This document provides an overview and analysis of gold market scenarios for the summer of 2014. It includes sections on: I. A market update covering developments in Europe, emerging markets, and US-China relations. II. Three potential gold scenarios for the summer - a rebound, a drift to $1000, or a deeper crash signaling deflation. III. A "Gold 101" covering historical gold price movements, relationships to interest rates and inflation, demand trends, and comparisons to other time periods. IV. A macro picture covering factors in India, China, bitcoin, and risks of global deflation that could influence gold prices.

1. Summer Goldrums
29 May 2014
War Room

2. HiddenLevers War Room
Open Q + A
Macro Coaching
Archived webinars
CE Credit
Idea Generation
Presentation deck
Product UpdatesScenario Updates

3. I. Market Update
II. Gold Scenarios
III. Gold 101
IV. Gold Macro Picture
Summer Goldrums

4. HiddenLevers
MARKET UPDATE

5. Market Update
EU Deflation = QE Reborn
World Cuprising
EM regime changes
US-China Tensions
sources: HiddenLevers, Marketwatch, New Yorker, Wikipedia, Reuters

6. Macro Snapshot
Endless bull? VIX + UI claims at 2007 levels, and 10Y diverging southward

7. SUMMER GOLDRUMS – SCENARIOS
HiddenLevers

8. Review: Gold Crash Scenario – Aug 2011
Solid analogy
Gold 2011-13
Oil 2008-09
gold miners
distinction
was key
start of
HL risk parity
ethos
Gold Crash
Amidst Uptrend
100% priced in
Aug 2011
Dec 2013
-33%
Slide from Aug 2011
War Room
sources: HiddenLevers

9. Ugly: Gold signals Deflation
caveat
govt price
controls
MDD
700usd/ounce
fiat currency
1930s
analogies
invalid
USD
purchasing
power rising
1929-41
CPI
Gold Standard
sources: HiddenLevers, MarketWatch, USAGold.com
Several
precedents on
- 40-50% MDD

10. Bad: Gold 1k drift
don’t confuse
bounce for long
term investment
Fed sees no
inflation risk,
continuing taper
MDD
1000usd/ounce
-40% drop
fits into usual
MDD paradigm
technical
support
at 1k
$1000/ounce

11. Good: Gold Rebound
Bounce off
technical
support at 1k
QE ending
priced in, so is
gold bottom
Safe-harbor
during EM chaos
Russia, Ukrazy
escalation
India/China
demand surprise
sources: HiddenLevers, Forbes, WSJ, John Holt

12. Scenario: Summer Goldrums
Good
Gold
Rebound
Bad
Gold 1k Drift
Ugly
Gold Signals
Deflation
Rising inflation could
drive gold prices back
up – if a source of
inflation can be found.
Typical gold decline is
40-50% from peak,
1900 -> 1000 in this
cycle. This could occur
while S&P continues
its steady climb.
A deeper gold crash
could be a harbinger
of deflation, which is
negative for both
equities and gold.

13. HiddenLevers
SUMMER GOLDRUMS – GOLD 101

14. Gold 101 – Overview
Gold trading
below long
term oil-gold
ratio, as it
did for most
of ‘00s
Median
Ratio = 15
Silver follows gold –
precious metals
moving together
Gold demand
down 3 years
straight
sources: HiddenLevers, World Gold Council

15. Gold 101 – Interest rates + Inflation
source: HiddenLevers, Reuters
Gold price
returns follow
inflation…
And by
extension
rates as well.

16. Gold 101 – Historical Comparisons
source: Bloomberg, HiddenLevers, Principes de Science Economique
Gold Era Max Rise
MDD
Jan 1973 – Dec 1974 +197% -
Dec 1974 – Aug 1976 - -44%
Aug 1976 – Jan 1980 +551% -
Jan 1980 – Jun 1982 - -48%
Mar 1985 – Dec 1987 +70% -
Dec 1987 – Apr 2001 - -47%
Apr 2001 – Sep 2011 +637% -
Sep 2011 – present - -35%
• Real commonality between events driving gold: Inflation
• Gold has experienced numerous bull/bear cycles, with typical
Max Drawdown over 40% before new cycle begins
• Gold 10y standard deviation almost 20%, greater than S&P 500

17. Gold 101 – Recap
worldwide demand down
3 years running
typical Gold drawdown = - 40-50%
volatility: Gold > S&P 500inflation = key driver of Gold

18. HiddenLevers
SUMMER GOLDRUMS – MACRO PICTURE

19. Macro Picture – India
source: HiddenLevers, WSJ, CNN
Post 2014 election
• BJP govt relaxing import laws
• Investors selling, prices weaker
• Shortage of gold over
• Jewelers not buying for long-term
2013
• Rupee tanks
• Stocks rally to record
• US recovery boon to software + exporters
• State-run Gold importers only
• Gold performance = -28%
Rupee strong, diverging

20. Macro Picture – China
source: HiddenLevers, Economic Times, Shanghai Daily
Yuan USD fix over
2013 ---> 2014
• Jewelry demand up 9%
• Investor demand down 17% 2013
China CPI vs Gold

21. Macro Picture – Bitcoin + Other Alternatives
History
Gold: 5000y
BTC: 4y
source: Coin Market Cap, Only Gold
0
2000
4000
6000
8000
Bitcoin
Gold
Market Cap in Billions of USD
Market Caps
Gold: 6500 B
BTC: 7.3 B
Crypto-
currency
Market
7.8 B
Similarities
divisible, durable, known/limited supply, transferrable.

22. Macro Picture – Global Deflation Risk
sources: HiddenLevers, Economist
technology automation
commodities sinking
first world baby bust decreasing birth rate
sluggish GDP growth
If you believe inflation
will return, buy Gold.
(we don’t)

23. China + Gold
jewelry, not investment
global deflation = quicksand
India no longer worships gold
Macro Picture – Recap
Bitcoin – the new girl in school

24. HiddenLevers Use Cases
scenario
End of QE
scenario
Global Deflation
scenario
Gold Crash
Summer Goldrums
Data Center
Commodities
Data Center
Currencies

25. • Annuities Support (Fixed / Variable / Equity Indexed)
• Advisor Fees Support
• Index Correlations
• Options Support – Call Writing
Integrations:
BlackDiamond
WealthAccess
Product Update