Issue link: http://resourceworld.uberflip.com/i/229125
Continued from page 10 Interestingly, the gold moved from ETF holdings to China during 2013 may no longer be available should ETF demand return. China has been the world's largest buyer of gold which it keeps as a long-term investment, and traders have increased contango as a result. Contango is a situation where the futures price (or forward price) of a commodity is higher than the expected spot price. Billionaire hedge-fund manager, John Paulson, the largest holder in the SPDR Gold Trust, told clients on November 20 that he wouldn't personally invest more money in his gold fund because it isn't clear when inflation will accelerate. According to a report by Goldman Sachs, gold is heading for a significant decline in 2014 and anticipates bullion to drop to US $1,050/oz by the end of 2014. Taking a more bullish stance, Adrian Day, who manages roughly $135 million of assets as the president of Adrian Day Asset Management, feels that the monetary policy remains extremely positive and accommodating for gold. "The sellers have 12 www.resourceworld.com RW December 2013.indd 12 to get exhausted," he commented, "I'm not sure we're at that point yet, but I think we're very close." A third quarter review of the global gold market by the World Gold Council highlighted some positive trends that have developed over the past year. The jewellery sector delivered another quarter of solid year-on-year growth as consumers across the globe, encouraged by lower average prices, showed an increasing demand for higher carat pieces. Demand for bars and coins grew 6% to 304.2 tonnes, with growth mainly coming from Asia and the Middle East, including Turkey. Outflows from ETFs slowed to 119 tonnes. The third quarter was another period of robust demand for gold in the technology sector. Demand related to the use of gold in electronics has shown the most resilience, aided by demand for tablets and smart phones. Central banks continued to accumulate gold, albeit at a slower rate than the elevated levels seen in 2012. Year-to-date, global central bank gold reserves have increased by almost 300 tonnes. The supply of gold in the third quarter fell by 3% from the same period in 2012. A sharp contraction in the supply of gold from recycling accounted for the decline as mine production increased by 4%. Based on World Gold Council research, the overall level of global mine production is relatively stable. Supply from mine production has averaged approximately 2,690 tonnes per year over the last five years. The stability of production comes from the fact that when new mines are developed, they're mostly serving to replace current production, rather than expanding global production levels. Gold production does experience long lead times, with new mines taking sometimes decades to come on stream. That means mining output is relatively inelastic, unable to respond quickly to a change in price outlook. Even a sustained price rally, as we've experienced over the last 12 years, doesn't translate easily into increased production. The recycling of gold ensures there is a potential source of readily available supply when needed. Between 2008 and 2012 DECEMBER/JANUARY 2014 12/11/2013 6:11 PM