GOLDGROUP 1: Charles, Farah, Joanne, Pamela, Raymond, Xi
Topics• Introduction• Gold Price Movement• Gold vs. US Dollar• Gold vs. Inflation• Gold vs. Stock• QE (Quantitative Easing)• Investment Strategies• The Future of Gold Price
Introduction• Usages of Gold• Demand• Gold Production
Demand• Individual Demand - The U.S. interest rate is near zero. - Investors prefer holding and purchasing more GOLD. - i.e. Chinese citizens stocking up• Worldwide Central Banks Demand - i.e. Chinese Central Banks
Three Major Purposes• Jewelry Market• Investment Purpose• Industrial Use
Worldwide Jewelry• Jewelry accounted for 54% of gold demand, which totaled 3812 tonnes, in 2010.• Jewelry Market• India, China, & the US are the largest consumers of gold for jewelry.
Industrial Use• Manufacturing of electronic & medical devices.• Electronic: Electronic components made with gold are highly reliable.• Medical devices i.e. Dentistry
Gold ProductionChina, South Africa, the US., Australia, the RussianFederation and Peru.2011- China, 355 tons;- Australia: 270 tons- United States: 237 tons- Total (World): 2710 tonnes
What factors drive the gold price?• Current Events; Breaking News.• Devaluate USD• Others i.e. Higher Cost of Gold Mining
Gold Price Movement Gold Price Movement 2011 - 20122000 20%1800 15%16001400 10%1200 5%1000 0% Gold Price 800 600 Gold Price % change -5% 400 -10% 200 0 -15% 2012 Jan Feb Mar Apr May Jun Jul Aug Sep OctGold Price (in $) 1656.12 1742.62 1673.77 1650.07 1585.5 1596.7 1593.91 1626.03 1744.45 1757.11 Gold Price % change 0.23% 5.22% -3.95% -1.42% -3.91% 0.71% -0.17% 2.02 7.28 0.73%
Why???• August 31st, US Fed hinted that more money stimulus to come. Mr. Bernanke defended his monetary policy.• September 6th, Mr. Draghi in Europe confirmed earlier rumors that the ECB would buy bonds of several European countries that are in trouble.• September 7th, the unemployment figures in the US showed worse than expected results.RESULTGold closed the trading session on September 7th with asolid gain of 2.7%.
US Dollar vs. Interest Rate• Real Interest Rate is positively related to USD demand. (r = n – i; r = 0.5 in 2011)• US Federal Reserve to keep interest rates near zero until 2014.• Interest Rate Forecast
Prediction• Predictions (Obama vs. Romney)1. Obama Win: r keeps low; USD continues devaluating.2. Romney Win: Ben Bernanke will be replaced. r may increase, and USD may appreciate.• In a recent interview on GoldSilverWorlds.com, Grant Williams stated that: “The current gold price breakout looks like it has some legs at the moment. If we get QE3 during the Fed meeting next week, I expect gold to make a further run.”
Gold Price vs. Inflation• Inflation• Definition: The general rise in the price level (rather than an increase in the money supply) and use changes in the Consumer Price Index as the measure of monthly inflation.
Gold Price and StockRelationshipInverse Growth RelationshipWhen stock goes up, investors turn to stock market whichenables them to make more profits in a short time ratherthan a long-term investment in gold. So I assume that theyare more likely to sell their gold rather than keeping it. Thisdrives the growth of gold price down.
QE, Stock, Gold Relationship• QE-------Stock• Stock------Gold Price• QE indirectly affect the Gold Price
QE----Quantitative Easing• Definition:BASICALLY: Printing $$ QE, Stock & Gold Price?? Hypothesis: Printing more money, as the investor gain more money, they will invest in stock as short term investment. Since they make more profit in shorter time, investors tend to sell their long term investment such as gold. The growth of gold price goes down because more people are selling gold.
Current InvestmentStrategies• $$ $$ • Gold and Silver• Long term • Gold mining stocks, exchange traded fund, gold mutual fund. • Jewelry• Catalyze the economy • Construction, resources • Mining stocks • Short-term: after QE3 • Long-term: after economic recovery• Oil, Oil-related product stocks• Housing
The Future of Gold PriceAs we are expecting inflation in 2013, the gold price willcontinuous to go upJim Rogers: “I am not selling my gold and silver … goldand silver will both go much, much higher over the courseof the bull market.”(The above quote was attributed to Jim Rogers in anOctober 2012 interview. Rogers has been an advocate ofphysical assets and commodities, includinggold, throughout his investing career.)