a healthy 3.3% growth, the most since 2011. Further, electronics exports last year recorded a 13.5% increase, benefiting from prosperous smartphone markets as well as expanding demand for other electronic devices. However, it is not incomprehensible considering the continuous erosion of gold usage in bonding wire due to substitution for cheaper alternatives such as platinum-plated copper and silver, as well as reduced offtake in gold potassium cyanide (GPC) primarily used in the plating sector. ——Substitution-led losses continued last year, despite GFMS GOLD SURVEY 2015 OTHER INDUSTRIAL & DECORATIVE USES (INCLUDING THE USE OF SCRAP) (tonnes) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 China 5.5 6.3 8.1 10.113.917.2 18.7 19.2 19.5 19.2 Switzerland 13.4 13.413.4 13.4 13.413.4 13.4 13.4 13.4 13.4 South Korea 7.6 Brazil 4.2 5.14.9 6.3 7.2 7.2 9.210.8 11.3 8.8 Italy 9.8 7.0 India 11.3 11.1 10.0 11.8 11.4 10.8 10.6 10.3 7.8 9.710.9 8.6 8.0 7.7 8.2 8.4 8.5 26.2 24.522.5 19.3 12.2 13.2 11.5 9.1 9.7 7.4 Japan 6.3 6.76.96.76.56.45.95.45.4 5.6 Germany 3.8 3.73.7 3.62.63.2 3.2 3.0 2.9 2.9 Thailand 2.4 2.52.6 2.7 2.42.6 2.5 2.6 2.6 2.6 United States 5.7 4.53.12.82.53.03.02.52.5 2.5 Hong Kong 1.4 1.51.61.61.51.71.71.61.6 1.3 Other Countries 8.6 9.6 10.6 11.6 12.6 13.6 14.6 15.6 16.6 17.6 92.0 94.5 98.0 97.4 86.4 94.8 95.0 92.3 92.8 87.1 World Total Source: GFMS, Thomson Reuters a change in the insurance rebate, which is set by the Ministry of Health, Labour and Welfare that restricted coverage to the front five teeth. This second factor, according to industry contacts, was the more significant of the two in gold’s demand decline last year. Elsewhere in key markets, demand was mixed, although in all cases weaker on a yearly comparison. Fabrication is North America declined 9% year-on-year while demand in Europe is estimated to have retreated 4% on 2013 levels. ——Global demand slipped 6% last year to a five-year low, dragged lower by a material fall in Indian offtake. Other industrial & decorative fabrication in Europe remained broadly flat last year. European gold compounds, produced mainly in Germany, are primarily gold potassium cyanide (GPC) and are used as plating salts for decorative and industrial use. Industrial demand OTHER INDUSTRIAL & DECORATIVE USES 120 100 India Other Europe East Asia Switzerland Other 80 Tonnes FABRICATION DEMAND OTHER INDUSTRIAL AND DECORATIVE USES 60 40 20 0 2005 2007 Source: GFMS, Thomson Reuters 96 2009 2011 2013 is focused on electronics, whereas decorative use is generally less, and tends to be exported to Asia. Turning to trade, last year Italian official imports of gold compounds grew by around 25%. This was a result of increased consumption of plating salts by luxury accessory manufacturers. A reason for this niche’s continued strength is that branding for the final product demands production in artisan centres such as Paris and Florence. German exports of gold compounds in 2014, in terms of mass, fell by 2% year-on-year, with a marked drop off in exports to Saudi Arabia and Hong Kong that tend to go for luxury goods plating. However exports to other European countries remained strong as demand held and switching from local to German supply of GPC by electronics manufacturers. Gold consumed in the other industrial and decorative sector in India declined 24% to 7 tonnes last year, the lowest level recorded in recent history. A comparison to 2004 numbers reveal demand has dropped to just one-third of that level. Such a steep decline is largely related to a shift from plated items to high value products with greater intrinsic value, a shift which is natural as the population moves higher up in the income pyramid. The trend was no different last year when prices fell sharply with consumers from low income groups preferring to purchase 22-carat jewellery in the form of chains or rings with most purchases in the range of five to eight grammes. The jari (thread made of gold, silver, and silk, as is used in the weaving of saris) market suffered again last year. Its consumption is primarily derived from making wedding brocades and saris. However its usage has been limited over the years to just immediate family members during weddings, and thrifting has played a key role due to a higher gold price in rupee terms, and shifting fashions. GFMS GOLD SURVEY 2015 According to jari traders in the city of Kanchipuram the per day consumption last year was in range of 1,800 marks to 2,000 marks per day as against more than 2,000 marks in 2013. To put this in perspective, 2000 marks translates to 500 kilogrammes of jari. Moreover, one kilogramme of jari contains 240 grammes of silver and three grammes of gold. There were a few exceptions to the wider trend, with modest increases seen in Taiwan and Indonesia, with the former benefitting from increased domestic production (at the expense of imports), while a higher domestic gold price last year helped support the plated fashion jewellery segment in Indonesia. One category which did see a turnaround last year was the electroplating for industrial applications, driven higher by improved demand from the automobile and electrical industries. This was due to its direct relation to improvement in economic activity in the latter part of the year with this trend continuing in the early months of 2015. China’s demand for gold use in the other industrial and decorative segments recorded a nearly 2% year-on-year decline in 2014, to an estimated 19 tonnes. Demand in this sector mainly consisted of demand for plating salts GPC offtake, which is widely used for electroplating of a wide range of luxury goods and accessories such as belt buckles, watch cases and sunglasses. Looking back to last year, demand from this segment was relatively quiet, in part reflecting a weaker Chinese economy. It is worth noting that should the domestic economy slow further in 2015, in addition to the continuation of the anti-corruption gifting policy, fine gold demand from this segment will likely slow down further in 2015. Other industrial and decorative fabrication across East Asia fell only at the margin last year, outperforming the majority of global markets, slipping just over 1% to an estimated 41 tonnes. While the drop in demand was minimal in 2014 it nonetheless drove regional offtake to a five-year low after several years of constrained output. During the 20032011 period growth from China in this demand segment expanded at an extraordinary rate, boosting regional offtake, as the domestic industry developed, averaging 20% growth over the period. However, in a sign that the market has matured, fabrication demand has plateaued, averaging just 1% growth over the last three years. FABRICATION DEMAND Elsewhere, a weaker economic environment last year drove Japanese electronics demand lower. This in turn led to a decline in the production of plating salts or GPC (gold potassium cyanide) which is used predominantly in the plating of various electronic components. In addition, a decline in demand for plated jewellery last year, a function of the weaker price environment, saw GPC fabrication demand from Thailand and Hong Kong retreat. The latter was the hardest hit, falling 15% year-on-year, having a greater exposure to the weaker Chinese mainland market. CHINESE IMPORTS OF GOLD COMPOUNDS 25 Other Taiwan Japan 20 Tonnes Hong Kong Europe 15 10 5 0 2005 2007 2009 2011 2013 Source: GFMS, Thomson Reuters 97 GFMS GOLD SURVEY 2015 8. APPENDICES 99 Appendix 2 - Official Sector Holdings and Other Reserves 100 Appendix 3 - Nominal Gold Prices in Various Currencies 1979-2014 101 Appendix 4 - Real Gold Prices in Various Currencies 1979-2014 102 Appendix 5 - Gold Prices and Annotated Graph 2005 103 Appendix 6 - Gold Prices and Annotated Graph 2006 104 Appendix 7 - Gold Prices and Annotated Graph 2007 105 Appendix 8 - Gold Prices and Annotated Graph 2008 106 Appendix 9 - Gold Prices and Annotated Graph 2009 107 Appendix 10 - Gold Prices and Annotated Graph 2010 108 Appendix 11 - Gold Prices and Annotated Graph 2011 109 Appendix 12 - Gold Prices and Annotated Graph 2012 110 Appendix 13 - Gold Prices and Annotated Graph 2013 111 Appendix 14 - Gold Prices and Annotated Graph 2014 112 APPENDICES Appendix 1 - Gold Futures and Options Turnover (COMEX, SHFE, and TOCOM) 98 GFMS GOLD SURVEY 2015 APPENDIX 1 - GOLD FUTURES AND OPTIONS TURNOVER Gold Contracts on COMEX Gold Contracts on SHFE Gold Contracts on TOCOM Futures Options Futures Futures Turnover1 Open Interest2Turnover1Turnover1 Open Interest2Turnover1 Open Interest2 (100 oz) (100 oz) (100 oz)(1kg)(1kg)(1kg)(1kg) 2005 15,890,617 323,247 2,886,183 17,958,240 299,973 2006 15,917,524 344,915 3,708,573 22,228,198 242,743 2007 25,060,440 541,854 3,555,038 18,202,949 177,089 2008 38,373,367 306,651 4,392,637 3,890,447 46,212 14,960,381 72,439 2009 35,136,388 489,779 4,850,111 3,406,232 101,316 11,913,502 134,163 2010 44,730,345 585,114 7,673,165 3,272,646 78,768 12,198,340 117,657 2011 49,171,091 419,154 9,477,081 7,221,758 102,312 15,193,602 123,688 2012 43,893,380 427,991 9,106,807 5,916,745 111,424 11,895,357 145,738 2013 47,291,629 379,550 10,247,306 20,087,824 170,992 12,224,581 90,135 2014 40,517,778 371,646 7,900,688 23,858,066 194,812 8,744,990 73,137 2013 Jan 4,221,119 424,165 940,044 333,658 123,134 1,282,839 Feb 3,632,342 435,263 1,038,071 249,915 124,902 1,339,193 140,800 141,559 Mar 3,906,568 408,594 887,611 346,681 124,504 957,936 143,098 108,422 Apr 5,218,768 421,087 1,434,651 794,755 107,970 1,719,855 May 5,312,285 375,206 904,087 1,178,181 113,280 1,115,809 101,207 Jun 3,744,747 409,081 784,258 747,093 122,856 1,094,429 105,790 Jul 4,647,176 398,573 925,609 3,581,330 163,592 1,049,758 109,802 Aug 3,463,769 381,963 712,054 4,372,781 146,932 953,479 106,075 Sep 3,331,945 369,196 653,543 2,294,726 126,944 830,574 101,911 Oct 3,458,162 387,763 641,769 2,000,275 150,716 748,222 102,603 Nov 3,577,065 383,966 667,131 1,894,919 164,734 531,061 102,650 Dec 2,777,683 379,550 658,478 2,293,510 170,992 601,426 90,135 2014 Jan 3,754,843 373,806 630,017 1,841,336 155,174 Feb 2,607,548 386,303 Mar 4,199,295 367,561 Apr 2,692,897 541,515 92,038 659,603 1,659,041 617,552 2,782,670 203,574 680,718 78,739 211,928 702,569 380,212 673,526 81,700 2,000,586 202,452 590,702 85,695 May 3,631,134 377,338 626,964 1,585,457 233,646 553,903 98,669 Jun 2,508,081 401,090 646,377 1,494,263 199,788 562,274 85,901 Jul 3,848,342 368,538 565,498 1,590,619 199,448 606,190 91,847 Aug 2,381,778 365,115 448,134 1,407,683 202,926 577,285 94,153 Sep 3,205,752 379,874 694,968 1,545,915 196,216 792,410 99,730 Oct 3,703,708 416,728 885,905 1,535,052 259,266 1,000,120 94,140 Nov 4,676,740 372,859 853,6993,274,720 248,892 1,220,210 78,747 Dec 3,307,660 371,646 598,4453,140,724 194,812 917,094 73,137 1. Turnover refers to period total. 2. Open Interest refers to end-period. APPENDICES Source: Thomson Reuters and respective exchange websites 99 GFMS GOLD SURVEY 2015 APPENDIX 2 - OFFICIAL SECTOR GOLD HOLDINGS AND OTHER RESERVES end-2005 end-2014 Gold Gold Share of Share of Reserve Reserve million oz tonnes $ billion1 $ billion2Assets3 million oz tonnes $ billion1 $ billion2Assets3 United States 261.55 Germany 8,135 11.04 130.78 70.7% 261.50 8,134 11.04 315.37 72.6% 110.213,428 56.54 55.1055.0% Italy 78.832,452 40.44 39.41 60.7% 78.83 2,452 94.54 95.07 66.6% France 90.852,826 46.61 45.43 62.1% 78.30 2,435 93.90 94.43 65.6% Russia 12.44 387 6.35 6.22 3.4% 38.841,20846.09 46.85 12.1% China, P.R.: Mainland 19.29 9.65 33.89 Switzerland 41.481,290 21.34 20.7436.4% 33.441,040 39.44 40.32 Japan 24.60 765 12.62 12.30 1.5% 24.60 76529.50 29.67 2.4% Netherlands 22.34 695 11.46 19.69 India 11.50 358 4.10 5.754.2% 600 4.07 1.91 1.2% 11.1755.4% 1,054 9.82 40.87 1.0% 7.4% 612 23.61 23.75 55.2% 17.93 55819.38 21.63 6.7% Turkey 3.73 116 Taiwan 13.61423 4.66 6.812.6% 13.624244.8716.433.8% Portugal 13.42 417 12.30 383 14.75 14.83 75.3% 6.89 1.87 3.6% 108.81 3,384130.48 131.22 67.8% 6.7165.9% 17.01 52920.40 20.52 16.1% Venezuela 11.47 357 5.72 5.7419.3% 11.82 368 15.31 14.25 69.3% Saudi Arabia 4.60 143 0.23 2.30 1.5% 10.38 323 0.43 12.52 1.7% United Kingdom 9.99 311 5.13 5.00 11.5% 9.98 310 12.03 12.03 11.2% Lebanon 9.22 287 4.74 4.6127.9% 9.22 287 10.95 Spain 14.72 458 7.55 7.3643.2% 9.05 282 10.86 10.92 21.7% Austria 9.73 302 4.99 4.8641.6% 9.00 280 10.80 10.86 43.4% Belgium 7.32 228 3.76 3.6630.8% 7.31 227 8.77 Philippines 4.97 155 2.57 2.4813.5% 6.28 195 7.48 7.57 9.5% Kazakhstan 1.92 60 0.99 0.9613.6% 6.17 192 7.39 7.44 25.7% Algeria 5.58 174 0.28 2.794.7% 5.58 174 0.28 6.73 3.5% Thailand 2.70 84 1.37 4.90 152 5.85 5.91 3.8% Singapore 4.10 127 0.21 2.051.7% 4.10 127 0.21 4.94 1.9% Sweden 5.41 168 2.80 2.7110.9% 4.04 126 4.80 4.87 7.8% South Africa 3.99 1.99 4.03 4.85 Mexico 0.11 124 2.05 1.352.6% 9.7% 3 0.06 0.050.1% 125 4.83 11.12 21.9% 8.82 34.7% 9.9% 3.95 123 4.76 4.76 2.4% Libya 4.62 144 0.19 2.315.5% 3.75 117 0.16 4.52 4.6% Greece 3.47 108 1.78 1.7477.4% 3.62 112 4.34 4.36 69.9% South Korea 0.46 0.07 3.36 104 14 0.23 0.1% 4.79 4.05 1.1% ECB 23.15 720 IMF 16.18 503 103.44 3,217 90.45 2,814 BIS 5.97 186 8.57 267 World APPENDICES 1 991.30 30,8331,029.90 32,034 National valuation. Market valuation based on end-2005 and end-2014 gold PM fix respectively. 3 Calculated using year-end gold PM fix. 2 Source: IMF and central bank websites 100 GFMS GOLD SURVEY 2015 APPENDIX 3 - NOMINAL GOLD PRICES IN VARIOUS CURRENCIES Average, high and low US$ prices are based on the London PM fix. Except for the Mumbai price, other prices are calculated using the PM fix and London exchange rates. PM Fix Low High Mumbai US$/ozUS$/ozUS$/oz euro/kg*CHF/kg yen/g A$/ozrand/kg yuan/gRs/10 g 1979 304.69 216.85 512.00 9,187 16,324 2,189 274.76 8,279 15.23 1,043 1980 614.50 481.50 850.00 18,284 32,946 4,457 537.56 15,331 29.60 1,452 1981 459.24 391.25 599.25 17,000 28,997 3,247 399.71 12,863 25.17 1,705 1982 375.17 296.75 481.00 15,016 24,599 3,016 371.96 13,142 22.83 1,708 1983 423.61 374.25 509.25 17,752 28,564 3,238 470.00 15,162 26.91 1,821 1984 360.78 307.50 405.85 16,811 27,144 2,749 409.90 16,948 26.91 1,958 1985 317.26 284.25 340.90 15,314 24,982 2,429 453.70 22,855 29.95 2,106 1986 367.85 326.30 438.10 13,067 21,147 1,983 553.11 27,126 40.84 2,210 1987 446.22 390.00 499.75 13,181 21,383 2,073 636.24 29,217 53.40 2,891 1988 436.87 395.30 483.90 12,604 20,532 1,801 560.13 31,889 52.28 3,202 1989 380.79 355.75 415.80 11,770 20,021 1,688 481.25 32,063 46.10 3,185 1990 383.59 345.85 423.75 10,192 17,148 1,784 491.27 31,893 58.99 3,406 1991 362.26 344.25 403.00 9,885 16,707 1,567 465.03 32,154 62.00 4,033 1992 343.95 330.35 359.60 8,819 15,522 1,400 468.13 31,502 60.98 4,255 1993 359.82 326.10 405.60 9,793 17,103 1,282 530.13 37,880 66.66 4,384 1994 384.15 369.65 396.25 10,235 16,865 1,261 525.36 43,867 106.45 4,652 1995 384.05 372.40 395.55 9,042 14,589 1,160 518.50 44,787 103.12 4,799 1996 387.87 367.40 414.80 9,587 15,388 1,355 495.99 53,466 103.68 5,191 1997 331.29 283.00 366.55 9,429 15,457 1,286 445.02 48,993 88.30 4,556 1998 294.09 273.40 313.15 8,506 13,707 1,238 467.79 52,307 78.28 4,182 1999 278.57 252.80 325.50 8,405 13,450 1,018 431.84 54,764 74.14 4,327 2000 279.11 263.80 312.70 9,734 15,158 967 480.88 62,173 74.29 4,518 2001 271.04 255.95 293.25 9,737 14,714 1,058 524.53 74,842 72.13 4,462 2002 309.68 277.75 349.30 10,545 15,470 1,245 569.76 104,477 82.41 5,131 2003 363.32 319.90 416.25 10,328 15,704 1,352 558.35 88,008 96.68 5,620 2004 409.17 375.00 454.20 10,582 16,335 1,422 556.01 84,738 108.88 6,119 2005 444.45 411.10 536.50 11,521 17,839 1,577 583.36 91,114 117.09 6,454 2006 603.77 524.75 725.00 15,452 24,298 2,256 801.47 131,751 154.78 8,912 2007 695.39 608.40 841.10 16,294 26,775 2,628 828.48 157,352 169.85 9,345 12,256 2008 871.96 712.50 1,011.25 19,071 30,267 2,907 1,033.13 229,694 194.79 2009 972.35 810.00 1,212.50 22,402 33,834 2,919 1,235.22 261,600 213.98 15,310 2010 1,224.52 1,058.00 1,421.00 29,739 40,947 3,444 1,331.28 287,568 266.15 18,386 2011 1,571.52 1,319.00 1,895.00 36,328 44,615 4,017 1,524.33 368,623 326.59 24,003 2012 1,668.98 1,540.00 1,791.75 41,755 50,297 4,278 1,610.49 440,575 338.51 29,730 2013 1,411.23 1,192.00 1,693.75 34,196 42,073 4,412 1,454.85 433,964 279.18 29,310 2014 1,266.40 1,142.00 1,385.00 30,638 37,202 4,298 1,402.94 440,561 250.82 28,278 * Prior to 1999 Deutsche Mark prices have been converted into euros at the official conversion rate APPENDICES 101 GFMS GOLD SURVEY 2015 APPENDIX 4 - REAL GOLD PRICES IN VARIOUS CURRENCIES (CPI DEFLATED - CONSTANT 2014 MONEY TERMS) Average, high and low US$ prices are based on the London PM fix. Except for the Mumbai price, other prices are calculated using the PM fix and London exchange rates. PM Fix Low High Mumbai US$/ozUS$/ozUS$/oz euro/kg*CHF/kg yen/g A$/ozrand/kg yuan/gRs/10 g 1979 993.78 707.27 1,669.93 20,925 31,096 3,144 1,218.19 191,372 94.12 16,793 1980 1,765.83 1,383.63 2,442.55 39,501 60,334 5,937 2,164.02 311,794 170.11 21,008 1981 1,195.58 1,018.58 1,560.09 34,543 49,865 4,123 1,469.66 226,981 140.99 21,813 1982 920.05 727.74 1,179.59 28,985 40,038 3,728 1,228.20 202,292 125.33 20,240 1983 1,007.04 889.69 1,210.62 33,179 45,160 3,929 1,410.32 207,807 144.85 19,322 1984 821.78 700.41 924.43 30,683 41,692 3,261 1,183.14 208,284 140.98 19,169 1985 698.02 625.39 750.03 27,353 37,097 2,823 1,226.92 241,527 140.29 19,504 1986 793.90 704.22 945.50 23,368 31,168 2,291 1,371.61 241,591 178.73 18,870 1987 929.76 812.62 1,041.30 23,515 31,069 2,392 1,453.73 224,016 217.96 22,649 1988 874.43 791.22 968.56 22,203 29,284 2,065 1,193.70 216,792 179.74 22,936 1989 727.34 679.50 794.20 20,175 27,682 1,892 953.74 189,986 133.36 21,306 1990 695.02 626.64 767.78 17,011 22,494 1,941 907.08 165,304 165.60 20,906 1991 629.81 598.50 700.65 15,842 20,702 1,650 832.19 144,500 168.07 21,741 1992 580.33 557.38 606.74 13,640 18,487 1,450 829.35 124,320 155.45 20,518 1993 589.59 534.35 664.61 14,666 19,721 1,310 922.99 136,253 148.32 19,876 1994 613.54 590.38 632.87 14,923 19,282 1,281 897.03 144,840 190.75 19,137 1995 596.65 578.54 614.51 12,868 16,386 1,180 846.16 136,066 157.85 17,910 1996 585.38 554.49 626.03 13,354 17,144 1,376 788.79 151,306 146.50 17,778 1997 488.58 417.36 540.57 12,935 17,131 1,284 706.14 127,671 121.35 14,560 1998 427.10 397.06 454.79 11,541 15,189 1,227 735.95 127,534 108.42 11,802 1999 395.88 359.26 462.58 11,280 14,785 1,012 669.45 126,945 104.15 11,668 2000 383.73 362.68 429.91 12,796 16,406 968 713.67 120,511 103.99 11,712 2001 362.43 342.25 392.13 12,507 15,770 1,067 745.58 155,810 100.24 11,146 2002 407.59 365.57 459.74 13,245 16,474 1,268 786.43 199,248 115.42 12,289 2003 467.45 411.59 535.55 12,709 16,618 1,380 750.19 158,550 133.85 12,967 2004 512.76 469.94 569.19 12,749 17,148 1,452 729.94 150,573 145.06 13,604 2005 538.84 498.41 650.44 13,584 18,509 1,615 745.76 156,580 153.21 13,766 2006 709.15 616.33 851.53 17,831 24,947 2,304 989.42 216,371 199.59 17,903 2007 793.96 694.64 960.33 18,409 27,291 2,682 999.50 241,287 209.06 17,647 2008 958.98 783.61 1,112.17 20,865 30,119 2,926 1,194.43 319,257 226.40 21,361 2009 1,072.82 893.70 1,337.79 24,437 33,831 2,980 1,403.23 339,381 250.41 24,072 2010 1,329.28 1,148.51 1,542.56 31,925 38,003 3,540 1,469.46 357,836 301.44 25,808 2011 1,653.99 1,388.22 1,994.45 37,969 56,897 4,142 1,628.75 436,852 350.89 30,953 2012 1,720.86 1,587.87 1,847.45 42,579 57,106 4,412 1,691.00 494,183 354.31 35,057 2013 1,434.10 1,211.32 1,721.20 34,409 48,945 4,534 1,486.56 460,293 284.74 31,172 2014 1,266.40 1,142.00 1,385.00 30,638 37,202 4,298 1,402.94 440,561 250.82 28,278 APPENDICES * Prior to 1999 Deutsche Mark prices have been converted into euros at the official conversion rate 102 GFMS GOLD SURVEY 2015 APPENDIX 5 - GOLD PRICES IN 2005 LondonLondon High Low AM fix PM fix PM fix PM fix rupees/ US$/oz US$/oz US$/oz US$/oz euro/kg CHF/kg yen/g A$/oz rand/kg £/oz 10g Annual Average 444.99 444.45 11,521 17,839 1,577 583.36 91,114 244.95 6,455 Maximum 537.50 536.50 14,431 22,422 2,070 710.76 109,323 310.39 8,100 Minimum 411.50 411.10 10,301 15,943 1,385 531.09 80,518 220.58 5,950 Range:Average 28.3% 28.2% 35.8% 36.3% 43.4% 30.8% 31.6% 36.7% 33.3% Monthly Average Jan424.08 424.03 427.75420.00 10,413 16,111 1,409 554.16 81,686 225.98 6,152 Feb423.43423.35435.45 411.10 10,457 16,218 1,429 541.99 81,797224.34 6,101 Mar 434.35 434.32 443.70 425.15 10,569 16,374 1,468 552.3584,048 227.66 6,270 Apr 429.14 429.23 437.00 423.45 10,665 16,499 1,480555.2284,902 226.39 6,147 May422.90 421.87 429.15 414.45 10,690 16,518 1,446 551.0086,053 227.61 6,030 Jun430.30430.66440.55 415.35 11,390 17,533 1,505 561.52 93,382 236.91 6,131 Jul 424.75424.48432.60 418.35 11,340 17,669 1,528564.06 91,523 242.44 6,060 Aug 437.77 437.93 447.25430.65 11,450 17,784 1,557 574.87 91,008244.07 6,258 Sep455.94456.05 473.25439.60 11,976 18,561 1,630 595.7893,289 252.36 6,533 Oct 470.11469.90475.50462.85 12,568 19,458 1,735 623.53 99,476266.40 6,874 Nov476.67476.67496.00456.50 13,01020,103 1,816648.36101,938274.98 Dec 509.42 510.10 536.50 489.00 13,829 21,396 1,947 684.77104,298 293.06 7,131 7,588 Quarterly Average Q1 427.40 427.35 10,481 16,237 1,436 549.55 82,536 226.02 6,174 Q2 427.57 427.39 10,926 16,866 1,478 556.08 88,229 230.45 6,101 Q3 439.71 439.72 11,593 18,010 1,572 578.45 91,947 246.35 6,285 Q4 484.88 484.20 13,099 20,262 1,827 650.56 101,787 277.36 7,209 GOLD PRICES IN 2005, PM FIX DAILY US$/oz; other currencies reindexed to 2nd January 600 US$/oz 550 500 Swedish National Bank announces 15t and a further 45t of sales under new CBGA Syria announces plans to withdraw from the Lebanon Chinese yuan revalued by 2.1% Dutch vote “no” to EU constitution French vote “no” to EU constitution First Palestenian election since 1996 Oil price at record high Gold at 24-year high US first time jobless claims at 2-year high Rand A$ 350 Terrorist attacks on London Bank of Korea to diversify reserves Iraqi election Jan Mar Feb Source: GFMS, Thomson Reuters Apr May Jun Yen Euro 450 400 Paris riots begin Jul US$/oz Swedish National Bank announces plans to sell 10t under year two of CBGA 2 Katrina strikes the US Gulf coast Aug APPENDICES 650 Bank of Portugal reveals 10t of sales over past month Sep Oct Nov Dec 103 GFMS GOLD SURVEY 2015 APPENDIX 6 - GOLD PRICES IN 2006 LondonLondon High Low AM fix PM fix PM fix PM fix rupees/ US$/oz US$/oz US$/oz US$/oz euro/kg CHF/kg yen/g A$/oz rand/kg £/oz 10g Annual Average 604.34 603.77 15,452 24,298 2,256 801.40 131,719 327.68 8,913 Maximum 725.75 725.00 18,094 28,036 2,575 936.27 153,245 383.54 10,665 Minimum 520.75 524.75 13,952 21,568 1,955 702.64 103,939 298.90 7,620 Range:Average 33.9% 33.2% 26.8% 26.6% 27.5% 29.1% 37.4% 25.8% 34.2% Monthly Average Jan 549.43549.86 568.75 524.75 14,588 22,599 2,041 733.38107,510 311.21 7,918 Feb 555.52555.00 572.15 538.75 14,949 23,298 2,102 748.55 109,141 317.66 8,029 Mar557.22557.09584.00535.0014,89523,384 2,101767.30111,928 319.53 8,059 Apr 611.85 610.65644.00586.50 15,985 25,174 2,296 828.35 119,414 345.23 8,957 May 676.77 675.39 725.00 642.25 16,99626,450 2,424 883.77137,326 361.14 9,969 Jun 597.90 596.15 641.80 567.00 15,140 23,617 2,196 805.91133,553 323.44 8,943 Jul633.09 633.71663.25605.7016,06025,203 2,357 842.14144,470343.54 9,568 Aug 631.56 632.59654.40 613.40 15,87325,040 2,356 828.74 141,141 333.90 9,546 Sep 600.15 598.19 637.75 573.60 15,11323,889 2,252 791.84143,017 317.15 8,975 Oct 586.65 585.78 608.50 560.75 14,931 23,741 2,235 777.19143,957 312.32 8,704 Nov 626.83 627.83 646.70 614.10 15,662 24,938 2,367 812.79146,267 328.37 9,141 Dec 629.51629.79648.75614.00 15,31924,423 2,368801.36142,593320.77 9,132 Quarterly Average Q1 554.13 554.07 14,811 23,099 2,082 750.31 109,607 316.22 8,002 Q2 629.17 627.71 16,028 25,052 2,304 839.34 130,680 342.85 9,294 Q3 621.76 621.67 15,685 24,716 2,322 821.03 142,849 331.57 9,361 Q4 613.61 613.21 15,302 24,363 2,320 796.77 144,410 320.46 9,015 GOLD PRICES IN 2006, PM FIX DAILY US$/oz; other currencies reindexed to 3rd January APPENDICES 800 750 Iran removes UN seals at the Natanz uranium plant US$/oz 700 650 Hamas wins Palestinian elections Silver ETF starts trading Gold at 26-year high Rand ECB announce 57tonne gold sale 600 Oil price at 17-month low 450 US$/oz Israel attacks Lebanon BT pension fund to invest 3% in commodities Jan Mar Feb Source: GFMS, Thomson Reuters 104 Yen A$ 550 500 Euro rises to 1.32 against US dollar Banco de Portugal reveals 20 tonnes sale N. Korea conducts first nuclear test N. Korea missile test Apr May Jun Jul Euro Israel-Hezbollah conflict Aug Sep Oct Chinese central bank comments on reserve allocation Nov Dec GFMS GOLD SURVEY 2015 APPENDIX 7 - GOLD PRICES IN 2007 London London High Low AM fix PM fix PM fix PM fix rupees/ US$/oz US$/oz US$/oz US$/oz euro/kg CHF/kg yen/g A$/oz rand/kg £/oz 10g Annual Average 696.43 695.39 16,294 26,775 2,628 828.48 157,352 346.98 9,345 Maximum 841.75 841.10 18,410 30,503 3,049 950.89 184,202 418.36 10,715 Minimum 608.30 608.40 15,063 24,242 2,324 756.38 141,802 314.34 8,520 Range:Average33.5%33.5%20.5%23.4% 27.6%23.5%26.9%30.0%23.5% Monthly Average Jan 630.35 631.17 651.75 608.40 15,622 25,235 2,444 806.34145,906 322.24 9,078 Feb 665.10 664.75 685.75 645.70 16,33726,486 2,575 849.24153,416 339.42 9,585 Mar 655.89 654.90 670.40 636.75 15,899 25,647 2,470 825.87154,830 336.27 9,368 Apr 680.01 679.37 691.40658.25 16,141 26,442 2,597820.08155,142 341.37 9,329 May 668.31 666.86688.80 652.65 15,863 26,185 2,590 807.95150,515 336.31 8,884 Jun 655.71 655.49 671.50 642.10 15,707 25,990 2,585 778.16150,842 329.87 8,713 Jul 665.27 665.30684.30 648.75 15,587 25,828 2,598 767.08149,158 327.08 8,755 Aug 664.53 665.41 675.50 657.50 15,704 25,728 2,497 803.62154,562 330.97 8,824 Sep 710.65 712.65 743.00 672.00 16,471 27,158 2,636 841.85162,798 352.92 9,322 Oct 754.48 754.60 789.50 725.50 17,049 28,490 2,811 839.32164,058 368.93 9,696 Nov 808.31 806.25 841.10 778.85 17,663 29,119 2,875 900.72174,059 389.36 10,341 Dec803.62803.20 833.75 784.25 17,72929,422 2,900 920.81176,124 397.28 10,291 Quarterly Average Q1 649.99 649.82 15,941 25,767 2,494 826.46 151,320 332.43 9,314 Q2 667.62 666.84 15,896 26,198 2,590 801.47 152,069 335.67 8,975 Q3 679.19 680.13 15,903 26,209 2,575 803.00 155,278 336.49 8,950 Q4 787.57 786.25 17,453 28,969 2,858 883.45 170,915 383.95 10,107 GOLD PRICES IN 2007, PM FIX DAILY US$/oz; other currencies reindexed to 2nd January US$/oz 800 Bear Stearns provides $3.2bn in loans to bail out hedge fund Cut in Fed Funds rate, basis points SNB announces plan to sell 250t over CBGA year Dollar weakens on lower than expected US trade report Turkish troops cross into US$/oz Iraq Newcrest reveals 2.3 Moz hedge book cut Slump in bond markets 50 News emerges of prospective Iranian and US talks Yen Rand 700 Euro Benazir Bhutto assassinated A$ Euro 600 500 Iran detains UK personnel Global stock markets fall Jan Mar Feb Source: GFMS, Thomson Reuters Novartis pension fund reveals 4% move into Lihir buyback commodities revealed Apr May Jun Turkish forces occupy Iraqi village 25 25 ECB injects €95bn to reassure markets Jul APPENDICES 900 Aug Sep Oct Gold price at 27-year high Nov Dec 105 GFMS GOLD SURVEY 2015 APPENDIX 8 - GOLD PRICES IN 2008 London London High Low AM fix PM fix PM fix PM fix rupees/ US$/oz US$/oz US$/oz US$/oz euro/kg CHF/kg yen/g A$/oz rand/kg £/oz 10g Annual Average 872.37 871.96 19,071 30,267 2,907 1,033 229,694 471.62 12,256 Maximum 1,023.50 1,011.25 21,390 33,263 3,313 Minimum 17,015 26,398 2,134 692.50 712.50 1,374 276,780 908 185,415 607.45 14,105 418.08 10,650 Range: Average 37.9% 34.3% 22.9% 22.7% 40.6% 45.1% 39.8% 40.2% 28.2% Monthly Average Jan 887.78 889.60 924.50 846.75 19,432 31,471 Feb 924.28 Mar 971.06 922.30 971.50 887.50 20,103 32,320 968.43 1,011.25 925.75 20,048 31,514 Apr 911.60 909.70 946.00 871.00 18,565 May 889.13 Jun 889.54 888.66 927.50 853.00 18,374 29,851 889.49 930.25 18,381 29,665 862.25 29,649 3,080 1,009.10 200,499 3,176 1,010.01 451.79 11,284 11,886 227,169 469.63 3,140 1,047.54 248,320 483.51 12,618 3,002 11,829 977.78 227,189 459.16 2,981 936.24 217,581 452.26 12,165 3,057 935.20 227,087 452.14 12,356 Jul 941.17 939.77 986.00 897.50 19,171 31,049 3,228 976.57 230,081 472.39 13,026 Aug 840.39 839.03 912.50 786.50 18,009 29,190 2,948 950.22 206,526 444.29 11,858 Sep 824.92 829.93 905.00 740.75 18,581 29,588 2,845 1,014.19 214,901 461.11 12,211 Oct 812.82 806.62 903.50 712.50 19,498 29,610 2,600 1,176.83 251,530 476.78 12,768 Nov 757.85 760.86 822.50 713.50 19,204 29,138 2,369 1,157.99 247,689 497.72 12,157 Dec 819.94 816.09 880.25 749.00 19,531 30,131 2,395 1,218.67 261,862 547.45 12,884 Quarterly Average Q1 925.67 924.83 19,848 31,772 3,131 1,021.19 224,187 467.55 11,912 Q2 897.11 896.29 18,443 29,718 3,014 950.40 224,105 454.63 12,114 Q3 870.81 871.60 18,613 29,983 3,012 981.19 217,695 459.93 12,389 Q4 797.98 794.76 19,413 29,618 2,463 1,183.57 253,457 505.19 12,611 GOLD PRICES IN 2008, PM FIX DAILY US$/oz; other currencies reindexed to 2nd January Collapse of Bear Stearns APPENDICES 1300 South African power crisis 1200 1100 Dollar at record low against euro US$/oz Israeli/Gaza conflict begins 50 Bailout of AIG Rand A$ 1000 US$/oz Euro 75 900 800 700 600 500 75 50 75 25 Cut in Fed Funds rate, basis points Jan Feb Source: GFMS, Thomson Reuters 106 Collapse of Washington Mutual Gold at record high Mar Apr May Oil price at record high BT Pension Fund invests £350m into commodities Jun Jul Yen 50 Collapse of Lehman Brothers Aug Sep Oct US interest rates at historic low Nov Dec GFMS GOLD SURVEY 2015 APPENDIX 9 - GOLD PRICES IN 2009 London London High Low AM fix PM fix PM fix PM fix rupees/ US$/oz US$/oz US$/oz US$/oz euro/kg CHF/kg yen/g A$/oz rand/kg £/oz 10g Annual Average 972.35 22,409 33,834 2,919 1,235.22 261,600 621.07 15,233 Maximum 1,218.25 1,212.50 973.66 25,857 38,963 3,442 1,543.63 324,690 729.97 18,220 Minimum 19,910 29,318 2,337 552.67 12,905 813.00 810.00 1,126.74 232,031 Range: Average 41.6% 41.4%26.5%28.5% 37.9%33.8%35.4%28.5%34.9% Monthly Average Jan 857.73 858.69 919.50 810.00 20,873 31,146 2,491 1,274.87 274,207 593.75 13,490 14,777 Feb 939.76 943.16 989.00 895.00 23,711 35,327 2,817 1,452.13 302,852 654.60 Mar 925.99 924.27 956.50 893.25 22,786 34,341 2,907 1,388.33 295,769 651.12 15,241 Apr 892.66 890.20 924.50 870.25 21,701 32,871 2,826 1,246.27 256,786 604.96 14,481 May 926.86 928.64 975.50 884.50 21,858 33,029 2,882 1,212.81 250,402 600.96 14,606 Jun 947.81 945.67 981.75 920.60 21,699 32,879 2,940 1,178.77 244,502 577.62 14,639 Jul 934.27 934.23 955.00 908.50 21,329 32,417 2,837 1,160.93 238,850 570.28 14,722 Aug 949.50 949.38 964.00 21,402 32,626 2,900 1,136.98 573.97 14,968 Sep 996.44 932.75 242,761 996.59 1,018.50 955.00 21,997 33,322 2,929 1,156.35 240,750 611.05 15,730 Oct 1,043.51 1,043.16 1,061.75 1,003.50 22,625 34,257 3,029 1,150.68 250,902 644.18 15,859 Nov 1,126.12 1,127.04 1,182.75 1,061.00 24,287 36,683 3,229 1,225.26 271,867 678.62 17,057 Dec 1,135.01 1,134.72 1,212.50 1,084.00 24,938 37,506 3,267 1,253.58 273,289 696.85 17,150 Quarterly Average Q1 907.61 908.41 22,442 33,589 2,739.87 1,370.76 290,830 633.10 14,467 Q2 923.20 922.18 21,749 32,923 2,884.56 1,211.50 250,367 593.86 14,577 Q3 960.00 960.00 21,577 32,788 2,887.37 1,152.01 240,696 585.21 15,125 Q4 1,100.64 1,099.63 23,897 36,075 3,169.69 1,208.06 264,864 672.38 16,712 GOLD PRICES IN 2009, PM FIX DAILY US$/oz; other currencies reindexed to 2nd January 1200 China reveals a 454-tonne increase in its gold reserves ECB cuts interest rate by 50 basis points 1100 US consumer prices fall most since 1955 Germany, Japan and France exit recession Yen Euro US$/oz 1000 Rand 900 800 APPENDICES 1300 Suspension of IMF approves gold Dubai World sales of 403.3 tonnes debt repayment India buys 200 tonnes of Barrick announces gold from IMF the closure of all US$/oz gold hedges Record inflows into ETFs 700 A$ FOMC begins ‘debt monetisation’ 600 US unemployment at 26-year high New CBGA announced 500 Jan Feb Source: GFMS, Thomson Reuters Mar Apr May Jun Jul Aug Sep Oct Nov Dec 107 GFMS GOLD SURVEY 2015 APPENDIX 10 - GOLD PRICES IN 2010 London London High Low AM fix PM fix PM fix PM fix rupees/ US$/oz US$/oz US$/oz US$/oz euro/kg CHF/kg yen/g A$/oz rand/kg £/oz 10g Annual Average 1,226.66 1,224.52 29,739 40,947 3,443.66 1,331.28 287,568 790.98 18,304 Maximum 1,426.00 1,421.00 34,573 46,133 3,792.49 1,523.73 315,461 911.35 20,780 Minimum 1,052.25 1,058.00 24,668 36,291 3,040.31 668.89 16,055 1,197.71 258,374 Range: Average30.5%29.6% 33.3%24.0% 21.8%24.5% 19.9%30.7%25.8% Monthly Average Jan 1,119.58 1,117.96 1,153.00 1,078.50 25,185 37,150 3,276 1,223.52 267,977 691.54 16,704 Feb 1,095.80 1,095.41 1,119.00 1,058.00 25,747 37,735 3,176 1,236.24 270,322 701.11 16,531 Mar 26,376 38,152 3,248 1,220.21 265,304 739.05 16,604 Apr 1,148.48 1,148.69 1,179.25 1,123.50 27,532 39,468 3,452 1,239.14 271,686 748.31 16,682 May 1,204.32 1,205.43 1,237.50 1,165.00 30,982 43,926 3,566 1,388.40 297,049 824.96 18,084 Jun 1,232.38 1,232.92 1,261.00 1,203.50 32,447 44,630 3,599 1,445.96 303,046 836.15 18,732 Jul 1,196.00 1,192.97 1,234.00 1,157.00 29,990 40,384 3,356 1,362.26 289,175 779.94 18,287 Aug 1,213.46 1,215.81 1,246.00 1,187.50 30,294 40,631 3,338 1,351.46 285,102 776.53 18,493 Sep 1,271.46 1,270.98 1,307.50 1,240.50 31,214 40,890 3,448 1,353.89 290,863 816.11 19,087 Oct 1,343.19 1,342.02 1,373.25 1,313.50 31,040 41,777 3,527 1,366.99 298,077 846.21 19,481 Nov 1,371.78 1,369.89 1,421.00 1,337.50 32,278 43,371 3,635 1,384.60 307,132 858.71 20,134 Dec 1,393.51 1,390.55 1,420.00 1,363.00 33,827 43,370 3,732 1,403.69 305,888 890.93 20,508 1,115.55 1,113.34 1,136.50 1,090.75 Quarterly Average Q1 1,110.56 1,109.12 25,798 37,701 3,234.21 1,226.35 267,746 711.92 16,615 Q2 1,196.13 1,196.74 30,369 42,718 3,540.10 1,359.75 290,794 800.55 17,826 Q3 1,227.18 1,226.75 30,503 40,635 3,381.48 1,355.94 288,431 791.08 18,605 Q4 1,369.53 1,366.78 32,333 42,831 3,628.36 1,384.49 303,684 863.91 20,044 GOLD PRICES IN 2010, PM FIX DAILY US$/oz; other currencies reindexed to 2nd January APPENDICES 1500 US$/oz 1400 1300 1200 IMF announces sale of 10 tonnes to the Central Bank of Bangladesh Eurozone sovereign debt crisis 1600 North Korea torpedoes South Korean ship Euro Anglogold Ashanti completes 95 tonne buyback US$/oz Greece asks for EU-IMF financial rescue package EU-IMF endorse Irish bailout Yen 1000 FOMC announces $600 billion QE2 package BIS announces it received 346 tonnes of gold in ‘swap’ operations 900 Jan Feb Mar Source: GFMS, Thomson Reuters Rand A$ Earthquake in Chile 1100 108 North Korea shells South Korea Apr May Jun Jul Aug Sep Oct Nov Dec GFMS GOLD SURVEY 2015 APPENDIX 11 - GOLD PRICES IN 2011 London London High Low AM fix PM fix PM fix PM fix rupees/ US$/oz US$/oz US$/oz US$/oz euro/kg CHF/kg yen/g A$/oz rand/kg £/oz 10g Annual Average 1,573.16 1,571.52 36,355 44,634 4,017.36 1,524.33 368,623 981.23 Maximum 1,896.50 1,895.00 43,403 52,578 4,697.99 1,801.96 468,817 1,188.73 23,899 29,140 Minimum 1,316.00 1,319.00 31,041 39,930 3,488.92 1,313.79 296,075 822.83 19,660 Range:Average 36.9% 36.7% 34.0% 28.3% 30.1% 32.0% 46.9% 37.3% 39.7% Monthly Average Jan 1,360.48 1,356.40 1,388.50 1,319.00 32,639 41,769 3,606.50 1,363.50 302,589 858.51 20,218 Feb 1,371.31 1,372.73 1,411.50 1,328.00 Mar 1,422.85 1,424.01 1,447.00 1,400.50 32,328 41,892 3,645.73 1,361.18 316,975 850.73 20,333 32,676 42,041 3,740.14 1,408.63 315,893 881.20 Apr 20,811 1,474.43 1,473.81 1,535.50 1,418.00 32,845 42,603 3,952.21 1,396.16 319,014 902.39 21,484 May 1,512.19 1,510.44 1,541.00 1,478.50 33,947 42,468 3,940.13 1,417.05 333,859 925.50 22,148 Jun 1,528.38 1,528.66 1,552.50 1,498.00 34,160 41,279 3,954.84 1,441.56 333,895 943.63 22,330 Jul 1,568.53 1,572.81 1,628.50 1,483.00 35,422 41,527 4,009.88 1,459.74 343,419 972.55 22,634 Aug 1,759.50 1,755.81 1,877.50 1,623.00 39,434 44,009 4,344.52 1,673.33 400,230 1,070.91 25,980 Sep 1,780.65 1,771.85 1,895.00 1,598.00 41,384 49,680 4,375.60 1,730.72 429,747 1,122.95 27,481 Oct 1,667.89 1,665.21 1,741.00 1,617.00 39,022 47,972 4,103.12 1,641.11 425,959 1,055.86 26,617 Nov 1,735.98 1,738.98 1,795.00 1,681.00 41,245 50,773 4,333.29 1,721.75 455,619 1,100.54 28,526 Dec 1,652.73 1,652.31 1,752.00 1,531.00 40,292 49,536 4,134.39 1,633.17 435,424 1,060.24 28,096 Quarterly Average Q1 1,386.69 1,386.27 32,552 41,907 3,666.58 1,378.77 311,950 864.32 19,660 Q2 1,506.80 1,506.13 33,687 42,073 3,949.05 1,419.40 329,343 924.27 20,745 Q3 1,704.96 1,702.12 38,798 45,126 4,246.92 1,623.75 391,866 1,057.86 21,585 Q4 1,686.85 1,688.01 40,199 49,444 4,195.36 1,667.85 439,449 1,073.26 25,915 GOLD PRICES IN 2011, PM FIX DAILY US$/oz; other currencies reindexed to 4th January 2200 IEA releases 600 million barrels of stockpiled oil Bond sales by Italy and Spain APPENDICES 2500 Italian P.M Berlusconi resigns Fed announces ‘Operation Twist’ Rand US$/oz 1900 Political tension in MENA Greek government passes austerity cuts A$ Portugal seeks EU bailout US$/oz Euro 1600 Yen 1300 1000 Earthquake strikes north-east Japan Jan Feb Mar Source: GFMS, Thomson Reuters Osama bin Laden killed Standard & Poor’s downgrades US debt to ‘AA+’ SNB announces a ceiling for CHF against the Euro Apr May Jun Jul Aug Sep Libyan leader Gadaffi killed North Korean leader Kim Jong-il dies Oct Nov Dec 109 GFMS GOLD SURVEY 2015 APPENDIX 12 - GOLD PRICES IN 2012 London London High Low AM fix PM fix PM fix PM fix rupees/ US$/oz US$/oz US$/oz US$/oz euro/kg CHF/kg yen/g A$/oz rand/kg £/oz 10g Annual Average 1,668.86 1,668.98 41,746 50,297 4,278.76 1,610.84 439,661 1,052.95 29,730 Maximum 1,790.00 1,791.75 44,579 53,903 4,796.72 1,752.28 506,902 1,129.33 32,640 Minimum 1,537.50 1,540.00 39,070 46,910 3,915.92 1,515.75 402,726 968.55 27,385 Range:Average15.1%15.1%13.2%13.9%20.6%14.7%23.7%15.3%17.7% Monthly Average Jan 1,656.10 1,656.12 1,744.001,598.00 41,248 49,9004,095.16 1,589.43 424,9601,066.94 27,713 Feb 1,743.10 1,742.62 1,781.00 1,711.50 42,328 51,0754,402.90 1,624.74 427,362 1,102.70 28,247 Mar 1,675.06 1,673.77 1,714.00 1,635.50 49,1144,439.99 1,589.72 408,376 1,057.45 27,979 40,731 Apr1,648.54 1,650.07 1,677.50 1,621.00 40,285 48,4104,309.32 1,593.70 415,184 1,030.25 28,750 May 1,585.11 1,585.50 1,664.00 1,540.00 39,905 47,9154,060.86 1,592.88 416,200 997.59 28,909 Jun 1,595.63 1,596.70 1,635.00 1,558.50 40,892 49,0924,076.66 1,594.54 429,451 1,025.09 29,951 Jul 1,592.78 1,593.91 1,622.00 1,556.25 41,694 50,0614,046.08 1,547.10 421,624 1,021.97 29,588 Aug 1,625.68 1,626.031,668.00 1,597.00 42,165 50,625 4,112.08 1,553.29 431,751 1,034.77 30,298 Sep 1,741.93 1,744.45 1,784.501,690.00 43,569 52,6634,382.48 1,678.17 462,742 1,082.66 31,779 Oct 1,746.35 1,747.01 1,791.751,706.50 43,313 52,3774,436.01 1,698.01485,5531,087.08 31,156 Nov 1,724.35 1,721.14 1,750.50 1,683.50 43,109 31,728 Dec 1,687.34 1,688.531,720.001,650.50 41,419 50,053 4,533.16 1,611.37466,5901,046.20 31,026 51,9354,484.45 1,654.56 486,317 1,078.30 Quarterly Average Q1 1,691.16 1,690.57 41,425 50,015 4,314.67 1,601.12 420,047 1,075.41 27,979 Q21,608.531,609.49 40,338 48,4454,144.541,593.66 420,074 1,016.64 29,234 Q31,650.701,652.00 42,442 51,0684,173.891,590.19437,9551,045.34 30,460 Q4 1,721.27 1,721.79 42,721 51,583 4,479.84 1,658.84 480,625 1,072.76 31,308 GOLD PRICES IN 2012, PM FIX DAILY US$/oz; other currencies reindexed to 3rd January APPENDICES 2200 Fed minutes lower Fed launches QE3 and anticipates low hopes of QE3 interest rates through mid-2015 Greek default avoided FOMC minutes Mario Draghi pledges Rand released, no sign of QE3 to do “whatever it takes” Spain seeks to save euro banking rescue Euro Fed says interest rates to stay low until at least 2014 US$/oz 1900 1600 1300 Standard & Poor’s downgrades 9 Eurozone nations, 14 put on negative outlook Fed Chairman Bernanke fails to mention QE3 Francois Hollande elected as French President ECB launches second round of LTRO Moody’s changes Fed minutes prompt Germany’s outlook increased hopes of QE3 to negative Fed extends “Operation Twist” ECB announces “unlimited” until year-end bond-buying scheme Greece bailout funds approved Yen German court ratifies Eurozone permanent rescue fund A$ US$/oz S&P cuts Spain’s credit rating Fed announces QE4 package Barack Obama re-elected as US President 1000 Jan Feb Mar Source: GFMS, Thomson Reuters 110 Apr May Jun Jul Aug Sep Oct Nov Dec GFMS GOLD SURVEY 2015 APPENDIX 13 - GOLD PRICES IN 2013 London London High Low AM fix PM fix PM fix PM fix rupees/ US$/oz US$/oz US$/oz US$/oz euro/kg CHF/kg yen/g A$/oz rand/kg £/oz 10g Annual Average 1,409.51 1,411.23 34,195 42,073 4,411.51 1,454.85 433,957 903.74 29,314 Maximum 1,692.50 1,693.75 40,810 50,752 5,052.10 1,623.04 489,792 1,069.66 33,590 Minimum 1,192.75 1,192.00 28,056 34,381 3,798.64 1,304.73 376,722 730.00 25,270 37.6% 28.4% Range:Average 35.5% 35.6% 37.3% 38.9% 28.4% 21.9% 26.1% Monthly Average Jan 1,671.89 1,670.95 1,693.75 1,645.25 40,383 49,645 4,791.78 1,590.90 471,490 1,047.05 30,691 Feb 1,630.69 1,627.59 1,674.25 1,576.50 39,230 48,203 4,872.23 30,091 39,513 48,450 4,859.41 1,539.98 Mar 1,591.01 1,592.86 1,613.75 1,574.00 1,579.14 463,478 1,052.42 468,771 1,056.66 29,658 Apr 1,485.90 1,485.08 1,583.50 1,380.00 36,643 44,689 4,675.82 1,431.18 433,109 970.01 27,823 May 1,416.14 1,413.50 1,469.25 1,354.75 35,024 43,469 4,590.97 1,428.98 424,447 924.77 26,883 Jun 1,342.70 1,342.36 1,404.00 1,192.00 32,690 40,250 4,196.95 1,423.44 430,454 866.11 27,359 Jul 1,284.35 1,286.72 1,335.00 1,212.75 31,590 39,045 4,120.81 1,404.32 408,562 847.23 27,040 Aug 1,345.05 1,347.10 1,419.50 1,280.50 32,526 40,082 4,233.99 1,491.95 435,363 869.02 30,339 Sep 1,348.46 1,348.80 1,399.50 1,301.00 32,467 40,034 4,301.21 1,452.72 430,847 850.14 30,566 Oct 1,314.40 1,316.18 1,361.00 1,265.50 31,027 38,204 4,138.85 1,383.45 417,523 818.05 30,755 Nov 1,277.42 1,275.82 1,320.50 1,240.00 30,394 37,429 4,104.94 1,369.56 417,534 791.95 30,864 Dec 1,221.59 1,225.40 1,266.25 1,195.25 28,752 407,174 748.53 30,172 35,191 4,071.12 1,363.12 Quarterly Average Q1 1,632.51 1,631.77 39,731 48,794 4,839.55 1,570.68 468,028 1,051.88 30,173 Q2 1,416.08 1,414.80 34,820 42,844 4,492.61 1,427.94 429,319 921.17 27,355 Q3 1,324.67 1,326.28 32,176 39,700 4,215.66 1,448.27 424,420 855.21 29,166 Q4 1,273.26 30,152 37,067 4,107.70 1,372.84 414,522 789.03 30,617 1,276.16 GOLD PRICES IN 2013, PM FIX DAILY US$/oz; other currencies reindexed to 2nd January 1800 Sequester triggers US spending cuts Indian government Q3 U.S. GDP climbed Import duty in raises import duty 2.8% annualised India raised to 10% to 8% vs. expected 2.0% EC suggests Imports to India get Cyprus sells US government shuts linked to volume of exports US Fed reduces €400mn worth down temporarily US economy shows bond buying of gold on budget impasse better-than-expected by $10 bn a month housing data and unemployment rate falls US$/oz 1600 APPENDICES 2000 Indian goverment raises import tax on gold and platinum from 4% to 6% Rand Yen 1400 1200 Fed will keep interest rate near zero until unemployment ECB cuts interest falls below 6.5% rate to new low of President Obama signs 0.5% amid region’s bill to avoid “fiscal cliff” ongoing worries A$ US$/oz Fed announces it could start slowing asset purchases by end-2013 1000 Jan Mar Feb Source: GFMS, Thomson Reuters Apr May Jun Jul Aug Sep US: added 203,000 new jobs, Euro jobless rate fall to 7% Oct Nov Dec 111 GFMS GOLD SURVEY 2015 APPENDIX 14 - GOLD PRICES IN 2014 LondonLondon High Low AM fix PM fix PM fix PM fix rupees/ US$/oz US$/oz US$/oz US$/oz euro/kg CHF/kg yen/g A$/oz rand/kg £/oz 10g Annual Average 1,266.06 1,266.40 30,638 37,202 4,298.13 1,402.94 440,562 768.22 28,283 Maximum 1,379.00 1,385.00 32,003 38,829 4,721.64 1,534.80 475,374 832.18 30,965 Minimum 1,144.50 1,142.00 28,811 35,391 4,085.57 1,323.91 409,113 714.91 25,585 Range:Average18.5%19.2%10.4% 9.2%14.8%15.0%15.0%15.3%19.0% Monthly Average Jan 1,243.071,244.80 1,267.00 1,221.00 29,396 36,163 4,153.751,406.38 434,373 755.95 29,732 Feb 1,298.711,300.981,339.001,250.25 30,599 37,3584,270.871,450.07 456,714 785.32 Mar 1,336.56 1,336.08 1,385.00 1,291.75 31,070 37,8204,396.04 1,471.67 460,280 30,411 804.17 30,034 Apr 1,299.181,299.00 1,325.75 1,283.75 30,242 36,8644,280.31 1,394.47 438,937 775.90 29,356 May 1,288.91 1,287.531,306.251,250.50 30,152 36,7974,214.08 1,383.49 429,199 764.67 28,914 Jun 1,277.86 1,279.10 1,318.50 1,242.75 30,239 36,8204,196.54 1,365.19438,950 756.12 27,552 Jul 1,312.99 1,310.971,340.251,285.25 31,135 37,8284,288.211,396.58 449,197 767.83 28,167 Aug 1,297.011,295.99 1,313.75 1,275.25 31,283 37,8984,287.68 1,392.57 443,821 775.91 28,302 Sep 1,241.33 1,238.821,286.50 1,213.50 30,888 37,2964,275.351,369.60 437,270 759.82 27,097 Oct 1,223.57 1,222.49 1,250.25 1,164.25 30,993 37,4324,244.32 1,392.98 434,539 760.55 27,082 Nov 1,176.41 1,176.30 1,203.75 1,142.00 30,320 36,4494,402.47 1,362.10 419,382 745.92 26,192 Dec1,200.441,202.291,229.00 1,175.75 31,342 37,6764,610.03 1,456.71 443,896 768.58 26,767 Quarterly Average Mar 1,291.90 1,293.06 30,336 37,095 4,271.69 1,442.01 450,101 731.34 30,042 Jun 1,288.47 1,288.39 30,211 36,827 4,229.76 1,380.79 435,749 765.41 28,587 Sep 1,283.82 1,281.94 31,097 37,670 4,283.70 1,386.21 443,506 767.61 27,830 Dec 1,201.24 1,201.40 30,883 37,190 4,407.41 1,402.55 432,517 758.29 26,680 GOLD PRICES IN 2014, PM FIX DAILY US$/oz; other currencies reindexed to 2nd January Additional taper takes stimulus down CME cuts to $55bn per month Gold short-covering rally gold futures A further $10bn margins by 10% meets profit taking followed taper is announced by heavy technical sales 1400 US April NFP rose 304,000 APPENDICES 1500 US November NFP ECB cuts refinancing rose by 321,000 rates to 0.05% Indian festival and overnight deposits to -0.20% demand reaches peak for the year Yen Euro US$/oz 1300 1200 1100 1000 Rand President Yanukovych leaves Ukraine US debt ceiling rises through to March 2015, technical default averted ISIS occupies Fallujah; Ukraine crisis adds to geopolitical risk. Jan Mar Feb Source: GFMS, Thomson Reuters 112 A$ US$/oz Argentina India eases gold defaults on Malaysian its debt Russia threatens import rules commercial airliner military exercise crashes in Ukraine along Ukraine border Apr May Jun Jul Aug India’s gold import Russian rouble weakens rule 80:20 13% in a week to scheme abolished lowest on record Sep Oct Nov Dec The cover of the GFMS Gold Survey 2015 is sponsored by the following companies: TANAKA PRECIOUS METALS Tanaka Precious Metals is Japan’s leading precious metals refiner and manufacturer. Although best known internationally for its high specification industrial products, used in various applications ranging from semiconductors to communications, the company is also a producer and trader of a wide range of gold bullion bars and coins. Tanaka bars are acceptable “good delivery” on the London gold market. Valcambi is a leader in precious metals refining and operates one of the world’s largest and most efficient integrated precious metals plants situated on a 33 hectare site, at Balerna, Switzerland. We are one of the world’s largest manufacturers of minted ingots. Reacting to the demands of investors in different markets around the globe we are continuously carefully developing within the size range from 0.5 g to 1000 g, gold, silver, platinum and palladium minted bars in different forms and new designs. For our clients, according to their wishes we customize individually obverse and reverse of the bars, certificates and tailored packaging solutions. All products produced in our foundry and minting facilities are certified by our laboratory, carefully inspected by our operators, individually packed and controlled before shipment. The Hallmark is not only a guarantee for quality of Swiss workmanship, it guarantees also the fineness of the most sought after bars in the world, desired by precious metals connoisseurs and investors alike. A Valcambi manufactured bar is not only sold at an outstanding price but is synonymous with unique craftsmanship, guaranteed fineness, transparency and reliability. GFMS Gold Gold Market Market Research Research GFMS and Forecasts Forecasts and SEEK MORE SEEK MORE Dig deeper into the gold market with GFMS research Dig deeper into on theThomson gold market withEikon. GFMSUse research and forecasts Reuters the and forecasts on Thomson Eikon. Use the the key new GFMS gold pages to Reuters quickly understand new GFMS gold market pages to quickly understand key drivers behind movements. See whichthe factors drivers market movements. See which drovebehind price performance in the past, what willfactors drive drove price performance in the past, willand drive the evolution of these markets in thewhat future, what is the evolutioninside of these markets in the future, and today. what is happening various sectors of the industry happening inside various sectors of the industry today. The cover of GFMS Gold Survey 2015 features the wide range of Tanaka and Valcambi minted and cast bars. Different pictures on a celluloid symbolise reasons why gold should be looked at as an investment. Cover designed by Valcambi and executed by BtoB Creativity, Coldrerio, Switzerland. GFMS gold pages include: GFMS gold pages include: • Historical supply and demand statistics •• Historical supply and demand statistics Forecasts of supply, demand and price •• •• Forecasts of supply, and price Field research reportsdemand on key markets Field research reports on key markets Exclusive analyst commentaries giving expert • Exclusive commentaries giving expert insight onanalyst news and market developments insight on news and market developments To find out more contact us on [email protected] ToFor findmore out more contactvisit us thomsonreuterseikon.com on [email protected] information For more information visit thomsonreuterseikon.com © 2015 Thomson Reuters. S019825 03/15. © 2015 Thomson Reuters. S019825 03/15. GFMS GOLD SURVEY 2015 © 2015 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. Thomson Reuters and the Kinesis logo are trademarks of Thomson Reuters. S020029 03/15. THOMSON REUTERS www.valcambi.com www.tanaka.co.jp GFMS GOLD SURVEY 2015
My Blog : http://pandacoinscollector.com/
© Copyright 2024 Paperzz