Precious Metals Advisory                                                                                                  ...
Precious Metals Advisory                 6 December 2012           Page 2Precious Metals Prices May Lack Direction in 2013...
Precious Metals Advisory                                      6 December 2012                Page 3Price Targets          ...
Precious Metals Advisory                                   6 December 2012                Page 4Price Targets             ...
Precious Metals Advisory                                           6 December 2012                             Page 5 Macr...
Precious Metals Advisory                           6 December 2012              Page 6Macroeconomic Indicators (cont)  10-...
Precious Metals Advisory                            6 December 2012              Page 7 U.S. Macroeconomic Indicators Real...
Precious Metals Advisory                                  6 December 2012              Page 8Gold OutlookGold prices may b...
Precious Metals Advisory                           6 December 2012                  Page 9Demand from central banks also m...
Precious Metals Advisory                          6 December 2012                   Page 10    this sharp decline over the...
Precious Metals Advisory                                  6 December 2012        Page 11   lion ounces, a record high, in ...
Precious Metals Advisory                                 6 December 2012           Page 12       not been very strong. The...
Precious Metals Advisory                            6 December 2012                  Page 13       by 54,713 ounces to 8.8...
Precious Metals Advisory                 6 December 2012           Page 14Bullion Coins                                   ...
Precious Metals Advisory                                              6 December 2012                         Page 15Gold ...
Precious Metals Advisory                             6 December 2012                   Page 16Silver OutlookSilver prices ...
Cpm precious metals advisory 2012 12-06
Cpm precious metals advisory 2012 12-06
Cpm precious metals advisory 2012 12-06
Cpm precious metals advisory 2012 12-06
Cpm precious metals advisory 2012 12-06
Cpm precious metals advisory 2012 12-06
Cpm precious metals advisory 2012 12-06
Cpm precious metals advisory 2012 12-06
Cpm precious metals advisory 2012 12-06
Cpm precious metals advisory 2012 12-06
Cpm precious metals advisory 2012 12-06
Cpm precious metals advisory 2012 12-06
Cpm precious metals advisory 2012 12-06
Cpm precious metals advisory 2012 12-06
Cpm precious metals advisory 2012 12-06
Cpm precious metals advisory 2012 12-06
Cpm precious metals advisory 2012 12-06
Cpm precious metals advisory 2012 12-06
Cpm precious metals advisory 2012 12-06
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  1. 1. Precious Metals Advisory Vol. XXV, No. 12 6 December 2012 Precious Metals Prices May Lack Direction in 2013 Next Scheduled Issue: 10 January 2012 Market Data (Data as of 6 December; changes from 8 November)There is a tremendous amount of uncertainty in the mar-ket regarding the economy and the future for precious Nymex/Comex Nearby Active Prices %∆ $∆metals prices. As a result precious metals investors may Gold 1,701.80 ↓ -1.4% -24.20wait on the sidelines in December. Many price-moving Silver 33.11 ↑ 2.7% 0.87factors appear already priced into the market, such as de- Platinum 1,600.70 ↑ 3.8% 58.20mand expectations for the PGMs and silver, a continua- Palladium 697.05 ↑ 13.5% 82.70tion of the recession in Western Europe, China’s reduced Rhodium* 1,100.00 ↓ -4.3% -50.00economic growth trajectory, and sovereign debt handling *Rhodium price is BASF daily settlement price.in Europe. The approaching U.S. fiscal cliff may have Nymex/Comex Inventories oz ∆ ozcontributed to precious metals price increases in Novem- Goldber and may continue to influence prices through the end Eligible 8,800,826 ↑ 119,225 8,681,601of the year. Registered 2,602,693 ↑ 15,114 2,587,579 T otal 11,403,519 ↑ 134,339 11,269,180 SilverPrecious metals prices typically move higher in the first Eligible 105,456,690 ↓ -1,141,470 106,598,160few months of the year due to seasonal factors. Overall, Registered 39,836,930 ↑ 3,428,100 36,408,830however, prices are expected to average modestly lower T otal 145,293,620 ↑ 2,286,630 143,006,990in 2013 relative to 2012 levels. Investment demand vol- Platinum - T otal 207,850 ↑ 9,350 198,500umes for gold and silver are expected to come off further Palladium - T otal 531,100 ↓ -2,000 533,100next year, which will be the primary driver behind lower Open Interest1 oz ∆ ozgold and silver prices. Investors are expected to continue Goldto welcome opportunities to buy at price dips. That ten- February 27,853,400 ↑ 21,074,800 6,778,600 T otal 42,851,800 ↓ -2,187,500 45,039,300dency to view dips in prices as buying opportunities Silvercould dissipate as the year progresses if sell-offs are not March 426,995,000 ↑ 318,450,000 108,545,000followed by significant rallies, as investors would begin T otal 704,615,000 ↑ 15,535,000 689,080,000 Platinumto re-evaluate their longer term bullish sentiments in light January 2,724,400 ↓ -79,200 2,803,600of weaker prices. The platinum group metals may trade April 344,950 ↑ 154,100 190,850 3,091,700 3,005,250modestly higher on an annual average basis, with weak T otal ↑ 86,450 Palladiumfabrication demand limiting the upside and constrained March 2,362,200 ↑ 2,074,900 287,300supply keeping prices well supported. T otal 2,377,100 ↑ 200,700 2,176,400The primary concern at present in the precious metals 1 Data as of 5 December; changes from 7 November.markets is when to expect demand growth to strengthen.In 2010 and 2011, assessing demand was fairly easy – Indicators %∆ $∆these were recovery years so demand was rising rapidly DJIA 13,074.0 ↑ 2.1% 263for cars and electronics containing PGMs and silver and FT World Stock Index 383.6 ↑ 3.0% 11.07for gold jewelry in the booming Chinese and Indian mar- FT Gold Mines Index 2,777.8 ↓ -11.2% -351.79kets. In 2012, demand expectations for all the precious CRB Index 297.9 ↑ 2.1% 6.07metals came off. India’s economy slowed and its govern- T -Bills 0.09% ↑ 5.6% 0.01%ment raised import taxes on gold in order to reduce its ICE Dollar Index 80.24 ↓ -0.7% -0.55current account deficit, which weighed on gold jewelry $ / Euro 1.30 ↑ 1.8% $0.023sales. Europe’s auto market contracted, weighing on ex-pectations for PGM demand growth. China’s economic Report Contents Prices in 2013…...…......……….....p.1 Palladium..….………......……...p.27growth slowed, adding further pressure to demand expec- Price Targets...………....…………p.3 Rhodium.…….….......……….…p.32tations. The demand picture in 2012 is expected to spill Macroeconomic Indicators………p.5 Precious Metals Price Table......p.33into 2013, will no material changes to prospects for Gold……...……….……...….…….p.8 Equities and Metrics Table..p.34-35growth. Silver………………...…………..p.16 Platinum………………………...p.22Copyright CPM Group 2012. Not for reproduction or retransmission without written consent of CPM Group. Precious Metals Advisory is published monthly by CPM Group and is distributed via e-mail.The views expressed within are solely those of CPM Group. Such information has not been verified, nor does CPM make any representation as to its accuracy or completeness. Any statements non-factualin nature constitute only current opinions, which are subject to change. While every effort has been made to ensure that the accuracy of the material contained in the reports is correct, CPM Group cannotbe held liable for errors or omissions. CPM Group is not soliciting any action based on it. Information contained here should not be relied on as specific investment or market timing advice. At times theprincipals and associates of CPM Group may have long or short positions in some of the markets mentioned here.
  2. 2. Precious Metals Advisory 6 December 2012 Page 2Precious Metals Prices May Lack Direction in 2013 (cont.)The lack of demand upside in 2013, especially throughthe first three quarters, is expected to weigh on preciousmetals prices. If the European and U.S. economies beginto pick up later in the year, industrial demand for pre-cious metals could help to improve price appreciationprospects.Commodities Research and Consulting,Asset Management, and Investment BankingCPM Group, founded in 1986, is an authoritative commodities research and consulting company. It is independent of allproducers, processors, financial institutions, and other companies having commercial positions in commodities. CPMGroup has extensive experience in commodities research, trading, and finance, equipping the company to provide finan-cial advice and consulting grounded in hands-on experience.email: research@cpmgroup.comTelephone 212-785-8320www.cpmgroup.com
  3. 3. Precious Metals Advisory 6 December 2012 Page 3Price Targets Key Top of Range 1-MonthNearby active Comex/Nymex prices. Rhodium prices Projection Forecast Averageare daily BASF prices. All prices are US$/ounce. Average 2nd & 3rd Month Bottom of Range ProjectionsGOLD Near Term Outlook — Gold prices could poten- tially move in a wide range between $1,620 and1,850 $1,780 during December. If prices settle below 1,7801,800 1,800 $1,680, prices could decline toward $1,650 or even $1,620. A decline in prices or consolidation1,750 at present low levels could induce bargain buying 1,710 1,715 by various market participants including investors,1,700 1,721 central banks, and fabricators. Prices could show1,650 some seasonal strength in the first few months of the year . Fiscal tightening in the United States is1,600 expected to reduce economic growth during the 1,620 first few months reducing concerns about infla-1,550 1,550 tion, which could weigh on gold prices. In such an1,500 environment gold prices could slip toward $1,550. J-12 J-12 A-12 S-12 O-12 N-12 D-12 J-13 F-13SILVER Near Term Outlook — Prices are expected to move sideways to lower this month, as the level of 38 uncertainty regarding the approaching U.S. fiscal cliff pushes and pulls at prices. Prices could head 36 35.50 35 higher in January and February of 2013 due to 34 32.79 33.45 index and portfolio rebalancing activity as well as 33 the approach of the Comex March futures delivery 32 period at the end of February. Seasonal demand for silver is typically stronger in the first few 31 30 months of the year. Prices may stay above $30 30 over the next three months. There is a lot of sup- 28 port at $30, but a move toward this level could trigger a spike lower, possibly toward $26. Indus- 26 trial demand remains weak, which will weigh on J-12 J-12 A-12 S-12 O-12 N-12 D-12 J-13 F-13 silver, but investors continue to buy on price dips. Near Term Outlook — Prices may trend higherPLATINUM over the next three months. Concerns about supply 1,800 remain high, but strike activity in South Africa’s 1,750 platinum mining sector has abated significantly in 1,700 recent months, which may weigh on prices. Anglo 1,700 1,650 Platinum restarted operations at its mines where 1,650 1,635 illegal strikes were taking place. The company has 1,579 1,600 1,595 lost about 200,000 ounces of potential platinum 1,550 output since the illegal strikes began in Septem- 1,560 1,540 ber. Fresh concerns about power supply in the 1,500 country as well as the potential for new strikes are 1,450 expected to keep prices above $1,540 in the near 1,400 term in even the worse price scenario. The first 1,350 few months of the year are typically a seasonally strong period for platinum prices, which may keep 1,300 J-12 J-12 A-12 S-12 O-12 N-12 D-12 J-13 F-13 platinum above $1,560 (?) and could help push prices toward $1,700 in January and February. Continued
  4. 4. Precious Metals Advisory 6 December 2012 Page 4Price Targets Key Top of Range 1-MonthNearby active Comex/Nymex prices. Rhodium prices Projection Forecast Averageare daily BASF prices. All prices are US$/ounce. Average 2nd & 3rd Month Bottom of Range ProjectionsPALLADIUM Near Term Outlook — Palladium prices could800 potentially decline as a result of profit taking and 750 the possibility of weaker real demand for the750 metal in the near to medium term. Prices have 725 risen sharply in recent weeks, which could result700 in investors booking profits in their positions, es-650 pecially toward the end of December. There also 638 650 is the possibility that fabrication demand for the 642600 610 metal will soften during the first half of 2013 due 580 to fiscal tightening in the United States. This550 could potentially push prices toward $580. Prices should find support on the downside because of500 the constant possibility of supply disruptions from South Africa.450 J-12 J-12 A-12 S-12 O-12 N-12 D-12 J-13 F-13RHODIUM Near Term Outlook — Rhodium prices are ex-1,400 pected to remain weak over the next three months.1,350 Rhodium prices are expected to average lower in1,300 December, at $1,105, from November, when1,250 prices averaged $1,142, as some of the supply 1,200 constraints supporting prices have eased. Prices1,200 1,142 1,150 could decline toward $1,000 over the next few1,150 1,130 months. Some seasonal price strength could help 1,1051,100 buoy prices in January and February. Demand1,050 prospects remain bleak, however, which has been 1,0501,000 weighing heavily on rhodium prices since 2011 1,000 950 and may continue to do so. There is scope for fur- ther declines in rhodium prices, but investors may 900 J-12 J-12 A-12 S-12 O-12 N-12 D-12 J-13 F-13 M-13 view prices below $1,000 or even $1,100 as a tre- mendous buying opportunity.
  5. 5. Precious Metals Advisory 6 December 2012 Page 5 Macroeconomic Indicators Real Gross Domestic Product Unemployment Rates in Developed Economies Quarterly Data, Quarter-over-Quarter Percentage Change Monthly Data, through October 2012 Percent Percent 15 12% Euro zone United States 11% United Kingdom Japan 10 10% 9% 5 8% 7% 0 6% 5% USA China -5 4% Japan Brazil 3% India EU -10 2% Jun-96 Nov-98 Apr-01 Sep-03 Feb-06 Jul-08 Dec-10 05 06 07 08 09 10 11 12 13Note: China and India is Quarterly data, with percentage change on a year-over-year basis. Note: U.K. data is through September 2012. Industrial Production in Developed Economies Industrial Production in Developing Economies Monthly through October 2012, Year-over-Year Percentage Change Monthly through August 2012, Year-over-Year Percentage Change 40% 30% Euro zone 30% United States United Kingdom 20% 20% Japan 10% 10% 0%-10% 0%-20% -10%-30% Brazil China India-40% -20% 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12Note: Euro Zone data is through September 2012. Note: Chinese. data is through July 2012. Inflation - Developed Countries Inflation -Developing Countries Monthly CPI, Year-over-Year Percentage Change, through October 2012 Monthly CPI, Year-over-Year Percentage Change, through October 2012 20% 8% Euro zone United Kingdom 18% Japan United States 16% 6% Brazil India 14% China 12% 4% 10% 2% 8% 6% 0% 4% 2%-2% 0% -2%-4% -4% 05 06 07 08 09 10 11 12 05 06 07 08 09 10 11 12
  6. 6. Precious Metals Advisory 6 December 2012 Page 6Macroeconomic Indicators (cont) 10-Year Treasury minus Three-Month Treasury 10-Year Nominal Treasury Yield minus 10-Year TIPS Yield Daily Data, through 4 December 2012 Daily Data, through 4 December 2012 Percent Percent 3.0 6.0 5.0 2.5 4.0 2.0 3.0 2.0 1.5 1.0 1.0 0.0 -1.0 0.5 -2.0 J-82 J-85 J-88 J-91 J-94 J-97 J-00 J-03 J-06 J-09 J-12 0.0 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Corporate Baa-rate bond minus Ten-year Treasury CBOE Volatility Index: VIX Daily Data, through 4 December 2012 Daily Data, through 5 December 2012 Percent Percent 7.0 90 80 6.0 70 5.0 60 4.0 50 3.0 40 30 2.0 20 1.0 10 0.0 0 Jan-86 Jan-90 Jan-94 Jan-98 Jan-02 Jan-06 Jan-10 Jan-04 Apr-05 Jul-06 Oct-07 Jan-09 Apr-10 Jul-11 Oct-12 MZM Money Supply and U.S. Inflation Trade-Weighted Dollar and Gold Prices Monthly Data, through September 2012 Monthly Data, through November 2012 Percent Percent Index $/Oz40 11 Trade-Weighted Dollar (LHS) Gold Prices 150 2,000 Correlation: negative 0.1135 10 1,800 MZM Money Supply (LHS) 14030 8 1,600 U.S. Inflation (CPI) 13025 7 1,400 12020 6 1,200 11015 4 1,00010 3 100 800 5 1 90 600 0 0 80 400-5 -1 70 200-10 -3 60 - Nov-81 May-86 Nov-90 May-95 Nov-99 May-04 Nov-08 Jan-73 Oct-78 Jul-84 Apr-90 Jan-96 Oct-01 Jul-07
  7. 7. Precious Metals Advisory 6 December 2012 Page 7 U.S. Macroeconomic Indicators Real Personal Income Total U.S. Consumer Debt Monthly Data, through October 2012 Quarterly End of Period Data, through 1 July 2012 Percent Trillion of Dollars10.0 16.0 8.0 14.0 6.0 12.0 4.0 10.0 2.0 0.0 8.0-2.0 6.0-4.0 4.0-6.0 2.0-8.0 0.0 J-60 J-66 J-72 J-78 J-84 J-90 J-96 J-02 J-08 O-49 F-57 J-64 O-71 F-79 J-86 O-93 F-01 J-08 Manufacturers New Orders: Durable Goods New Orders: Nondefense Capital Goods Excluding Aircrafts Monthly Data, through October 2012 Monthly Data, through October 2012 Billion of Dollars Billion of Dollars 260 75 240 70 220 65 60 200 55 180 50 160 45 140 40 120 35 100 30 F-92 J-94 O-96 F-99 J-01 O-03 F-06 J-08 O-10 F-92 J-94 O-96 F-99 J-01 O-03 F-06 J-08 O-10 Total Construction Spending Housing Starts Monthly Data, through October 2012 Monthly Data, through October 2012 Thousands of Units Billions of Dollars 30001400.0 25001200.01000.0 2000 800.0 1500 600.0 1000 400.0 500 200.0 0.0 0 J-93 J-95 J-97 J-99 J-01 J-03 J-05 J-07 J-09 J-11 J-59 J-64 J-69 J-74 J-79 J-84 J-89 J-94 J-99 J-04 J-09
  8. 8. Precious Metals Advisory 6 December 2012 Page 8Gold OutlookGold prices may be expected to move between $1,620 As this is being written gold prices have fallen to levelsand $1,780 in December. There have been a couple of just above support at $1,680. If prices decisively breaksharp declines in gold prices in the past two weeks, re- below this level they could slip toward $1,660. Or, theyflecting investor profit taking and nervousness on the part could cascade sharply lower, to $1,650 or even $1,620. Ifof long investors. It may be that investor attitudes toward prices hold above $1,680 the sense that a low has beenthe state of the world and the outlook for gold are con- made at least on a temporary basis could lead to increasedtinuing to shift, away from fear of major problems toward demand from fabricators, central banks, and investors, alla view that economic and political problems remain unre- of whom have become extremely sensitive to the price ofsolved but are less likely to trigger a major collapse than gold.investors had expected earlier India is presently in the midst of its marriage season andGold settled at $1,716.50 on 28 November, down $25.80 any weakness in prices should be supportive of fabrica-from the previous day and prices had declined to tion demand there. The Indian rupee has also been$1,695.80 on 4 December, down $25.30 from the prior strengthening lately, reducing the cost of imports, whichtrading session. Part of the selling on 28 November was could further boost fabrication demand for the metal frominvestors who had bought December Comex calls earlier India.at lower prices, who had exercised these calls at the closeof trading the day before, on options expiration day.These investors then sold the futures contracts at the Gold Prices: 1 January 2009 to 5 December 2012opening of trading the next day. Additional selling is be- $ / Ozlieved to have been prompted by stop loss selling by 2,000nervous longs. The sharpness of these declines is likely to 1,900have made other remaining investors nervous, and kept 1,800fresh investors on the sidelines, which could drive priceslower. That said, some physically backed exchange 1,700traded products (ETPs) saw an increase in their holdings 1,600on both of those days, with ETP holdings reaching a re- 1,500cord high 86.5 million ounces on 4 December. Even 1,400though holdings are at record levels, the net additions to 1,300holdings have not been particularly large. The strength in 1,200incremental demand is more important in pushing prices 1,100higher. 1,000 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12Gold Quarterly Average Price Projections to Q3 2014$ / Ounce Quarterly$1,900 $1,900 Year Quarter Change Annual AVG Change$1,800 $1,800 AVG$1,700 $1,700 2012 IV $1,726 4.2% $1,675 6.7%$1,600 $1,600$1,500 $1,500 2013 I $1,718 -0.4%$1,400 Actual $1,400$1,300 $1,300 II $1,667 -3.0% Projections$1,200 $1,200 III $1,608 -3.5%$1,100 $1,100$1,000 $1,000 IV $1,641 2.0% $1,659 -1.0% $900 $900 2014 I $1,673 2.0% $800 $800 $700 $700 II $1,623 -3.0% 2009 2010 2011 2012 2013 2014 III $1,599 -1.5%
  9. 9. Precious Metals Advisory 6 December 2012 Page 9Demand from central banks also might be expected to In a scenario where the fiscal cliff is averted, market sen-rise if gold prices soften. During the first 10 months of timent should improve driving gold prices, along with2012, central banks had added 10.76 million ounces of other markets, higher at the beginning of 2013. Any com-gold to their reported holdings, on a net basis. Some of promise reached on the fiscal deficit issue, which wouldthe strongest net additions by central banks were seen in be positive for market sentiment, would still hurt eco-months when prices softened or were at relatively low nomic growth, only less than if all of the fiscal tighteninglevels. Central banks added on a net basis 2.95 million were to occur. As a result of this the present loose mone-ounces of gold to their holdings in July, when the price of tary policy is expected to remain in place, to offset eco-gold was at the lower end of its trading range for the year. nomic weakness arising from any fiscal tightening. ThisThis was the highest monthly net additions made by cen- might provide slight support to gold prices, but probablytral banks during 2012. Central banks were also seen add- would not drive prices significantly higher from currenting 2.3 million ounces of metal to holdings when prices levels.slipped lower in March 2012. In the less likely scenario, where no deal is reached onFor a variety of reasons investors remain interested in how to address the U.S. fiscal situation gold prices shouldowning gold and should be expected to step in as buyers be expected to decline alongside other assets as investorswhen prices soften. There is a lot of uncertainty sur- move into cash. In such a scenario monetary accommoda-rounding the handling of the current U.S. fiscal deficit tion is likely to be increased significantly to support eco-situation, which if not addressed would trigger automatic nomic growth, which could be supportive of gold prices.federal spending cuts and tax increases in January 2013(the fiscal cliff). We expect that the U.S. government will Pricespatch together a relatively superficial agreement at the11th hour, with most of the proposed tax increases and Volatility in gold prices rose during November, withbudget cuts in the years beyond 2014. However, there are prices both rising and declining sharply on variouslikely to be some increases in taxes and reductions in occasions during the month. Monthly average pricegovernment spending, so the question is how much weak- volatility was 20.8%, which was the highest level ofness should be expected in the first half of 2013, regard- monthly price volatility since July of this year. Priceless of the outcome of the political discussions. More im- volatility should be expected to continue rising dur-portant for the matters at hand, the gold market, along ing December, as markets focus on the fiscal cliffwith broader financial markets and economic conditions issue in the United States. November began with goldaround the world, will be held hostage to a bathetic politi- prices declining sharply. Prices settled at $1,675.20cal melodrama over the remainder of December. on 2 November, down from a settlement price of $1,715.50 the previous day. Prices recovered fromGold Price Volatility and Gold Fabrication Demand Gold Price Volatility Annual Total Fabrication Demand Monthly, Through November 2012 Million Ounces Million Ounces 120 120 90% 110 110 80% 100 Other 100 70% 90 90 80 80 60% Electronics 70 Jewelry, Developed 70 50% 60 60 40% Dental 50 50 30% 40 40 30 30 20% 20 Jewelry, Developing Countries 20 10% 10 10 0% 0 0 75 78 81 84 87 90 93 96 99 02 05 08 11 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11e
  10. 10. Precious Metals Advisory 6 December 2012 Page 10 this sharp decline over the next two trading session, increase demand for gold from India. The strength in reaching an intraday high of $1,720.9 on 6 November the Indian rupee helps to reduce the cost of importing and settling at $1,715 that day. Prices began to soften gold. These factors could collectively result in some toward the end of the month, with the sharpest de- strength in gold fabrication demand from India. cline seen on 28 November, when prices settled at $1,716.50 (around where they were at the beginning Official Transactions of the month), down $25.80 from the previous day. The weakness in prices continued into the first few Central banks added on a net basis, 1.61 million days of December. ounces of gold to their holdings in October. Gross additions to holdings during the month were 1.75 million ounces, and gross reductions were 141,000Fabrication Demand ounces. India is presently in the middle of its marriage sea- The central bank of Turkey added 564,000 ounces of son, traditionally a strong gold buying season. The gold to its holdings in October, making it the largest recent weakness in the price of gold coupled with central bank buyer of gold during the month. The some strength in the Indian rupee is likely to help Turkish central bank’s holdings reached 10.28 mil-Official Transactions and SupplyOfficial Sector Gold Reserve Levels Total World Mine ProductionMillion Ounces Million Ounces Million Ounces Million Ounces1,160 1,160 90 90 Indonesia1,140 1,140 85 85 80 Canada 801,120 1,120 75 75 70 Peru 701,100 1,100 65 Australia 65 60 601,080 1,080 55 United States 551,060 1,060 50 50 45 451,040 1,040 40 40 35 351,020 1,020 30 30 25 South Africa 25 Other Market Economies1,000 1,000 20 20 980 980 15 15 10 Russia China 10 960 960 5 Transitional Economies 5 0 0 940 940 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 0911e 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12p Official Sector Changes In Gold Holdings Official Sector Changes In Gold Holdings in 2009 - October 2012 2012 Through October Excludes China, India and IMF Transactions, Million Ounces Million Ounces Million Ounces Million Ounces 30 30 7.0 7.0 25 25 Net Additions/Reductions Gross Additions 20 20 6.0 6.0 Gross Reductions 15 15 5.0 5.0 Gross Additions 10 10 Net Additions/Reductions 4.0 4.0 5 5 0 0 3.0 3.0 -5 -5 2.0 2.0-10 -10 1.0 1.0-15 -15 0.0 0.0-20 -20 Gross Reductions -1.0 -1.0-25 -25-30 -30 -2.0 -2.0 04 05 06 07 08 09 10 11 12 Jan-09 Aug-09 Mar-10 Oct-10 May-11 Dec-11 Jul-12
  11. 11. Precious Metals Advisory 6 December 2012 Page 11 lion ounces, a record high, in October. The central during the first 10 months with gross reduction of bank of Brazil added 552,000 ounces of gold to its 290,000 ounces. holdings in October, taking total holdings of gold to 1.69 million ounces. This was the second consecutive Supply month that the central bank added gold, after making no additions to holdings between October 2001 and The global production-weighted cash cost for gold August 2012. The central bank of Kazakhstan re- mining continued to rise during the third quarter of sumed purchasing gold after being a seller of the 2012 reaching $733/ounce, up from $730/ounce in metal in September. The central bank purchased the second quarter of 2012 and $662/ounce in the 242,000 ounces of gold in October, raising its hold- third quarter of 2011. On average the global gold ings to a record high 3.6 million ounces. mining industry is still enjoying a healthy margin between cash costs and gold prices. The average The Bank of International Settlements’ gold holdings price of gold during the third quarter of 2012 was rose by 371,429 ounces in October. Other central $1,654.37. The price of gold has not been rising in banks that added gold to their holdings included the the same fashion as it was in the past few years. This central bank of Russia (13,000 ounces), Mongolia coupled with continuing increases in cash costs is (1,000 ounces), Greece (1,000 ounces), and Belarus squeezing producer margins. During the third quarter (2,000 ounces). of 2011 the average price of gold was $1,700 and The central banks of Germany reduced its holdings cash costs were $662/ounce, giving producers an av- by 135,000 ounces in October to 109.03 million erage margin of $1,038/ounce in that quarter. ounces. This was the second time that Germany re- duced its holdings this year, with the first reduction made in June. The central bank of Mexico reduced its Investment Demand holdings for the sixth consecutive month in October, taking its total holdings of gold to 4.01 million Gold exchange traded product holdings continued to ounces. This level of gold holdings is still 600,000 rise in November. Total holdings reached 86.3 mil- ounces higher than levels at the end of 2011. lion ounces at the end of the month, up 932,050 Reported net additions to central bank gold holdings ounces from 85.4 million ounces at the end of Octo- during the first 10 months of the year were 10.76 mil- ber. Holdings continued to rise during the first few lion ounces, driven entirely by an increase in gross days of December, reaching a record high 86.5 mil- purchases made by central banks. Gross additions to lion ounces on 4 December. Even though holdings central bank gold holdings were 11.06 million ounces are at record levels, the net additions to holdings haveInvestment DemandMonth-end Change in ETF Gold Holdings and % Change in Gold Price Exchange Traded Funds Physical Gold HoldingsThrough November 2012 Million Ounces Million Ounces% Change 100 100 Million Ounces Japan HDFC40% 8 Religare SBI 90 Quantum Reliance 90 Change in ETF Gold Holdings Kotak UTI Gold Price %Change M-t-M 80 AUUSA CSGLDE 8030% 6 CSGLDC CSGOLD 70 SGLD SGLN 7020% 4 AGOL GLTR 60 CGL GBEES 60 Sprott German 50 Turkey SGBS 5010% 2 GOLD NYSE 40 JB ETF 40 0% 0 ZKB IAU 30 GLD GLD 30 GBS GOLD-10% -2 20 CGT CEF 20 10 10-20% -4 Jan-07 May-08 Sep-09 Jan-11 May-12 - 0 20032004 2005 2006 2007 2008 2009 2010 2011 2012 Note: Data as of 30 November 2012
  12. 12. Precious Metals Advisory 6 December 2012 Page 12 not been very strong. The strength in this incremental end of November, total open interest was 44.3 mil- demand is more important to price increases. lion ounces and was down to 43.4 million ounces by Investors in exchange traded funds were seen adding 4 December. to their holdings when the price of gold was declin- Open interest in the December Comex contract de- ing or was relatively depressed. This shows that in- clined over the course of November as market par- vestors remain interested in the metal but are also ticipants either rolled forward or closed out their po- price sensitive and are reluctant to purchase the metal sitions. Open interest in this contract slipped from when prices rise. 29.7 million ounces at the beginning of November to 462,300 ounces at the end of the month. Open inter-Markets and Inventories est in the nearby active February Comex contract was at 28.6 million ounces on 4 December, down from Total open interest in the Comex gold futures con- 29.3 million ounces at the end of November. tract rose to 49.3 million ounces on 23 November, Gold delivered via the December Comex contract from 45.7 million ounces at the end of October. Total totaled 240,100 ounces as of 5 December. Comex open interest softened over the remainder of Novem- registered inventories rose by 67,830 ounces on 5 ber and into the first few days of December. At the December from 2.53 million ounces at the end of November. Total eligible stocks meanwhile declinedMarkets and InventoriesGross Long and Short Positions of Comex Disaggragated Non-Commercial Positions Gross Long and Short Positions of Non-Commercial PositionsComex Gold Futures and Options. Weekly Data, Through 27 November 2012 Comex Gold Futures & Options.Weekly Data,through 27November 2012 Million Ounces Million Ounces 35 35 Million Ounces Million Ounces Money Managers Long 35 35 30 Other Traders 30 Net Position 30 30 25 25 Long 25 25 20 20 20 20 Net Fund Position in Comex 15 15 15 15 10 10 10 10 5 5 5 5 0 0 0 0 -5 -5 -5 Short -5 Short -10 -10 -10 -10 A-95 D-96 J-98 M-00O-01 J-03 J-05 S-06 A-08 D-09 A-11 Jun-06 Apr-07 Mar-08 Jan-09 Nov-09 Oct-10 Aug-11 Jun-12 Comex Gold Inventories & Total Open Interest O Gold Price and Total Open Interest M Daily, Through 5 December 2012 Daily, Through 5 December 2012 Million Ounces Million Ounces $/Ounce Million Ounces13 70 2,000 7012 Total Open Interest (Right Scale) 1,800 6511 6010 1,600 60 9 50 55 1,400 Total Open Interest 8 50 40 1,200 7 45 6 1,000 Eligible Stocks 30 Gold 40 5 800 4 20 35 3 600 30 2 10 400 Registered Stocks 25 1 0 0 200 20 J-06 A-06 A-07 D-07 J-08 M-09O-09M-10 J-11 A-11M-12N-12 2004 2005 2006 2007 2008 2009 2010 2011 2012
  13. 13. Precious Metals Advisory 6 December 2012 Page 13 by 54,713 ounces to 8.8 million ounces over the same ber, reducing the increase in net long positions, to period of time, which resulted in total Comex inven- 3.04 million ounces on 27 November from 2.7 mil- tories rising to 11.4 million ounces on 4 December, lion ounces on 30 October. up 13,117 ounces from the end of November. Net long positions held by large non-commercial Clearing activity by member banks of the London market participants rose during November reaching Bullion Market Association declined to 19.9 million 21.2 million ounces on 27 November from 19.3 mil- ounces in October on average per day from 22.4 mil- lion ounces on 30 October. The increase in net long lion ounces in September. The average value traded positions was driven entirely by an increase in gross per day declined to $34.7 billion in October from long positions, which reached 24.2 million ounces on $39.2 billion in September. The average number of 27 November from 22.1 million ounces at the end of transfers slipped to 2,453 in October from 2,911 in October. Gross short positions rose during Novem- September.Bullion Coins Monthly U.S. Eagle and Buffalo Gold Coin Sale s by the U.S. Mint Monthly U.S. Mint Gold Coin Sales to Dealers Month 2010 2011 2012 Thousand Ounces Thousand Ounces350 350 January 85,000 133,500 140,500 Fe bruary 84,000 92,500 28,000300 300 March 102,000 111,500 88,500 April 117,000 128,500 29,000250 250 May 260,500 122,500 62,500 June 185,000 67,000 70,000200 200 July 175,000 76,500 34,500 August 57,000 140,000 48,000150 150 Se pte mbe r 98,000 104,000 77,000 O ctobe r 94,000 62,500 70,000100 100 Nove mbe r 112,000 49,500 153,000 De ce mbe r 60,000 86,50050 50 YTD Total June 2012 1,369,500 1,088,000 801,000 % Change YOY -0.6% -20.6% -26.4% 0 0 92 94 96 98 00 02 04 06 08 10 12 Annual Total 1,429,500 1,174,500 801,000 % Change Previous Year -12.0% -17.8%World Gold Supply and Demand Gold Quarterly Average Price Projections Million Ounces $/Ounce, through Q3 2014 140 140 $2,000 $2,000 130 Investment Demand 130 120 120 $1,800 $1,800 110 110 $1,600 $1,600 100 100 Available Supply 90 90 $1,400 Projections $1,400 80 80 Actual $1,200 $1,200 70 70 60 60 $1,000 $1,000 50 50 $800 $800 40 40 30 30 $600 $600 Fabrication Demand 20 20 $400 $400 10 10 0 0 $200 $200 50 53 56 59 62 65 68 71 74 77 80 83 86 89 92 95 98 01 04 07 10 13p 2002 2004 2006 2008 2010 2012 2014
  14. 14. Precious Metals Advisory 6 December 2012 Page 14Bullion Coins Sales during the first 11 months of 2012 declined to 124,000 ounces, down 19.2% from the same period U.S. Mint gold coin sales reached 153,000 ounces in in 2011. November, the highest level reached since July 2010 Premiums on both the American Eagle and American when sales had totaled 175,000 ounces. Sales during Buffalo gold coins remained mostly flat during No- the first 11 months of 2012 totaled 801,000 ounces, vember. This suggests that the market was well sup- down 26.4% over the same period in 2011. On a year plied and could potentially result in softening in de- -on-year basis, sales during November 2012 were up mand from dealers in December. 209%, however. U.S. Mint American Eagle gold coin sales reached 136,500 ounces during November 2012, the highest level of sales for these coins since July 2010. Sales of these coins during the first eleven months of the year reached 677,000 ounces, down 27.6% from the corre- sponding period in 2011. American Buffalo gold coin sales continued to rise in November reaching 16,500 ounces during the month. This was up from 8,500 ounces from the same period in 2011 and up from 11,000 ounces in October 2012.
  15. 15. Precious Metals Advisory 6 December 2012 Page 15Gold Statistical PositionMillion OuncesSupply 2007 2008 2009 2010 2011 2012p 2013pMine Production China 8.7 9.1 10.1 11.0 11.6 12.3 13.0 Australia 7.9 6.9 7.2 8.4 8.3 8.1 8.4 United States 7.7 7.5 7.2 7.4 7.6 7.2 7.4 South Africa 8.2 7.1 6.6 6.2 6.0 5.3 5.1 Peru 5.5 5.8 5.9 5.3 5.3 5.4 5.5 Indonesia 3.7 2.1 4.0 3.4 2.5 1.8 2.0 Canada 3.3 3.1 3.1 2.9 3.2 3.2 3.1 Other Market Economies 20.4 21.5 23.1 24.6 25.0 26.0 28.0 Total 65.3 62.9 67.1 69.2 69.4 69.3 72.6 % Change Year Ago -0.7% -3.6% 6.6% 3.1% 0.3% -0.2% 4.8%Secondary Supply 33.8 39.8 41.2 40.3 40.6 40.7 38.3 % Change Year Ago 22.5% 17.8% 3.7% -2.1% 0.5% 0.3% -6.0%Transitional Economy Sales 11.3 12.0 10.5 9.7 9.0 7.5 7.0 % Change Year Ago 9.7% 6.2% - -7.6% - - -Total Supply 110.3 114.7 118.8 119.2 119.0 117.6 118.1 % Change Year Ago 6.5% 4.0% 3.6% 0.3% -0.2% -1.2% 0.4%Fabrication DemandIndustrial Demand Electronics 9.1 9.1 7.9 8.5 8.5 8.4 8.6 Dental/Medical 2.5 2.4 2.2 2.2 2.1 2.1 2.1 Other 3.9 4.6 4.1 4.1 4.7 4.8 4.9 Total 15.4 16.1 14.2 14.8 15.3 15.3 15.6 % Change Year Ago 15.6% 4.2% -11.9% 4.6% 3.1% 0.0% 1.8%Jewelry Developed Countries 14.9 12.4 9.4 8.7 8.4 8.2 8.1 Developing Countries 60.0 58.4 48.0 49.6 49.1 51.0 53.8 Total 74.9 70.8 57.3 58.3 57.5 59.2 61.8 % Change Year Ago -0.8% -5.5% -19.0% 1.7% -1.4% 3.0% 4.5%Total Fabrication Demand 90.4 86.9 71.4 73.1 72.7 74.5 77.4 % Change Year Ago 1.7% -3.9% -17.8% 2.4% -0.5% 2.4% 3.9%Stock DemandTotal Official Transactions -16.0 0.2 16.8 10.1 12.7 11.0 9.0 % Change Year Ago 37.2% NM NM -39.9% 25.9% -13.6% -18.2%Net Private Investment Official Coins 4.4 5.0 6.0 6.3 4.5 4.1 3.6 Bullion 28.8 18.1 20.1 24.7 26.0 25.4 25.6 Medallions 2.8 4.5 4.5 5.0 3.0 2.7 2.4 Total 36.0 27.6 30.6 36.0 33.5 32.1 31.7 % Change Year Ago 36.5% -23.3% 10.7% 17.8% -6.9% -4.1% -1.4%Total Stock Demand 20.0 27.8 47.4 46.1 46.3 43.1 40.7 % Change Year Ago 36.0% 39.3% 70.4% -2.7% 0.3% -6.7% -5.6%Total Demand(Fabrication Plus Stock Change) 110.3 114.7 118.8 119.2 119.0 117.6 118.1Price Per Ounce YTD High $842.70 $1,004.30 $1,218.30 $1,421.40 $1,889.70 $1,796.50 Low 606.90 705.00 807.30 1,052.80 1,318.40 1536.60 Average 700.11 872.82 974.70 1,228.63 1,572.00 1669.27 % Change Year Ago 15.4% 24.7% 11.7% 26.1% 27.9% 6.5%*Million Ounces; Source: CPM Group; Notes: There may be discrepancies in totals and percent changes due to rounding; Net official sales are indicated by negative numbers; The priceis the Comex nearby active settlement, 2012 Through 11 October. Longer term projections are available in CPM Groups Gold Supply, Demand, and Price: 10-Year Projections report; e-- estimates; p -- projections; NM -- Not meaningful; December 5, 2012
  16. 16. Precious Metals Advisory 6 December 2012 Page 16Silver OutlookSilver prices rose last month, after trending lower in Oc- volumes in the Comex silver futures market are downtober. The roll of the December contract into the March about 30%, clearing volumes in the London interbankand forward month contracts helped boost prices. This market are 20% lower this year than last year, silver Ea-coupled with seasonal demand for the metal ahead of Di- gle bullion sales are down 15% year-to-date, and silverwali, contributed to the 11.3% trough-to-peak increase in ETP net purchases are the lowest seen since 2005settlement prices between 2 and 29 November. (excluding 2011 when investors sold a net of 24.4 million ounces of silver ETPs). CPM Group is projecting invest-Silver prices have been trending lower since April of last ment demand for silver to fall to 124.3 million ounces inyear. Each price rally has ended at lower highs. Intraday 2012 from 133.2 million ounces last year. A further de-peaks went from $49.82 in April 2011 to $44.09 in Au- cline in investment demand to 102.0 million ounces ingust 2011 to $37.48 in February 2012 to $35.45 in Octo- projected for 2013 while prices may come off by 8%ber 2012 to the most recent peak of $34.35 on 29 Novem- from 2012 levels.ber. Price support throughout this period has been firmlypositioned at $26.25. Going forward CPM Group expects Silver prices are projected to move sideways to lower thisfurther declines in silver prices, driven by continued month amid reduced trading activity during the holidayweakness in industrial demand and rising supply. These season in the Western hemisphere. Investor concernsfuture declines, however, may be limited. Over the past about the fiscal cliff so far have appeared immaterial toyear, despite a broad decline in the price of the metal, the silver market. It seems investor views about the ap-investors have remained relatively interested in silver as aform of investment. Investors have purchased a net of Silver Prices: 1 January 2010 to 5 December 201240.6 million ounces of silver exchange traded products $ / Oz(ETPs), more than reversing the 24.4 million ounces of 52silver ETPs sold during 2011. Last month, the U.S. Mint 48witnessed a spike in November bullion coin sales, selling 443.2 million ounces of silver Eagle bullion coins, up 40128.3% from last November, to authorized dealers. Also, 36net long positions held by non-commercial Comex mar- 32ket participants in silver futures and options have been 28increasing since July and open interest in Comex silver 24futures rose above levels seen in April of last year when 20prices peaked last month. 16 12Even though investment demand has been positive this 8 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12year thus far, 2012 pales in comparison to 2011. TradingSilver Quarterly Average Price Projections to Q3 2014$ / Ounce Quarterly $48 $48 Year Quarter Change Annual AVG Change AVG $44 $44 $40 $40 2012 IV $32.72 9.7% $31.32 -6.0% $36 $36 2013 I $29.47 0.9% Actual $32 $32 II $30.08 -8.0% $28 $28 III $32.99 -4.0% $24 $24 $20 $20 IV $33.28 3.0% $30.89 -1.3% $16 $16 2014 I $30.62 4.0% Projections $12 $12 II $29.40 -1.0% $8 $8 2009 2010 2011 2012 2013 III $30.28 -6.0%

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