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Gold (GLD) Is A Bubble?

IS GOLD FA BUBBLE? GOLD BULLION INTERNATIONAL GOLD BULLION INTERNATIONAL WHICH OF THESE MARKETS IS NOT LIKE THE OTHERS? 2,500 Gold Price "71-'82 2,000 1,500 Nasdaq 90-'02 1,000 set to 100 500 Gold Price "01-present 2 3 4 5 6 7 8 9 10 11 12 Years Some perspective on Gold's decade long run in comparison to other recent bull markets 2500 2000 O NASDAQ (peak in March 2000) 1500 OIL NASDAQ TERMS PEAK PEAK 1000 PRICE O Crude oil (peak in July 2008) OF GOLD $2,602 $6,072 500 O Gold (peak August 2011) Source: FactSet Research Systems Gold's rise over the past ten years has been steady. We haven't had exponential growth that is typically seen in most bubble markets. IS GOLD UNDEROWNED ? HAS GOLD ALWAYS BEEN AN Today 1% of world's wealth is in gold UNDEROWNED ASSET CLASS ? let's look at the last 100 Years ! Fixed income (48.7% 35% Money markets 9.1% 30% Gold ( 1.0% 25% Alternative investment 4.0% 20% Equities (37.2%) 15% 10% 5% 0% 1921 1932 1948 1981 2009 Source: BIS, Hedge Fund Research, J.P. Morgan, Prequin, World Federation of Exchanges, WGC Source: Silberjunge.de, Erste Group Research Less than 1% of the total wealth today is in gold. During the last bull market in the late 70's, 5% of the world's wealth was in Gold. In order to rise to 2%, it would require 85,000 tonnes (-35 years of mine supply current prices) WHAT ARE CENTRAL BANKS DOING ? CENTRAL BANKS HAVE TURNED NET BUYERS Million Ounces Percent 30 30 20 20 10- 10 ШЧ -10 -10 -20 -20 -30 -30 -40 40 -50 -50 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 Emerging market central banks are underexposed 89.4% 81.4% 77.4% 75.7% 13.4% United States Germany France Netherlands 9.1% 3.3% 1.7% 0.5% WORLD India Saudi Arabia China Brazil BUT THEY HAVE STARTED BUYING WHERE IS THE GOLD DEMAND GOING? Chinese maindland's: India's share: 248.3 Tons 155.9 Tons (up 25% from Q2 of 2010) (World Highest) Worth $12.0 Billion worth $7.5 Billion Global Gold demand for Q2, 2011: 919.8 Tons worth $44.5 Billion Source: World Gold Council, GFMS However, China and India are on the lower end of the gold consumption intensity Per capita gold consumption (gm) 1.6 Taiwan 1.4 O South Korea 1.2 United States 1.0 O Japan Italy 0.8 0.6 O Russia O United Kingdom India 0.4 O China 0.2 O Indonesia O Thailand 10 20 30 40 50 GDP per capita (USS'000) Source: GFMS, IMF, World Gold Council estimates China gold demand per capita (gm) and the gold price (RMB/oz) Grams RMB/oz 0.6 10000 0.5 8000 0.4 6000 0.3 -4000 0.2 0.1 2000 0.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Total demand per capita GOLD (RMB/oz, rhs) Source: Bloomberg, GFMS, World Gold Council Is there enough gold to handle a growing demand? Above Ground Stock of Gold 12/2010 - 166,600 Tonnes 3.45x Olympic sized Pools can fit all (Official Holdings (16%)) Jewelry (52%) the gold in the world Private Investment (19%)) All gold ever mined is still in existence. Despite improvements in exploration technology, supply is ONLY growing 2% per annum Other Fabrication (11%)) Lost & Unaccounted (2%) Source: GFMS (Gold Survey 2011) MINIMAL SUPPLY GROWTH AND DECLINE IN QUALITY SUPPLY GROWTH IS MINIMAL 2001: Peak Production 3,000 I Other 2,500 I Big Four 2,000 1,500 1,000 500 1969 1974 1979 1984 1989 1994 1999 2004 2009 "South Africa, United States, Australia, Canada DISCOVERY QUALITY IS DECLINING Average grades are flattening. High Grade discoveries are 10 2.32 G/T IN 1980 increasingly hard to find. 3-YEAR ROLLING AVERAGE 1.10 G/T IN 2007 1960 1970 1980 1990 2000 2010 Source: FactSet Research Systems Gold supply has not grown in proportion to money supply over the past two decades 1000% 900% Money Supply 800% Mining Supply 700% 600% s00% 400% 300% 200% 100% 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 Source: GFMS World Gold Survey 2010 1 Year of Gold Production 2500 Metrics of supply each year GOLD BULLION INTERNATIONAL 10 YEARS PERFORMANCE

Gold (GLD) Is A Bubble?

shared by rmmojado on Mar 26
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Gold (GLD) and Gold investing has become one of the most polarizing subjects within the investment world today. This infograph lays out the case that secular trends we’ve seen emerge over the last f...

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Gold Bullion

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Economy
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