The Gold Price Outlook
Bullish/Bearish Factors
DGG – European Gold Forum
Dr. Martin Murenbeeld
Zurich - May 6, 2014
Last Year’s Forecast – April 16, 2013
“Scenario C was downgraded and the probabilities were shifted
towards Scenario A in the latest update!”
Gold Price Scenarios
2013-avg
Scenario A: p = 30%
Scenario B: p = 50%
Scenario C: p = 20%
$1519
$1637
$1767
2013-end
$1410
$1665
$1950
2014-avg
$1338
$1700
$2130
_______________________________________________
2
Weighted
$1625
$1653
$1707
Actual
$1411
$1205
????
What Went Wrong in 2013?
An orgy of ETF sales – 881 tonnes in 2013!
10
Change from previous week, tonnes
0
-10
-20
-30
-40
-50
-60
-70
2013-Q1
2013-Q2
Source: Bloomberg, World Gold Council, DCM Economics
3
| DUNDEE CAPITAL MARKETS
2013-Q3
2013-Q4
What Went Wrong in 2013?
ETF investors sold gold …
2750
2500
Tonnes
Last date: April 24, 2014
-895 T
-34%
2250
2000
1750
Other
1500
1250
-561 T
-42%
1000
SPDR Gold ETF
750
500
250
0
Apr-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14
Source: ExchangeTradedGold.com, Bloomberg
4
| DUNDEE CAPITAL MARKETS
What Went Wrong in 2013?
… And the “specs” sold off net-long positions
36
300
Weekly data
Last date: April 22, 2014
Gold Price
(quarterly % change)
240
24
180
12
120
0
607.7
tonnes
-12
60
“Specs” net long
-24
0
-60
2007
2008
Source: US CFTC, Comex
5
| DUNDEE CAPITAL MARKETS
2009
2010
2011
2012
2013
2014
ETF sales plus COMEX
“spec” selling totaled nearly
1500 tonnes in 2013!
-36
What Went Wrong in 2013?
… And everyone bought equities* …
1900
2000
1800
1875
1700
Gold
S&P 500
1750
1600
1625
1500
1500
1400
1375
1300
1250
1200
1125
1100
1000
Massive negative
correlation in 2013: -.88
1000
900
750
625
800
700
Daily data
Last date: April 30, 2014
600
2007
2008
2009
2010
2011
2012
2013
2014
Source: Thomson Reuters Datastream, London Bullion Market Association
6
875
| DUNDEE CAPITAL MARKETS
* “what’s good for gold is also
good for equities”
500
375
What Went Right in 2013?
Chinese demand picked up the slack!
250
200
Chinese Gold Imports from Hong Kong
1158 tonnes (net)
(monthly – tonnes)
150
557 tonnes (net)
100
50
0
-50
Chinese Gold Re-Exports to Hong Kong
(monthly – tonnes)
-100
Jan-10
Last month: February 2014
Jan-11
Jan-12
Jan-13
Source: Thomson Reuters Datastream, Hong Kong Census, DCM Economics
7
| DUNDEE CAPITAL MARKETS
Jan-14
What Went Right in 2013?
Chinese imports from Hong Kong hit record levels
225
200
Chinese Gold Imports
through Hong Kong
175
(monthly – tonnes)
150
3-month MA
125
100
75
50
25
0
J a n- 0 2
J a n- 0 3
J a n- 0 4
J a n- 0 5
J a n- 0 6
Source: Thomson Reuters Datastream
8
| DUNDEE CAPITAL MARKETS
J a n- 0 7
J a n- 0 8
J a n- 0 9
J a n- 10
J a n - 11
J a n- 12
J a n- 13
J a n- 14
Last month: February 2014
Where are we now? … “Struggling!”
1950
Gold - $/oz
$1895
1850
Death Cross!
$1795
1750
$1694
1650
$1614
1550
50-day MA
1450
200-day MA
$1540
$1469
$1420
$1385
1350
1250
$1250
Golden Cross!
1150
$1192
$1157
1050
$1058
Last date: May 1, 2014
950
2010
2011
Source: London Bullion Market Association
9
| DUNDEE CAPITAL MARKETS
2012
2013
2014
The Outlook for 2014-2015
A balance between Bullish and Bearish factors!
Eight Bullish Factors, including:
1.
•
•
•
•
Five Bearish Factors, including:
2.
•
•
•
•
Fed will end QE
US dollar will remain firm in 2014
Inflation will remain mostly absent
Financial assets will remain attractive
Forecast
3.
•
10
ETF supply will decline dramatically
Asian physical demand will continue
Global debt crisis will require ongoing monetary reflation
Long-run central bank demand will remain firm
Flat to moderately bullish!
| DUNDEE CAPITAL MARKETS
Bullish: (1) Gold Supply
Supply to jewelers/investors unlikely to rise …
1500
Net Mine
Supply
Billion
US$ ( supply less dehedging)
1500
Tonnes
Tonnes
Rising Modestly
1200
1200
900
900
600
600
300
300
0
2009
Net Mine Supply + Scrap Supply
2010
2011
2012
2013
2014
Stable
0
2009
2010
2011
2012
2013
2014
Net Mine Supply + Scrap – CB Demand
1500
(e)
Tonnes
1200
Lower gold prices
should curtail mine
output going forward!
900
600
Stable
300
0
2009
11
2010
2011
2012
| DUNDEE CAPITAL MARKETS
2013
2014
Bullish: (1) Gold Supply
Massive sales in 2013 not to be repeated in 2014!
20
Change from previous week, tonnes
10
0
0
-10
-20
-25 tonnes
2014 to date
-30
-40
-50
-869 tonnes
2013
-60
2013-Q1 2013-Q2 2013-Q3
-70
Source: Bloomberg, DCM Economics
12
| DUNDEE CAPITAL MARKETS
2013-Q4 2014-Q1
2014-Q2 2014-Q3 2014-Q4
Bullish: (2) Consumer Demand*
India/China becoming richer … LT demand positive
1100
tonnes
1000
RoW
China
India
900
800
700
600
500
400
300
49%
200
100
0
09-Q1
10-Q1
11-Q1
Source: World Gold Council “Gold Demand Trends - Full Year 2013”
data tabulated by Thomson Reuters GFMS
13
| DUNDEE CAPITAL MARKETS
12-Q1
13-Q1
14-Q1
*Consumer Demand
= Jewelry + bar/coin
Bullish: (3) CB’s Buying Gold
Data show demand holding up …
200
tonnes
150
100
50
0
-50
Central Bank Gold Sales/Purchases
-100
09-Q1
10-Q1
11-Q1
Source: World Gold Council “Gold Demand Trends - Full Year 2013”
Thomson Reuters GFMS
14
| DUNDEE CAPITAL MARKETS
12-Q1
13-Q1
14-Q1
Bullish: (3) CB’s Buying Gold
Global FX reserves are excessive … (62% in $’s)
Foreign Exchange Reserves
(countries over $100 bn)
bn$
China
3978.1 Hong Kong
Japan
1213.4 India
Saudi Arabia 727.4 Algeria
Switzerland
491.9 Mexico
Russia
429.7 Thailand
Taiwan
419.2 Malaysia
Brazil
354.1 Libya
Korea
341.0 Turkey
TOTAL
bn$
315.8
266.9
191.7
173.6
158.8
125.8
115.7
104.3
9407.3
Addendum: Fuel Exporters $1840 bn
Source: IM F - data through M arch 2014
15
| DUNDEE CAPITAL MARKETS
Some central banks
like the fact that gold
is not a liability of the
Federal Reserve …
RUSSIA?
CHINA?
OIL EXPORTERS?
Bullish: (4) Global Debt Crisis
Entitlements are killing Western economies …
70
US Budget:
60 Percent of total outlays
Entitlements
50
40
30
Defense
Interest on Debt
20
10
Other
0
Annual data (last year 2013)
1970
1975
1980
Source: Bureau of Economic Analysis
16
| DUNDEE CAPITAL MARKETS
1985
1990
1995
2000
2005
2010
Bullish: (4) Global Debt Crisis
Countries accordingly have high debt/GDP ratios
250
Percent
of GDP
General government debt
200
2002
2008
2014
150
Over 90%
spells trouble
(Reinhart/Rogoff)
100
50
0
Japan
Italy
Source: IMF Fiscal Monitor April 2014
17
| DUNDEE CAPITAL MARKETS
US
Portugal
Greece
Spain
France
Bullish: (4) Global Debt Crisis
Higher growth needed (and lower interest rates) …
Estimates for 2013
Primary
Nominal
Balance GDP Growth
A
B
Greece
Japan
Spain
Ireland
Portugal
US
Canada
Italy
Germany
1.5
-7.6
-4.3
-3.4
-0.7
-4.1
-2.6
2.0
1.7
-5.8
1.0
-0.6
0.1
0.3
3.4
3.3
-0.4
2.7
5-year
Bond Yield
C
A+B-C
5.0
0.2
1.7
1.1
2.6
1.7
1.7
1.9
0.6
-9.3
-6.8
-6.6
-4.5
-3.0
-2.4
-1.1
-0.3
3.7
Sources:
Primary Balance - IM F Fiscal M onitor, April 2014
Nominal GDP - IM F World Economic Outlook, April 2014
Yields as of April 28, Thomson Reuters DataStream (Greece: April 10 bond sale)
RED: Debt/GDP ratio to rise further!
18
| DUNDEE CAPITAL MARKETS
For debt ratio
to decline
A+B–C > 0
As it stands
only Germany
will actually
have reduced
its Debt/GDP
ratio in 2013!!
Bullish: (4) Global Debt Crisis
So what will governments do?
Government Choices:
• Austerity:
•
•
Cut services/raise taxes
Deflate – accept “depression”
Bad for gold
• Reflation:
• Inflate-devalue-default
• Financial repression
19
| DUNDEE CAPITAL MARKETS
Good for gold
Bullish: (4) Global Debt Crisis
All balance sheets expanding – ECB excepted …
1000
January 2000 = 100
800
People's Bank of China
Bank of England*
Federal Reserve
European Central Bank
Bank of Japan
600
400
Set to 100
200
Last month: March 2014
0
00
01
02
03
04
*Bank of England June 2006 = 130
Source: Thomson Reuters Datastream
20
| DUNDEE CAPITAL MARKETS
05
06
07
08
09
10
11
12
13
14
Bullish: (4) Global Debt Crisis
But ECB will have to change policies …
110
105
REAL GDP
Q4 2007 = 100
100
United States
95
Eurozone
90
85
Last quarter: 2013-Q4
80
00
01
02
03
04
05
06
07
08
09
Source: US Bureau of Economic Analysis, Eurostat, DCM Economics calculations
21
| DUNDEE CAPITAL MARKETS
10
11
12
13
14
Bullish: (4) Global Debt Crisis
Liquidity is important to gold …
1850
16.5
1700
15.0
1550
13.5
Gold oversold
in 2013?
1400
12.0
1250
10.5
1100
9.0
950
7.5
Global Liquidity
800
Gold
650
(month average)
6.0
4.5
500
3.0
Last month:
Gold – April 2014
Liquidity – March 201r
350
200
0.0
82
84
86
88
90
92
94
96
98
00
12
12
12
Global Liquidity: FX Reserves + US MBase
Source: London Bullion Market Association, IMF International Financial Statistics, Federal Reserve
22
1.5
| DUNDEE CAPITAL MARKETS
12
10
12
14
Bullish: (4) Global Debt Crisis
Gold often rises and falls with liquidity …
60
%
%
48
42
35
Global Liquidity
Gold
36
28
24
21
12
14
0
7
-12
0
Gold oversold
in 2013?
-24
-7
Correlation: .62
Last month: April 2014
-36
-14
82
84
86
88
90
92
94
96
98
00
02
04
06
Global Liquidity: FX Reserves + US MBase
Source: London Bullion Market Association, IMF International Financial Statistics, Federal Reserve
23
| DUNDEE CAPITAL MARKETS
08
10
12
14
Bullish: (5) Dollar Fundamentally Overvalued
US dollar “should” continue to decline …
150
US recession
US Dollar Indices
Fed Major (March 1973=100)
Murenbeeld-EFXR0 (Jan 1999=100)
Murenbeeld-NEFXR (Jan 1999=100)
140
130
120
110
100
90
80
70
Last month: April 2014
60
73
75
77
79
81
83
85
87
89
91
93
Source: Wall Street Journal, Federal Reserve, DCM Economics
24
| DUNDEE CAPITAL MARKETS
95
97
99
01
03
05
07
09
11
13
Bullish: (5) Dollar Fundamentally Overvalued
US trade deficits are much too large …
0
bn$
-10
0
Billion US$
-100
-20
-200
-30
-300
-40
-400
-50
-500
12-month
total bn$
-60
World
-70
12-month total
(goods only)
-80
-90
-2
Billion US$
25
-80
-10
-100
-12
-120
| DUNDEE CAPITAL MARKETS
-200
-250
China
12-month
total bn$
-300
-350
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
-8
Source: Thomson Reuters Datastream
-20
-35
-60
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
-150
-900
-6
-16
-50
-15
-30
-20
12-month
total bn$
Billion US$
-100
-800
-40
EU
0
-10
-25
-4
-14
-5
-700
0
bn$
bn$
-600
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
0
0
0
-1
bn$
0
Billion US$
-10
-2
-20
-3
-30
-4
-40
-5
-50
-6
-60
-7
-70
-8
-140
-9
-160
-10
Japan
-80
12-month
total bn$
-90
-100
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
Last month: February 2014
Bullish: (5) RMB Fundamentally Undervalued
China’s trade balance surpluses significant!
225
810
bn$
200
4-quarter total bn$
Billion US$
175
World
150
90
630
80
540
70
450
100
360
75
270
50
180
25
90
0
95
98
01
04
07
10
13
80
60
240
50
200
40
160
30
120
20
80
10
40
0
0
98
01
04
07
Source: Thomson Reuters Datastream
| DUNDEE CAPITAL MARKETS
10
13
Billion US$
400
360
280
US
60
240
50
200
40
160
30
120
20
80
10
40
0
0
98
01
04
07
18
10
13
4-quarter total bn$
bn$
280
EU
4-quarter total bn$
320
95
320
95
bn$
4-quarter total bn$
bn$
70
26
720
125
0
100
(e)
15
12
60
50
40
Japan
9
30
6
20
3
10
0
0
95
98
01
04
07
10
13
Bullish: (6) Commodity Cycle
The shortest copper cycle lasted 16 years*
700
Shortest cycle – 16 years
650
600
Real Copper Price
550
2013 cents/lb
500
450
400
350
300
250
200
150
10-year MA
100
50
1850
1875
1900
1925
1950
1975
*despite reversals – which are common in all long cycles
Source: Wall Street Journal, DCM Economics
27
| DUNDEE CAPITAL MARKETS
2000
Bullish: (6) Commodity Cycle
The shortest gold cycle lasted 10 years*
7.50
LN (Real Gold Price)
7.25
2013$/ounce
Shortest bull-cycle
– 10 years
7.00
6.75
US Civil
War
6.50
6.25
6.00
Gold set
at $35
5.75
CORRECTION
10-year MA
5.50
5.25
1800
1825
1850
1875
1900
1925
*data converted to log-data for easy visual!
Source: Thomson Reuters Datastream, LBMA, DCM Economics
28
| DUNDEE CAPITAL MARKETS
1950
1975
2000
The 1970 Bull Market - Price Corrections
900
850
London Daily PM Fix
800
Bull market
ends
700
Geopolitical Crisis!
600
US recession
500
-43%
Mid-Cycle
Correction
400
482
426
-17%
(more than 86 weeks)
354
300
243
195
200
180
127
100
70
154
-28%
90 -29%
60 -14%
190
137
129
104
-47%
-20%
-12%
193
168
-11%
0
70
71
72
73
Source: London Bullion Market Association
29
| DUNDEE CAPITAL MARKETS
74
75
76
77
78
79
80
81
Bullish: (7) Gold Not "Expensive"
The NASDAQ was a real bubble … not gold …
1600
1400
NASDAQ 1990-2009
1200
SILVER: 2001/11/23 to date
GOLD: 2001/03/30 to date
1000
800
600
Everything
set to 100
400
200
0
1
2
3
4
5
6
7
Years
Source: Thomson Reuters Datastream, DCM Economics
30
| DUNDEE CAPITAL MARKETS
8
9
10
11
12
13
14
Bullish: (7) Gold Not "Expensive"
To back US money supply higher prices needed
11000
10000
$9800
Price of gold to “cover” US M2
(Cover ratio = .24)
9000
8000
7000
6000
5000
Price of gold to “cover” US M1
(Cover ratio = .38)
4000
$3700
3000
2000
1000
0
1934
1944
1954
1964
1974
1984
“Cover ratio” as determined in 1934 when gold was revalued to $35
Source: Thomson Reuters Datastream, DCM Economics
31
| DUNDEE CAPITAL MARKETS
1994
2004
2014
Bullish: (7) Gold Not "Expensive"
But gold close to long-term average versus oil
35
30
1970 to date
average:
15.10
25
20
15
10
5
Barrels of oil per
ounce of gold
Last month: April 2014
0
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14
Source: Thomson Reuters Datastream, London Bullion Market Association
32
| DUNDEE CAPITAL MARKETS
Bullish: (7) Gold Not "Expensive"
Gold close to long-term average with copper
800
Pounds of copper per ounce of gold
700
600
500
400
300
200
1970 to date
average: 349.0
100
Last month: April 2014
0
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14
Source: Thomson Reuters Datastream, London Bullion Market Association
33
| DUNDEE CAPITAL MARKETS
Bullish: (7) Gold Not "Expensive"
And gold/silver ratio close to long-term average
105
90
Ounces of silver per
ounce of gold
75
60
45
1970 to date
average: 53.8
30
Last month: April 2014
15
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14
Source: Thomson Reuters Datastream, London Bullion Market Association
34
| DUNDEE CAPITAL MARKETS
Bullish: (8) Geopolitical
The biggest geopolitical crisis to date …
900
IRAN
800
700
about $400
(or 100%)
Cyclical peak in gold
600
500
Iranian hostage crisis and
Russia in Afghanistan
400
300
Gold Price: Jul 30/79 to May 29/80
200
1979
Source: London Bullion Market Association
35
| DUNDEE CAPITAL MARKETS
1980
1981
Bullish: (8) Geopolitical
… the Ukraine/Crimea crisis added about $100
1400
Ukraine/Crimea
1350
1300
The Ukraine/Crimea crisis
would appear to have added
about $100 to the gold price
the first time around.
We’ll see what the (likely)
second round will look like!
1250
1200
Gold Price: Oct 01/13 to date
1150
2013
Source: London Bullion Market Association
36
| DUNDEE CAPITAL MARKETS
2014
Bearish: (1) Need for Liquidity
The EM’s have significant gold reserves of late …
9000
Tonnes
Last month: February 2014
8000
US Gold Reserves
7000
EM’s Gold Reserves
6000
5000
4000
Jan-09
Jan-10
Jan-11
Source: IMF International Financial Statistics
37
| DUNDEE CAPITAL MARKETS
Jan-12
Jan-13
Jan-14
Bearish: (1) Need for Liquidity
Recycled gold elevated when liquidity needs rise
2000
tonnes
Great
Recession
Recycled/Scrap Gold
1800
1600
1400
Asian
Financial
Crisis
1200
1000
800
600
400
200
0
1986
1990
1994
1998
Source: World Gold Council “Gold Demand Trends - Full Year 2013”
Thomson Reuters GFMS
38
| DUNDEE CAPITAL MARKETS
2002
2006
2010
2014
Bearish: (1) Need for Liquidity
Indian CA deficit* has led to gold import barriers
175
Last month: January 2014
INDIA
Gold Imports
150
(monthly – tonnes)
125
100
12-month MA
75
50
25
0
J a n- 0 3
J a n- 0 4
J a n- 0 5
J a n- 0 6
J a n- 0 7
J a n- 0 8
J a n- 0 9
J a n - 10
J a n- 11
J a n- 12
J a n- 13
J a n- 14
Source: Thomson Reuters Datastream, DCM estimates
*Need to preserve scarce FX liquidity!
39
| DUNDEE CAPITAL MARKETS
Bearish: (2) Fed Ends QE
US real rates rise … TIPS rise …
2000
-1.0
1750
-0.5
1500
0.0
GOLD
1250
0.5
1000
1.0
750
1.5
10-year TIPS
500
2.0
250
2.5
Last month: April 2014
0
00
01
02
03
04
05
06
Source: US Bureau of Labor Statistics, Federal Reserve
40
| DUNDEE CAPITAL MARKETS
07
08
09
10
11
12
13
3.0
14
Bearish: (2) Fed Ends QE
US real rates rise … but gold down too far!?
60
-1.0
10-year TIPS
48
-0.5
GOLD
% year-on-year
36
0.0
24
0.5
12
1.0
0
1.5
-12
2.0
-24
2.5
Last month: April 2014
-36
00
01
02
03
04
05
06
07
08
09
10
11
12
13
3.0
14
Source: US Bureau of Labor Statistics, Federal Reserve
Gold fell too far in 2013?
41
| DUNDEE CAPITAL MARKETS
Bearish: (2) Fed Ends QE
Real 10-year rate rising …
-2.0
60
10-year Treasuries
less CPI
48
-1.0
36
0.0
24
1.0
12
2.0
0
3.0
GOLD
% year-over-year
-12
4.0
5.0
-24
Last month: April 2014
-36
00
01
02
03
04
05
Source: US Bureau of Labor Statistics, Federal Reserve
42
| DUNDEE CAPITAL MARKETS
06
07
08
09
10
11
12
13
6.0
14
Bearish: (2) Fed Ends QE
Real TB-rate also rising somewhat …
60
-4.0
GOLD
% year-on-year
48
-3.0
36
-2.0
24
-1.0
12
0.0
0
1.0
-12
2.0
90-day TB less CPI
-24
Last month: April 2014
-36
00
01
02
03
04
05
Source: US Bureau of Labor Statistics, Federal Reserve
43
3.0
| DUNDEE CAPITAL MARKETS
06
07
08
09
10
11
12
13
4.0
14
Bearish: (2) Fed Ends QE
But real ST rates <2% do not usually slow gold …!
5
US real short term
interest rate
4
Gold prices
often stall
when real
rates rise
above 2%!
3
2
Real rates
not above
zero before
2016 …??
1
0
Real rates below zero are
very positive for gold
-1
-2
-3
-4
Last month: April 2014
-5
90
91
92
93
94
95
96
97
98
99
00
Source: US Bureau of Labor Statistics, Federal Reserve
44
| DUNDEE CAPITAL MARKETS
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
Bearish: (3) Global Economy Sluggish
Recessions always a major headwind for gold …
2000
1900
Gold daily p.m. fix
Data through May 1, 2014
1800
1700
1600
US recession
1500
37%
1400
1300
1200
1100
1000
900
30%
Eurozone
Recession/Depression
800
700
600
500
Jan 07 Jul 07 Feb 08 Sep 08 Apr 09 Nov 09 Jun 10 Jan 11 Aug 11 Mar 12 Oct 12 Apr 13 Nov 13 Jun 14
Source: London Bullion Market Association
45
| DUNDEE CAPITAL MARKETS
Bearish: (3) Global Economy Sluggish
Commodities decline when world growth < 4%
8
CRB and BoC commodity price indices are inflationadjusted and highly correlated with world growth
7
40
30
CRB Index
6
20
Bank of Canada Index
5
10
4
0
3
-10
2
-20
1
-30
World GDP %
0
-40
US recession
-1
-50
1968
1972
1976
1980
1984
1988
1992
1996
Source: IMF, Bank of Canada, Thomson Reuters Datastream, DCM Economics
46
| DUNDEE CAPITAL MARKETS
2000
2004
2008
2012
Bearish: (3) Global Economy Sluggish
And commodity prices generally are down …
50
470
US recessions
China Joins WTO
430
40
Nov 2001
30
390
20
% year-over-year
350
10
0
310
-10
270
-20
230
-30
Thomson
Reuters/Jeffries
CRB Index
190
-40
Last month: April 2014
150
90
92
94
96
Source: Wall Street Journal
47
| DUNDEE CAPITAL MARKETS
98
00
02
04
06
08
10
12
14
CRB INDEX: 19 commodity prices - Energy 39%, Agriculture
41%, Precious Metals 7%, Industrial Metals 13%
-50
Bearish: (3) Global Economy Sluggish
US CPI is trending lower too …!
7
Last month: March 2014
% YoY
6
Headline CPI
5
Core CPI
4
3
2
1
0
Fed’s PCE
US recessions
-1
-2
-3
90
92
94
96
98
00
02
04
Source: US Bureau of Labor Statistics, US Bureau of Economic Analysis
48
| DUNDEE CAPITAL MARKETS
06
08
10
12
14
Bearish: (4) Dollar Strengthens
The dollar rises … others devalue against dollar
65
2000
Corr: -.90
US Dollar
stronger
Corr: -.84
Corr: -.77
Corr: -.48
Corr: -.29
Corr: -.80
Corr: -.58
Corr: -.20
to date
70
1750
75
1500
80
1250
Since 2006
correlation: -.81
85
1000
Gold
90
750
Latest week: April 25, 2014
95
07
08
09
10
11
12
13
Dollar Index includes: Canadian dollar, Aussie dollar, euro, yen, Swiss Franc, pound, rupee, RMB/yuan
Axis is inverted!
Source: Wall Street Journal, London Bullion Market Association, Dundee Capital Markets calculations
49
| DUNDEE CAPITAL MARKETS
14
500
Bearish: (4) Dollar Strengthens
Gold/US dollar correlations always negative
-35
50
US Dollar - %
Inverted scale
Gold
%
40
-28
30
-21
US dollar index
(four currencies)
20
-14
10
-7
0
0
-10
7
US dollar index
-20
14
(eight currencies)
Last quarter: 2014-Q1
21
-30
82
84
86
88
90
92
94
96
98
00
Source: Wall Street Journal, Dundee Capital Markets calculations
50
| DUNDEE CAPITAL MARKETS
13
13
13
13
13
12
correlation: -0.59
correlation: -0.64
14
Bearish: (5) Equity Markets Rally Further
Equity markets are competition for gold!?
1900
2000
1800
1875
1700
Gold
S&P 500
1750
1600
1625
1500
1500
1400
1375
1300
1250
1200
1125
1100
1000
1000
875
Monetary Reflation!
900
750
625
800
700
Daily data
Last date: April 30, 2014
600
2007
2008
2009
2010
2011
Source: Thomson Reuters Datastream, London Bullion Market Association
51
| DUNDEE CAPITAL MARKETS
2012
2013
2014
500
375
Forecast Issued March 28, 2014
Gold Price Scenarios
2014-avg
Scenario A: p = 25-15% $1182
Scenario B: p = 50-55% $1307
Scenario C: p = 25-30% $1409
2014-end
$1105
$1350
$1535
2015-avg
$1065
$1400
$1667
_______________________________________________
Weighted
$1311
$1367
Averages to date: Q1 - $1293; April - $1300
52
| DUNDEE CAPITAL MARKETS
$1438