BULLION: Mr. Kunal Shah Head – Commodities Research, Nirmal Bang

1. Kunal Shah
Head of Commodities
Research
Outlook on Precious
Metals : Indian Merchant
Chambers
Is Gold still good investment? Why?
Will Silver Outperform Gold?
23 - January, 2020

2. Theme for Bullions
U.S. after witnessing robust growth showing signs of slowing down .
After Phase 1 deal of China and U.S., Phase 2 -3 deal progress remains to be seen, which
looks difficult
China debt restructuring will limit the upside in GDP growth, but China showing some signs
of stability
After normalization of monetary policy, stance of most of the central bankers have turned
dovish and are open for more monetary easing. Massive monetary easing is underway the
moment growth slows down more printing will go on.
Jewllery demand of bullions continues to remain weak where as investment demand
arising due to portfolio diversification for Gold remained key driver of gold prices.

3. Real GDP growth likely to slowdown & global manufacturing PMI easing
Impact of trade war was clearly visible on
global GDP and manufacturing activity
U.S. growth rate have slowed down &
visible slowing ISM manufacturing and
service activity
In order to avoid sharp slowdown Federal
Reserve is cutting rates and started to
expand their balance sheet and global
central bankers have joined the party
Not just U.S.even Eurozone GDP growth
rate likely to drop from 1.2% to 1.3%

4. This is what Federal reserve balancesheet looked like 6 months ago

5. U.S. ISM manufactiring & services index weak

6. This is what Federal reserve balancesheet now!!!!!!

7. Even Euro Area GDP growth have weakened
Not just the U.S., even Euro zone and Germany's prospects have weaken.

8. Gold Outlook
U.S. dollar likely to
weaken going
forward which is
bullish for Gold
In near term we are
not bullish on gold
we expect it to test
again $1535-1530
and can test levels
of $1625-1630
Central bank buying
will remain strong
in 2020.

9. Central bank buying and etf demand likely to remain strong
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
2010 2011 2012 2013 2014 2015 2016 2017 2018
Central Bank gold buying spree
Source: Bloomberg, NB Research
In a bid to diversify from U.S. based assets China and Russia have been on buying spree along
with other countries and investors were seen hoping on to gold ETF’s. Gold likely to move up
on its own weight as we are likely to witness robust investment demand going forward. As
investor seeks to refuge themselves against global slowdown .
500.00
1000.00
1500.00
2000.00
2500.00
Jan-15
May-15
Sep-15
Jan-16
May-16
Sep-16
Jan-17
May-17
Sep-17
Jan-18
May-18
Sep-18
Jan-19
May-19
Sep-19
Intonnes
Total Gold ETFs

10. Silver: Underperformer likely to catch up later…
Global Silver Demand and Supply
(Million Ounce)
SUPPLY 2012 2013 2014 2015 2016 2017 2018 2019
Mine Production 758.3 791.7 823.7 868.6 890.8 885.8 876.9 855.7
Net Government Sales 12 7.4 7.9.. .. .. .. ..
Scrap 260.1 253.8 191 165.3 141.1 139.7 153.8 151.3
Net Hedging Supply 12.2 -47.1 -34.8 16.8 7.8 -18.4 1.9 -2.8
Total Supply 1042.7 1005.8 987.8 1050.7 1039.7 1007.1 1032.6 1004.3
DEMAND 2011 2012 2013 2014 2015 2016 2017 2018
Jewellery 191.5 187.4 221.8 227.9 228.3 207 204.5 212.5
Coins & Bars 208.4 159.2 240.6 234 290.7 206.8 150.4 181.2
Silverware 47.2 43.7 58.8 60.7 62.9 52.1 57.6 61.1
Industrial Fabrication 661.4 600 604.5 595.7 569.6 561.9 585.8 578.6
...of which Electrical & Electronics 290.8 266.7 266 263.4 245.9 233.6 243.1 248.5
...of which Brazing Alloys & Solders 63.2 61.1 63.7 66.7 61.5 55.4 57.5 58
...of which Photography 61.2 54.2 50.5 48.5 46.6 45.2 40.9 39.3
... of which Photovoltaic* 75.8 58.2 55.9 51.8 57.2 76.6 88.9 80.5
...of which Ethylene Oxide 6.2 4.7 7.7 5 10.2 10.2 6.9 5.4
...of which Other Industrial Uses 164.1 155 160.8 160.5 148.4 141 148.4 146.9
TOTAL DEMAND 1108.5 990.3 1125.7 1118.3 1151.5 1027.8 998.3 1033.5
Source: GFMS, Thomson Reuters/The Silver Institute
Silver demand drivers are
in electrical and
electronics and in
photovoltaic cells.
Due to contraction in
manufacturing PMI’s we
have seen industrial
demand of silver have
remained weak and
hence we have seen
under performance but
with limited mine supply
growth its likely to catch
up in times to come.

11. Disclaimer
This presentation has been prepared by Nirmal Bang Securities Private Ltd. The information,
analysis and estimates contained herein are based on Nirmal Bang Research assessment and have
been obtained from sources believed to be reliable. This document is meant for the use of the
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