Gfms Gold Survey Oct2013

GOLD SURVEY 2013
THOMSON REUTERS GFMS
GOLD SURVEY 2013

Prepared by Thomson Reuters GFMS
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GOLD SURVEY 2013
BY:
Neil Meader, Head of Precious Metals Research & Forecasts

William Tankard, Research Director
Peter Ryan, Senior Analyst
Cameron Alexander, Senior Analyst
Rhona O’Connell, Senior Analyst
Junlu Liang, Senior Analyst
Matthew Piggott, Senior Analyst
Marcin Szczypka, Senior Analyst
Johann Wiebe, Senior Analyst
George Coles, Analyst
Saida Litosh, Analyst
Sudheesh Nambiath, Analyst
Janette Tourney, Analyst
CONSULTANTS & OTHER CONTRIBUTORS:
Emma Hastings
Vitaly Borisovich
Jadwiga Zajac
PUBLISHED APRIL 2013 BY THOMSON REUTERS GFMS
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THOMSON REUTERS GFMS GRATEFULLY
THE FOLLOWING COMPANIES FOR THIS
www.pamp.com www.gold.org
www.goldcorp.com www.pretivm.com
www.cmegroup.com Italpreziosi SPA
www.moro.si
ACKNOWLEDGE THE GENEROUS SUPPORT FROM
YEAR’S GOLD SURVEY AND ITS TWO UPDATES
Barrick Gold Corporation www.standardbank.com/cib
www.randrefinery.com www.igr.com.tr
www.cyplus.com
TABLE OF CONTENTS
1. Summary and Price Outlook 8
• Supply 10 • Demand 10
2. Gold Prices 13
• Introduction 13 • Statistical Overview 14 • Price Commentary and Outlook 16
3. Investment 21
• Overview 21 • Implied Net Investment 26 • Exchange Listed Structured Products 28
• Activity on Commodity Exchanges 28 • OTC Market 31 • Physical Bar Investment 33
• Official Coins 36 • Medals and Imitation Coins 38
4. Mine Supply 39
• Mine Production 39 • Production Costs 52 • Producer Hedging 57
5. Supply from Above-Ground Stocks 59

• Overview 59 • Official Sector 60 • Scrap Supply 66
6. Gold Bullion Trade 74

• Europe 74 • North America 76 • Middle East 77 • Indian Sub-Continent 79
• East Asia & Oceania 80
7. Fabrication Demand 83
• Carat Jewellery 83 • Electronics 105 • Dentistry 107
• Other Industrial and Decorative Uses 108
8. Appendices 110
FOCUS BOXES
• A Review of Price Volatility in 2012 15

• Gold Price Correlations 18
• Investment in Commodities 24
• Exchange Traded Funds 27
• Corporate Activity in 2012 51
• The New World of Central Bank Gold Purchases 63
• CBGA: Sales Remained Tiny in 2012 64
• Negative Net Consumption in Western Jewellery Markets 90
• Westernisation’s Potential Impact on Emerging Market Jewellery Consumption 94

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ISBN: 978-0-9568286-5-1
ISSN: 1471-2814
FORTHCOMING PUBLICATIONS
• WORLD SILVER SURVEY 2013: 24th April 2013

• PLATINUM & PALLADIUM SURVEY 2013: 2nd May 2013
• GOLD SURVEY 2013 - UPDATE 1: September 2013
• GOLD SURVEY 2013 - UPDATE 2: January 2014
ACKNOWLEDGEMENTS
The estimates shown in Gold Survey for the main components of mine production, scrap, fabrication and investment demand are calculated on the
basis of a detailed supply/demand analysis for each of the markets listed in the main tables. In the vast majority of cases, the information used in
these analyses has been derived from visits to the countries concerned and discussions with local traders, producers, refiners, fabricators and central
bankers. Although we also make use of public domain data where this is relevant, it is the information provided by our contacts which ultimately
makes Gold Survey unique. We are grateful to all of them.

NOTES
UNITS USED
troy ounce (oz) = 31.103 grammes

tonne = 1 metric tonne, 32,151 troy ounces
carat = gold purity in parts per 24
• Unless otherwise stated, US dollar prices and their equivalents are for the PM fix of the London Bullion Market.
• Unless otherwise stated, all statistics on gold supply and demand are expressed in terms of fine gold content.
• Throughout the tables, totals may not add due to independent rounding.
TERMINOLOGY
“-” Not available or not applicable.

“0.0” Zero or less than 0.05.
“dollar”, “$” US dollar unless otherwise stated.
“Implied Net Investment” Implied net investment is the residual from combining all of the other Thomson
Reuters GFMS data on gold supply/demand as shown in the Summary Table.
As such, it captures the net physical impact of all transactions not covered by
the other supply/demand variables. For more on this see Chapter 3.
“Physical Bar Investment” Identifiable net investment in physical gold in bar form. The bars may or
may not conform to ‘London Good Delivery’ status but will be in a form
that is commonly traded in the country of origin.
“World Investment” The sum of implied net investment, physical bar investment and all coins.
“Jewellery Consumption” Fine gold content of all new jewellery (i.e. does not include exchanged or second-
hand pieces) sold at the retail level. It is calculated as being equal to jewellery
fabrication, plus imports less exports (i.e. the net inflow of jewellery). An
adjustment is also made for retail stock movements.

GOLD SURVEY 2013
1. SUMMARY AND PRICE OUTLOOK

There are some in the gold market who feel that the bull sovereign debt; we saw a fair sized uplift when Cyprus
run in place since 2002 has witnessed its death-throes hit the headlines in mid-March and, so should any strife
SUMMARY AND PRICE OUTLOOK
and that a sustained bear market has begun. Such a hit the US markets, we could readily see a gold price
belief is certainly not without merit. From a technical move akin to August 2011 when the first US downgrade
perspective, gold’s failure three times at $1,800 and the occurred. We could also easily see support from growing
fact that it is now languishing below its 200-day moving inflation fears, if markets view governments as likely to
average are scarcely bullish. From a broader investment only slowly unwind lax monetary policies after private
perspective, patchy but still positive economic news sector credit returns to more normal levels. Such a
also calls into question the value of safe havens. When backdrop and the return of speculative buying could then
looking at actual gold investment, we also saw the fuller push gold safely north of the $1,800 mark.
emergence of a new factor, satiation (namely, those
investors considering gold already having bought all they Of course, gold still has to deal with a hefty fundamental
deemed sufficient). Furthermore, the weight of money surplus and this could prove larger in 2013 than in 2012.
story (the concept of only a minute slice of institutional Nonetheless, there were several positive points to emerge
funds switching into precious metals and causing a major from last year’s results. Firstly, supply posed little threat
rally) is starting to look a little tired; conditions of a near in that it fell last year, chiefly as a result of near-market
“perfect storm” have been with us for several years and stock depletion curtailing scrap, and we would need a
the involvement by mainstream funds remains modest. strong price rally for total supply to materially rise this
year. On the demand side, official sector buying proved
All that leads us to be more restrained in our medium buoyant and that should continue this year. Lastly,
term outlook for gold, but this has done little to alter our jewellery buying provided good support on price dips and
belief in the potential for one last flourish. This centres producer hedging remained trivial last year, and both
on likely problems in resolving the industrialised world’s should be repeated in 2013.
TABLE 1 - WORLD GOLD SUPPLY AND DEMAND (TONNES)

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Supply
Mine production 2,631 2,504 2,560 2,495 2,498 2,430 2,612 2,739 2,838 2,861
Net official sector sales 620 479 663 365 484 235 34 - - -
Old gold scrap 991 881 902 1,133 1,005 1,350 1,735 1,723 1,669 1,616
Net producer hedging - - - - - - - - 11 -
Total Supply 4,241 3,864 4,126 3,994 3,986 4,015 4,381 4,462 4,517 4,477
Demand
Fabrication
Jewellery 2,484 2,616 2,719 2,300 2,423 2,304 1,816 2,020 1,975 1,893
Other 519 564 586 658 680 723 703 767 785 721
Total Fabrication 3,003 3,180 3,305 2,958 3,103 3,027 2,518 2,787 2,760 2,613
Net official sector purchases - - - - - - - 77 457 532
Bar hoarding 177 215 251 233 240 622 498 886 1,197 998
Net producer de-hedging 289 438 92 434 436 357 234 106 - 40
Implied net investment 772 31 477 369 207 10 1,130 607 103 294
Total Demand 4,241 3,864 4,126 3,994 3,986 4,015 4,381 4,462 4,517 4,477
Gold Price (London PM, US$/oz) 363.32 409.17 444.45 603.77 695.39 871.96 972.35 1,224.52 1,571.52 1,668.98
Source: Thomson Reuters GFMS
Totals may not add due to independent rounding. Net producer hedging is the change in the physical market impact of mining companies’
gold loans, forwards and options positions. Implied net investment is the residual from combining all other Thomson Reuters GFMS data
on gold supply/demand as shown in the Summary Table. As such, it captures the net physical impact of all transactions not covered by the
other supply/demand variables.
GS 2013 CH1.indd 8 21/03/2013 12:06:40

GOLD SURVEY 2013
TABLE 1A - END-USE GOLD CONSUMPTION (TONNES)
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Jewellery Consumption 2,484 2,616 2,719 2,300 2,423 2,304 1,816 2,020 1,975 1,893

Industrial & Dental 386 419 438 468 476 461 410 465 452 407
Electronics 237 266 286 316 322 311 275 326 320 285
Other Industrial & Decorative 82 85 90 92 96 95 82 91 89 84
Dentistry 67 68 62 61 58 56 53 48 43 39
Identifiable Investment 350 493 608 683 698 1,204 1,414 1,569 1,715 1,590
Physical Bar investment 177 215 251 233 240 622 498 886 1,197 998
Official Coins 107 116 112 130 136 192 234 213 245 200
Medals & Imitation Coins 26 29 37 59 68 70 59 88 88 113
Investment in Exchange Traded 39 133 208 260 253 321 623 382 185 279
Funds and Related Products*
Total 3,220 3,528 3,765 3,451 3,597 3,970 3,640 4,055 4,142 3,890
* Including: Gold Bullion Securities (both traded at LSE and ASX), SPDR Gold Shares, NewGold Gold Debentures, Central Fund
of Canada and Central Gold Trust, iShares Comex Gold Trust, ZKB Gold ETF, Goldist, ETF Securities, ETFS Physical Gold, Xetra
Gold, Julius Baer, Claymore Gold Bullion ETF, ETFS-Swiss Gold, Sprott Physical Gold, Dubai DGX, ETFS Precious Metals Basket
Trust, Mitsubushi Tokyo, ETFS Asian Gold Trust, Claymore Gold Bullion ETF (Non-Hedged), DB Physical Gold ETC (EUR), DB Euro
Hedged, DB Physical Gold ETC, DB Physical Gold SGD Hedged ETC, DB Physical Gold GBP Hedged ETC, Source Physical Gold
ETC, iShares Gold Bullion Fund, Indian ETFs and Royal Canadian Mint.
Table 1A above presents our statistics on supply and readily used as most funds publish hard data. Exactly
demand in a different way to Table 1 on the preceding which of these funds to include can be a grey area
page for two key reasons. Firstly, it provides greater but those whose classification is debatable tend to
detail on the five non-jewellery areas of fabrication. be off a lesser importance. Our figures indicate that
Secondly, the above format aims to present figures gold ETFs saw another robust increase in 2012. In
on a gross basis. It should not be forgotten that some the middle would be investment in physical bars. For
areas of supply and demand are shown overleaf on a some countries, reliable bullion trade data can make
net basis. This is the case for the official sector, where our estimates solid. However, if a sizeable proportion
confidentiality often rules out full disclosure of gross of bullion flows are unofficial, we tend to rely more on
sales and purchases. commentary from our research contacts. Even then,
however, conjecture is likely to be needed, particularly if
It is also worth highlighting that the jewellery line has the business in any one country is highly fragmented.
been labelled ‘consumption’ rather than fabrication.
At a global level and over time, these two can be taken More opaque are the figures on the net ‘investor’ long
as one and the same, although for individual countries on the Comex as the precise weekly statistics in the
and on a quarterly basis the two will diverge. Good commitment of traders reports unfortunately bear a
examples would be jewellery fabrication exceeding fairly elastic link to their physical metal impact and
consumption in export-focused countries like Italy so they are excluded here. At the bottom end of the
or Malaysia and a fabrication-supportive stock build spectrum would be over-the-counter (OTC) investment,
in western countries in advance of a consumption- where data is in essence absent, sometimes even
boosting Christmas sales period. from those working within the principal bullion banks.
Nonetheless, an impression of activity can still be
Our choice of the elements of investment to include established in this area. Our information indicates that
is largely determined by the existence, or not, of in 2012 the OTC market saw modest net selling for the
quantifying statistics. A figure for ETF holdings can be year as a whole.
GS 2013 CH1.indd 9 21/03/2013 12:06:41

GOLD SURVEY 2013
SUPPLY IN 2012 Producers’ costs continued to escalate apace in 2012,

having risen by more than 10% year-on-year for both
— Mine production increased only fractionally in 2012, Total Cash Costs and Thomson Reuters GFMS’ All-
by 0.8%, but still achieved a record, of 2,861 tonnes. in Costs metric, to average $738/oz and $1,211/oz
— Global scrap supply fell by 3.1% to 1,616 tonnes last respectively.

year due primarily to close to market stock depletion.
— Total supply of gold, at 4,477 tonnes, was 0.9% Last year, scrap supply fell for the third consecutive year,
lower year-on-year. dipping 3.1% to 1,616 tonnes but still contributing 36%
of total supply. A fall may surprise given the 6% rise in
Global mine production was almost flat year-on-year in the dollar gold price last year. However, close to market
2012, having edged up by less than 1% or by 22 tonnes. stock depletion and expectations of a return to higher
Nevertheless, it represented an all-time high for global prices left consumers reluctant to liquidate gold assets.
mine production volumes, at 2,861 tonnes. This outcome In contrast, scrap flows from India surged by more than
was more modest than our expectation for the year at 90% last year as a weaker rupee and legislative changes
the start of 2012, which was for a production growth saw supply approach record levels; if we exclude India
rate similar to that of 2011. That another year of decisive from the global total, scrap fell a more telling 7% in 2012.
production growth was not fully realised was attributable
to a combination of slower than anticipated ramp-ups Scrap supply from the industrialised world saw modest
at a small handful of projects and unforeseen disruption falls last year following several years of consecutive
events. In the case of the latter, the starkest was the records flows, with a drop in close to market stocks
disruptive strikes to have engulfed the South African offsetting further flows motivated by distress selling. In
mining industry in the latter part of last year. the Middle East, scrap dipped just 3%, although this
outcome was supported by a strong recovery in supply
Looking at the regional trends, the stand-out performers from Egypt, with double-digit declines commonplace
were Asia and the CIS, where respective production elsewhere. Similarly, supply from East Asia saw material
grew by 18 and 12 tonnes. Both results were largely falls, led by a sharp drop in Japanese recycling.
down to higher volumes from the regions’ largest
producers, China and Russia, and in the case of Asia this DEMAND IN 2012
robust result was in spite of heavy losses once again in
Indonesia. European output was modestly higher thanks — Total demand fell by 0.9% in 2012 as losses in
primarily to increased output from Finland. Production physical bar investment and fabrication outweighed
from the Americas was, in aggregate, flat. In Africa the jump in official sector purchases and the return to
the heavy fall in South Africa prevailed over higher modest de-hedging.
production from much of west Africa, while a 10 tonne — Jewellery demand dropped by 4.2%, mainly due to
loss in Oceania was brought about by lower volumes from losses in India, while all other areas of fabrication,
Australia and, to a lesser extent, New Zealand. save unofficial coins, registered declines.
— Implied net investment almost tripled in 2012, due to
WORLD GOLD SUPPLY MOBILISATION OF ABOVE-GROUND STOCKS
6000 Net Producer Hedging 2000 2000 2000

Net hedging
Real Gold Price Real Gold Price
Net Official Sector Sales
5000
1600
1500 1500
Constant 2012 US$/oz
4000
1200 Scrap
Tonnes
Tonnes
3000 Scrap 1000 1000

800
2000
500 500
400
1000
Mine Production Official Sector Sales
0 0 0 0
2003 2005 2007 2009 2011 2003 2005 2007 2009 2011
Source: Thomson Reuters GFMS Source: Thomson Reuters GFMS
10
GS 2013 CH1.indd 10 21/03/2013 15:34:02

GOLD SURVEY 2013
a major recovery in demand for gold ETFs. the chief culprit of this poor performance was the impact
— Physical bar investment dropped by a hefty 17% to of high and volatile prices, poor western consumption
just below 1,000 tonnes last year. also undermined offtake for the region’s exporters.
— Net official sector purchases grew by 75 tonnes to
532 tonnes in 2012. Elsewhere, given its historical price sensitivity, it may

— Producer de-hedging returned, with a modest 40 seem surprising that demand in the Middle East dropped
tonne reduction to the global hedge book in 2012. by a modest 2.5% last year. This result was down to
strong gains in Egypt on the back of the improving
Total fabrication fell by 5.3% in 2012, chiefly due to political situation, which partially offset significant losses
losses in jewellery demand, which dropped by 4.2%. It elsewhere in the region. A combination of higher gold
is worth stressing that this decline last year was assisted prices and a still challenging economic backdrop in many
by broad stability in Chinese demand. If we exclude industrialised countries continued to weigh heavily on
China from the global total, demand elsewhere dropped the western gold jewellery market. US jewellery offtake
by a slightly more noteworthy 5.7%. In terms excluding posted a double-digit percentage decline as a result
scrap, the fall for full year global demand in 2012 was of the ongoing substitution away from gold to silver
more pronounced at 7.7%. However, if in this instance we jewellery. European jewellery fabrication fell by 7% last
remove India, offtake for the remainder was essentially year, primarily driven by losses in Italy, where jewellery
flat year-on-year. offtake continued to decline, chiefly in response to higher
gold prices. Swiss and German jewellery fabrication
The bulk of losses last year can be attributed to lower posted more modest losses, thanks to strong results in
demand in India, which represented close to 50% of the top end jewellery and watch segments. An actual
the year’s total gross losses (if we exclude the country, increase was recorded in Russia, where jewellery offtake
jewellery offtake in the rest of the world dropped by a continued to approach pre-crisis levels.
modest 2.6%). Indian jewellery fabrication declined
for the second consecutive year, falling by 7.3% to Other fabrication fell by 8.2% to 721 tonnes in 2012.
618 tonnes. This result was mainly driven by the 24% However, if we exclude all coins, the rise was a more
year-on-year increase in the rupee gold price, a patchy robust 9.8%. Much of that was driven by the 11.1% drop
monsoon and the imposition of a new customs duty at in electronics demand, hit by the weaker economic
an ad valorem rate. A lack of a clear gold price trend, backdrop and price-led substitution losses. Higher gold
coupled with a weaker economic environment, saw prices resulted in the 5.1% decline in other industrial
Chinese jewellery fabrication rise by a mere 0.6%. To put & decorative demand, while dental demand posted a
this into perspective, jewellery offtake in China posted an double-digit decrease due to ongoing substitution.
average annual growth rate of around 10% over the last
decade. That said, last year’s offtake reached a historical Investment demand remained solid last year. Despite a
high of 498 tonnes. Robust demand in China helps to modest 1.8% decline, at 1,605 tonnes, World Investment
explain why the drop for East Asian jewellery offtake in (the sum of implied net investment, physical bar
total was limited to just 1.0%; if we exclude China, the investment and all coins) remained elevated by historical
region’s demand dropped by a more notable 5.8%. While standards. In value terms, the picture is brighter, with
WORLD GOLD DEMAND JEWELLERY FABRICATION AND WORLD INVESTMENT

1000 2000
Jewellery Fabrication World Investment*
6000 Producer De-Hedging Implied Net Investment
2000
Bar Investment Official Sector Purchases Gold Price
800
5000 Other Fabrication
Real Gold Price
1500 1500
600
4000
US$/oz
Tonnes
Tonnes
3000 1000 400

1000
2000
200
500
1000
Jewellery 0 500
Q1-09 Q1-10 Q1-11 Q1-12
0 0
2003 2005 2007 2009 2011 *World Investment is the sum of implied net (dis)investment, physical
Source: Thomson Reuters GFMS bar investment, official coins and medals & imitation coins.
11
GS 2013 CH1.indd 11 21/03/2013 12:06:43

GOLD SURVEY 2013
the approximate equivalent value of this demand still raise cash saw those with a short-term outlook sell their
growing as it rose to a fresh high of $86 billion. The liquid assets rapidly. Meanwhile, as investors that would
fall in the tonnage figure was largely attributable to a like to keep gold as a means of wealth preservation
heavy drop in purchases of physical bullion products by perhaps had already built up sufficient stocks in previous
retail investors. For instance, physical bar investment years, there were few new entrants coming into the
dropped by 17% to 998 tonnes last year, although market, especially given an absence of intense concerns
the total remained the largest component of World over the Eurozone debt problem. Finally, a lack of long-
Investment and the second highest basis our records. A term clear price trends certainly kept many investors
similar fall in percentage terms was recorded by official waiting on the sidelines.
coin minting with volumes hitting a four-year low of
200 tonnes. A good portion of these losses was offset Net official sector purchases jumped to a 48-year high
by a recovery in implied net investment, almost entirely of 532 tonnes in 2012, with their contribution to total
driven by a major rebound in investor interest in gold gold demand rising to 12%. The overwhelming majority
ETFs. Furthermore, demand for medals & imitation of last year’s central bank buying was accounted for by
coins jumped to a record high in 2012, although its net the developing world, especially from countries with
contribution to total investment was modest. substantial foreign exchange reserves and a low share
of gold holdings. This clearly highlighted their growing
Key to such robust investment demand last year was the desire to diversify their reserve portfolio away from the
persistence of negative real short-term interest rates major international currencies, the dollar in particular, in
and a new round of monetary easing in many countries, response to a new round of monetary loosening by the
especially in the United States where the Fed indicated major central banks and a further drop in yields on top-
that it would be prepared to tolerate higher rates of rated sovereign bonds during 2012. Meanwhile, gold’s
inflation to reduce high unemployment. Not only did appeal was further enhanced by the metal’s impressive
these ultra-loose monetary policies keep the cost of carry price performance in recent years and its unique property
on bullion negligible, but they also provided an important as a vehicle that carries no default risk. Finally, it is of
stimulus to investment demand for gold as a safe haven. note that the high net purchase figure was also boosted
Other key factors that encouraged gold investment by the ongoing absence of major sales from signatories
in 2012 included the underlying fragility of the global to the Central Bank Gold Agreement in 2012.
economic recovery and a lack of sufficient progress in
fiscal consolidations in many European countries and the Producers collectively de-hedged 40 tonnes of gold last
United States. Consequently, with the credibility of some year, representing a return to the ‘demand side’ to leave
sovereign debt brought into question, gold was felt to the outstanding book at 123 tonnes. Having been close
offer a good form of insurance against outright default or to neutrality for much of the year, as existing hedges
an ultimate currency hedge. matured at a comparable rate to new hedging being
established (mostly as a condition of debt financings),
That said, investment also faced a series of headwinds de-hedging picked up in the latter part of the year:
last year. First and foremost, gold was not immune from Minera Frisco actively reduced hedge cover and Great
several bouts of heavy investor sell-offs across the board Basin Gold’s hedges were retired as part of insolvency
amid heightened market uncertainty when a need to proceedings.
BULLION ABSORPTION JEWELLERY FABRICATION EXCLUDING SCRAP
2500 2000 700 2000

Net Official Sector Purchases Gold Price
Gold Price
Net Producer De-Hedging 600
2000
1500 500
1500
1500
400
US$/oz
Tonnes
Tonnes
1000
1000 300
1000
200
500
500
100
World Investment
0 0 0 500
2003 2005 2007 2009 2011 Q1-09 Q1-10 Q1-11 Q1-12
12
GS 2013 CH1.indd 12 21/03/2013 12:06:43

GOLD SURVEY 2013
2. GOLD PRICES GOLD PRICES

% change
y-o-y 2012
• The annual average gold price in 2012 reached a record 2011 2012 average intra-year
$1,668.98, as it rose for the eleventh year in a row, although US$/oz 1,571.52 1,668.98 6.2% 3.7%
the increase at 6.2% was the slowest of this multi-year rally. Euro/kg 36,355 41,755 14.9% 2.4%
Yen/g 4,017 4,278 6.5% 16.4%
Yuan/g 326.59 338.51 3.7% 2.7%
• After a strong rally to late February, the gold price saw
Rand/kg 368,623 440,575 19.5% 9.5%
a sharp fall from the start of March to mid-May when it
A$/oz 1,524 1,610 5.7% 3.7%
posted a low for the year of $1,537.50. This was followed by
Rouble/g 1,487 1,667 12.1% -1.8%
three months in a relatively narrow range either side of the
TL/g 84.78 96.34 13.6% -1.5%
$1,600 mark, building a springboard for the sharp recovery
Rps/10g 24,003 29,730 23.9% 12.1%
in August and September that took gold to its high for the
Rph/g 442,525 502,315 13.5% 9.4%
year (basis the fix) of $1,791.75 on 4th October. Source: Thomson Reuters GFMS
• Gold price volatility contracted over 2012 to the lowest

quarterly level since the third quarter of 2005 as post-QE3 INTRODUCTION
investor euphoria waned and then as investors were unnerved
by protracted Congressional wrangling over the budget deficit. The annual average gold price in 2012 was 6.2% higher
GOLD PRICES
than in 2011, although the spot price did not approach
• The 1980 nominal price record of $850, when expressed the daily records of 2011. Continued unsettled economic
in 2012 dollars, remained unchallenged at the equivalent of conditions again reduced demand in jewellery and other
$2,369. Similarly, the 1980 real average was higher than sectors, while bar hoarding also contracted, especially in
last year’s at an equivalent of $1,712. the middle part of the year. This latter element helped
to inform the comparative price weakness mid-year, but
• The annual average gain in dollar terms in 2012 was there was an important difference between 2012 and
amongst the weakest of the major currencies, two others the year before; whereas record bar hoarding in 2011
performing similarly being the increase in Australian dollars was an important price driver, the price swings in 2012
at 6% and in the renminbi at 4%. In marked contrast, the were a partial cause of reduced bar investment. Early
euro gold price saw a 15% lift, gold in rand rose 20% and price strength was driven by hedging against economic
the increase in rupee terms was 24%. This meant no clear and financial risk, while US monetary policy became an
distinction between producer and consumer currencies. increasingly significant driver of sentiment over the year.
The downswing in March to May was triggered by fading
• Prices were also helped by fundamental supply being expectations for QE3 and a loss of investor appetite for
restrained in 2012, with mine production rising by less than risk, while the rally in August and September stemmed
1% and scrap sales contracting. Jewellery demand also from renewed anticipation of more monetary easing. The
slipped by just 4%, while net official sector purchases were final quarter price fall was triggered by disappointment
extremely buoyant, helping to put a floor under the gold at the failure at $1,800 and extended by the lack of
price during the year. agreement over US debt management.
GOLD PRICE AND TRADE-WEIGHTED DOLLAR (INVERTED) - DAILY
2000 -90
Fed says interest Fed minutes lower Fed launches QE3 and anticipates low Fed announces
rates to stay low Greek default hopes of QE3 interest rates through mid-2015 QE4 package
until at least 2014 avoided FOMC minutes Mario Draghi pledges S&P cuts Spain’s Haruhiko Kuroda
1800 released, no sign of QE3 to do “whatever it takes” credit rating appointed as head
Spain seeks to save euro of BoJ -95
(Inverted, 3rd Jan=100)
Trade Weighted Dollar
banking rescue
Gold Price
1600
US$/oz
Trade Weighted -100

Dollar German court ratifies
Fed Chairman Bernanke Eurozone permanent
1400 Greece bailout
fails to mention QE3 rescue fund
Standard & Poor’s funds approved
Fed minutes prompt Barack Obama re-elected President Obama signs
downgrades 9 Eurozone
Francois Hollande increased hopes of QE3 as US President -105
nations, 14 put on sequester which cuts
1200 elected as Moody’s changes
negative outlook $85bn from US budget
French President Fed extends Germany’s outlook
ECB launches “Operation Twist” to negative ECB announces “unlimited” President Obama signs
second round of LTRO until year-end bond-buying scheme bill to avoid “fiscal cliff”
1000 -110
Jan-12 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan-13 Feb Mar
13
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GOLD SURVEY 2013
REAL GOLD PRICES IN 2012 DOLLARS

STATISTICAL OVERVIEW 1982 1992 2002 2012
Annual 893.20 562.71 395.27 1,668.98
PRICE SUMMARY Maximum 1,144.74 588.31 445.84 1,791.75
Minimum 706.24 540.46 354.52 1,540.00
Gold’s annual average of $1,668.98 in 2012 was just 6.2% Range/Average 49.09% 8.50% 23.10% 15.08%
higher than that of 2011. While this was the eleventh Source: Thomson Reuters GFMS
consecutive annual gain in price, it was also the smallest,
being substantially below the annual average increase of
19.5% from 2002 to 2011 inclusive. PRICES IN OTHER CURRENCIES
The result of the swings between bull and bear phases The variations in annual average price changes in 2012
during the year was that 2012 was the third successive meant that there was no clear distinction between
year in which the intra-year gain, at 3.5%, was smaller producer and consumer currencies. The gain in the
than that of its predecessor (the increases in 2010 and average price in China was one of the smallest at 4%
2011 respectively had been 25.3% and 10.3%). In terms as the renminbi held to a narrow range against the
of absolute price ranges, 2012 had the narrowest band dollar, although it was allowed to edge higher in the
since 2001 at 16%; the range in 2001 had been 15% and second half of the year. Several other nations important
the average from 2001-2012 inclusive was 31%. on the producer side saw only modest increases;
GOLD PRICES
Australian dollar prices, for example, only gained 6%,

The price did not reattain the record highs of 2011, with while Canadian dollar prices rose 7%. The real stand
a high p.m. fix for the year of $1,791.75 on 4th October, out was the gain in rand terms at 20% as labour strife
5.4% below the September 2011 record of $1,895.00. In in particular contributed to the pressure on the South
real terms, the average gold price in 2012 was a 32-year African currency. Other producers also benefited from
high, although 1980 still holds the record high average, stronger price gains, with the rouble gold price averaging
at the equivalent of $1,712 in 2012 dollars. Similarly, the 12% more than in 2011 and the rupiah price gaining 14%.
nominal peak of $850 in 1980 equated to $2,369 in 2012
dollars and so this record has also not been surpassed. The dollar-denominated price stood towards the bottom
Even so, in real terms, the dollar gold price rose by a of the international range with an increase of 6%, while
factor of five over the decade 2002-2012. persistent Eurozone problems meant that the rise in
the average euro price was near the other end of the
The oscillation between bull and bear phases during the scale, at 15%. The dollar’s strength against the euro
year meant that the bull trend that started in late 2008 for much of 2012 also meant that gold’s four-year bull
came under test on several occasions. This trend was market was not tested in euro terms until December. The
breached towards end-December, and although it was price declined in Swiss francs (albeit by less than 1%),
regained before year-end, 2012 ended on a cautious note reflecting the currency’s role as a safe haven. The rupee
and the trend was broken in early 2013. price, though, was 24% higher, helping to contribute to
India’s reduced demand in 2012. Turkish prices posted
gains of 14% year-on-year.
ANNUAL GOLD PRICES GOLD PRICES IN MAJOR CURRENCIES
2000 450
High
rupee
Average
1600 Low 380
Index, 4th January 2006= 100
1200 310
US$/oz
euro
800 240
dollar
400 170 yen
0
100
1970 1975 1980 1985 1990 1995 2000 2005 2010 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
Source: Thomson Reuters GFMS Source: Thomson Reuters
14
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GOLD SURVEY 2013
A REVIEW OF PRICE VOLATILITY IN 2012 first half-year contributed to year-on-year declines in jewellery
fabrication, but falling volatility did not really help fabrication
Gold’s price volatility in the final quarter of 2012 was the lowest in the second half year, as the weak global economy and lack
since the third quarter of 2005 as post-QE3 investor euphoria of clear price trend were more influential. As for the annual
waned and then as investors were unnerved by Congressional numbers, gold’s 2012 volatility was 17%, and so higher than the
wrangling over the budget deficit. Previously, volatility in the long-term average. It was, however, lower than a number of
third quarter of 2011 had been the highest since the first quarter other assets; silver’s volatility, for example, was 28%, oil stood
of 2009 (when it was retreating from very high levels after the at 25% and copper, 19%. The S&P 500’s volatility was below
Lehman collapse). High volatility persisted in the first half of that of gold, in contrast, at 13%.
2012 as the late 2011 rally ran to late February 2012, before an
QUARTERLY PRICE VOLATILITY
abrupt reversal occurred through to late May.
Q1 Q2 Q3 Q4
Price volatility can have a clear impact on physical gold 2011 12.9% 13.7% 29.4% 23.5%
demand, but 2012 was slightly anomalous. High volatility in the 2012 19.3% 19.0% 13.0% 11.7%
OTHER COMMODITIES to the US economy, and fears about the outlook for China
were partly (and temporarily) dispelled. Gold gained
After the large average annual price gains that were 8% over the year, but was outshone by platinum and
GOLD PRICES
posted in 2011 by the majority of metals, the changes in palladium, as well as lead and zinc. Platinum is slightly
2012 were more modest. The direction of change was anomalous in that its price gains revolved largely around
also different; in 2012, the only metal to rise on an annual a supply risk premium, while palladium benefited from
average basis was gold. The price declines in March investment in anticipation of a developing shortfall.
to May, by way of illustration, were heavier among the Platinum traded at a discount to gold for the vast
base metals than gold. With the exception of platinum majority of 2012, although it regained a premium in the
and zinc, gold was the strongest performer over the first first quarter of 2013. This again reflects supply issues,
five months of the year (i.e. to the end of the sharp bear this time geared more to longer-term risk than shorter-
phase), laying the foundation for a better annual average term disruption. Lead and zinc prices were both lifted
performance than the rest. towards end-2012 by improved economic confidence,
while lead was also boosted by a tightening in availability
On an intra-year basis, the picture was different, as and zinc was further lifted by technical financing issues.
confidence started to seep into the markets with respect
Silver, historically the most closely related metal
ANNUAL HIGHS/LOWS & TRADING RANGES to gold, posted an annual average in 2012 some
11% lower than in 2011. A 26% drop in price
2007 2008 2009 2010 2011 2012
between end-February and late May reflected
US$/oz 841.10 1,011.25 1,212.50 1,421.00 1,895.00 1,791.75
silver’s high volatility and deterred investors in
608.40 712.50 810.00 1,058.00 1,319.00 1,540.00
the second quarter, but their appetite returned
33.5% 34.3% 41.4% 29.6% 36.7% 16.3%
Rand/kg 184,202 276,780 324,690 322,735 468,817 506,434
in the third quarter to help towards an intra-
141,802 185,415 232,031 258,374 296,075 402,433 year gain of 6%, a rise that could have been
26.9% 39.8% 35.4% 19.9% 46.9% 25.8% higher but for lingering memories of the April/
Euro/kg 18,410 21,390 25,857 34,573 43,403 44,515 May 2011 slump. Silver is a thin market, with
15,063 17,015 19,910 24,668 31,041 39,028 relatively weak fundamentals that include
20.5% 22.9% 26.5% 33.3% 34.0% 14.1% largely price-inelastic supply. The August
A$/oz 950.89 1,373.98 1,543.63 1,523.73 1801.96 1,750.72 price recovery, driven by gold’s strength, was
756.38 908.48 1,126.74 1,197.71 1,313.79 1,517.90 followed by a sharp reversal in the final quarter,
23.5% 45.1% 33.8% 24.5% 32.0% 15.3% notably in December, as the markets retreated
Yen/g 3,049 3,313 3,442 3,792 4,698 4,622 in the face of protected budget wrangling in
2,324 2,134 2,337 3,040 3,489 3,909 Washington. Due to its volatility, silver is a
27.6% 40.6% 37.9% 21.8% 30.1% 18.2% geared proxy for gold and attracts short-term
Rps/10g 10,715 14,105 18,220 20,780 29,275 32,640 traders accordingly, which means that this
8,520 10,650 12,905 16,055 19,745 27,320 volatility can be self-fulfilling, leading to wide
23.5% 28.2% 34.9% 25.8% 39.7% 13.3%
price swings.
15
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GOLD SURVEY 2013
PRECIOUS METALS PRICES GOLD/OIL PRICE RATIO
500 35
Silver
30
400
Index, 2nd January 2009 = 100
25
Gold/Oil Price Ratio

300 20
15
200
10
100 Platinum
Gold
5
0 0
Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 1993 1996 1999 2002 2005 2008 2011
Source: Thomson Reuters Source: Thomson Reuters
PRICE COMMENTARY AND OUTLOOK
Gold traded in a range of $252 or 15% during 2012, with There was a subtle shift during 2012 in the way investors
a net gain of 6%. Over the year, there were a number of reacted to changes in financial policy. In 2011 and early
changes in sentiment, mainly down to investor responses 2012, gold had tended to respond positively to shifting
GOLD PRICES
to shifts in economic and financial policy, which produced fragilities in the US and Eurozone economies in particular
wide price swings during the year. Price falls were and also to any perceived stagnation in political efforts
regularly met by bargain hunting in the physical market to resolve different financial crises. By the final weeks
and buying from the official sector, with the result that a of 2012, however, the market had almost developed a
body of support developed between $1,540 and $1,600. fatigue towards perceived see-sawing in policy and, more
On the upside, the price approached $1,800 in both specifically, protracted political negotiations, especially
February and October, but on each occasion it failed to as regards the US “fiscal cliff”. In addition, increasingly
pierce this important psychological level. public reservations in late 2012 and early 2013
among some FOMC members about the longer-term
The outlook for the global economy was uppermost in ramifications of the easing programme and when (and
the minds of gold investors over the year and the shifts in how) to effect an exit strategy meant some investors took
the focus of the United States’ monetary policy became fright and liquidated gold holdings in the belief that the
increasingly dominant. Among other significant areas potential for an inflation premium was losing relevance.
of influence, signs of distress from, or improvements
in, the Eurozone had intermittent impacts. This was Gold opened 2012 at $1,598 and rose to fix at $1,781
mainly with respect to sovereign debt risk, as fears for at the end of February (a level not seen since mid-
the region’s banking sector generally receded during the November 2011) amid a range of economic and financial
year. Changing economic signals from China were also uncertainties. In Europe especially, evidence abounded
an important element affecting sentiment. of intensifying problems. Spain raised its projections
PRODUCTION AND CONSUMPTION-WEIGHTED GOLD PRICES
The rationale behind the use of a consumption and

200
production-weighted series, as shown opposite, is that much
Real Gold Price of the world’s gold is produced and consumed in countries
175
Index, 2nd January 2008 = 100
where currencies are not tied to the US dollar. This can

150 reduce the impact of dollar price movements on production or
Production Price
consumption decisions. The two series are weighted based on
125
production and consumption relative to the size of the overall
100 Consumption Price market. In 2012, the consumption-weighted index fractionally
under-performed the dollar price while the production index
75
was the strongest of the three. The absolute changes were all
50
very small, however, with the producer index gaining just 1.2%
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
and the consumer index, 0.2% (basis monthly averages).
Source: Thomson Reuters
16
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GOLD SURVEY 2013
for the size of its 2012 deficit, there was heavy domestic to 7.5% for 2012; this was the first time in eight years
bank borrowing from the “marginal lending facility” at that growth had been projected at below 8%. In Europe,
the European Central Bank (ECB) and in mid-January Greece’s debt restructuring agreement in mid-March
Standard & Poor’s downgraded the credit ratings of nine was met with caution as the economy was not believed
European nations. Later in January, with the Eurozone to be strong enough to grow out of its remaining debt.
in the throes of a credit crunch, the statement from the Spain slipped into recession in the first quarter, while
United States’ Federal Open Market Committee (FOMC) the Spanish and Italian bond markets started to send
projected the likely need for ultra-low interest rates until out distress signals in April and a German bond auction
late 2014. This further fuelled gold’s rally as a result in mid-April was not fully covered. The ECB continued
of safe haven investment, illustrated by inflows into its refinancing operations, but refrained from any overt
ETFs and strong gains in investor longs on Comex. This stimulus, while tacitly pressuring politicians to accelerate
investment momentum was sustained until the end of crisis negotiations. Across the Atlantic, US economic
February, with Moody’s downgrading some European indicators were generally improving and the dollar and
nations and putting others onto a negative outlook, while Treasuries acted as the safe haven assets in the markets.
progress on a Greek bail-out was slow.
During this period, gold traded more as a commodity
The flow of supportive news slowed in the latter part of than as a risk hedge, with sales pervading the market
February. By the end of the month, gold’s self-fulfilling from March through to May (the month in which
upward momentum, which had been helped by chart- investment only properly began to recover). Exchange
GOLD PRICES
related technical factors, had left the price overbought traded products, the over-the-counter (OTC) market and
and ripe for a correction. investors on Comex all reduced their gold exposure and
bar hoarding demand slowed, while short-side traders
This reversal was triggered by Dr. Bernanke’s bi-annual on Comex increased their positions substantially. Gold
Congressional testimony on 29th February, which did experience bouts of physical demand as buyers took
helped to usher in a period of nervousness for the metals advantage of lower prices, which helped to bolster the
markets. Gold, which had touched $1,790 on an intra- market during March and April, and support at $1,620
day basis on the day of the testimony, then fell sharply, started to look as if it would contain the weakness. Net
posting a range of more than $102 (almost 6%) on that official sector buying was also strong in May, partly
same day as the markets took Dr. Bernanke to imply that reflecting opportunistic reserve diversification. The
QE3 was in some doubt, even though high long-term further price downturn in the first half of May came as the
unemployment remained, in his words, “particularly markets focused on sovereign debt and, particularly, over
troubling”. Price slippage continued through to mid- whether Greece would have to leave the Eurozone. The
May, when gold traded at $1,527 (intra-day), which ensuing breach of $1,600 prompted a swift drop to the
subsequently proved to be the low for the year. year’s low. Even so, gold proved to be the most defensive
metal during the broader sector’s fall, with a price decline
There were other influences at work during this March- of 10% between end-February and mid-May.
May period that helped to keep sentiment in the
commodities sector under pressure. In early March, the A gradual return of investor interest helped to support
Chinese government cut its economic growth forecast the price between $1,550 and $1,600 in May and June,
GOLD PRICE & THE MISERY INDEX GOLD PRICE & SPANISH, ITALIAN, CREDIT DEFAULT SWAPS
2000 800
2000 15
Gold price Gold price 700
Credit Default Swap price, 5 year (US$)
1700
1600 600
12
500
Misery Index 1400
1200
Misery Index
US$/oz
US$/oz
400
9
1100 300
800
Spanish
CDS price 200
6 800
400 Italian 100
CDS price
500 0
0 3
Jan-10 Jul Jan-11 Jul Jan-12 Jul Jan-13
Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
17
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GOLD SURVEY 2013
GOLD PRICE CORRELATIONS GOLD PRICE CORRELATIONS
2011 2011 2012 2012 2012 2012

Thomson Reuters GFMS believes the study of correlation Quarterly Q3 Q4 Q1 Q2 Q3 Q4
coefficients to be highly useful, not only as an indication of US$/Euro Rate 0.07 0.43 0.56 0.61 0.53 0.23
underlying themes that may influence the market, but also to US$/Yen Rate 0.16 0.17 0.25 0.07 -0.07 0.18
confirm economic theory with empirical evidence. It must be Silver 0.67 0.65 0.71 0.46 0.69 0.49
noted, however, that the existence of either a positive or inverse Oil (WTI) -0.03 0.14 0.28 0.39 0.24 0.26
correlation between two assets is not sufficient in itself to GSCI Index 0.01 0.30 0.30 0.43 0.32 0.36
establish direct causality. CRB Index 0.12 0.40 0.08 0.22 0.12 0.19
S&P 500 -0.25 0.28 0.09 0.15 0.27 0.11
The table to the right illustrates daily-log return correlations

Annual 2007 2008 2009 2010 2011 2012
between gold and a number of asset classes. It should come as
US$/Euro Rate 0.51 0.50 0.37 0.26 0.27 0.51
little surprise that the relationship with silver is the strongest
US$/Yen Rate -0.10 0.21 0.25 0.16 0.14 0.12
among those under scrutiny, given the historical closeness
Silver 0.54 0.60 0.63 0.58 0.63 0.60
between the two metals. For much of 2012, the gold:silver Oil (WTI) 0.15 0.21 0.20 0.32 0.13 0.30
relationship was stronger in comparison with gold’s correlation GSCI Index 0.23 0.25 0.22 0.40 0.20 0.36
with other assets, with silver remaining generally dependent CRB Index 0.21 0.23 0.28 0.23 0.21 0.15
on gold rather than the other way around. It should be noted, S&P 500 0.09 -0.10 0.07 0.17 -0.03 0.16
though, that silver, with its higher volatility and lower unit price, Source: Thomson Reuters GFMS
GOLD PRICES
often leads any change in price trends in the two metals.

markets focused increasingly on developments within the
Gold’s relationship with the dollar:euro rate was generally United States, with particular respect to the budget deficit; this
re-affirmed in 2012 after a looser period in 2010 and 2011. This kept gold quiet and under some pressure, while also weakening
occurred despite the dollar also assuming a safe haven role for the dollar against the euro in the final weeks of the year.
certain periods, as a result of sentiment towards the Eurozone
being cautious for much of the year. In the second quarter, The correlation between gold and the S&P 500 remained
gold’s correlation with the dollar:euro rate even eclipsed that loose for much of 2012, as, despite some bouts of nervousness,
with silver. It was during this period that the markets reacted sentiment became increasingly positive towards the US
to a growing belief that QE3 might not be implemented and economic outlook and investors increased equity holdings.
the historical interplay between the dollar and gold as hedges Gold’s role as a diversifier of risk within an equity portfolio
against risk thus brought the correlation with the dollar:euro appeared to have little concomitant impact on price, suggesting
rate to the fore, with the dollar in demand. that some investors were already positioned accordingly. Gold’s
relationship with oil was generally in mid-range in 2012 among
Gold’s relationship with the commodities sector as a whole the assets under consideration. Oil’s influence on inflationary
became closer during the second quarter as investors’ risk pressures is now less marked than in the 1990s and so the
appetite was reduced, leading to falls in all major metals’ prices. gold:oil ratio relationship is less closely monitored than used
In the third quarter of the year, this correlation weakened, as to be the case. It can, however, become important when
investment pressure started to build in gold, leading to the geopolitical tensions are an issue.
strong August-September rally. In the fourth quarter, the
CORRELATIONS WITH THE GOLD PRICE GOLD, THE CRB, OIL AND THE DOLLAR:EURO RATE
0.75 150
US$/Euro S&P 500
CRB Index
0.50 135
Index, 4th January 2011= 100
Gold
Correlation Coefficient
Oil
0.25 120
0.00 CRB
105
-0.25 90
$:Euro
-0.50 75
1991 1995 1999 2003 2007 2011 Jan-11 Jul Jan-12 Jul Jan-13
Source: Thomson Reuters GFMS Source: Thomson Reuters
18
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GOLD SURVEY 2013
TRADE WEIGHTED DOLLAR & GOLD PRICE INDEX REAL GDP GROWTH AND INFLATION (%)
2008 2009 2010 2011 2012 2008 2009 2010 2011 2012e
US TW$ 107 112 108 102 104 World GDP 2.8 -0.6 5.1 3.8 2.1
Gold 227 253 319 409 434 Inflation 6.0 2.4 3.7 4.9 4.0
annual averages, 1995 = 100; Source: IMF, World Economic Outlook
although the buying was largely professional. “Grass had increased their gold exposure in the June quarter.
roots” support was thinner, especially with Indian buyers Grass roots demand was also strengthening, while the
deterred by poor pre-monsoon rains, concerns for the run was boosted by ECB President Draghi’s re-affirmation
monsoon as a whole and the lack of a clear price trend. of the Bank’s determination to act as buyer of last resort
for Eurozone states’ bonds. This helped gold as the
The extension to the fiscally-neutral Operation Twist euro:dollar rate strengthened and gold’s correlation
in June saw gold dip towards $1,550. The subsequent tightened with this rate as investors hedged dollar risk.
European Summit reached an unexpected degree of
agreement on measures to address the region’s crisis, Gold’s rally reversed as physical demand started to
rejuvenating interest in commodities and prompting struggle in the face of high prices and as monetary easing
substantial euro short-covering, thus supporting dollar became increasingly discounted into the price. There
gold prices. While gold was essentially neutral in dollar was a knock-on effect here, in that the brinkmanship in
GOLD PRICES
terms over June, it trended downwards in euro terms. Washington in December over the fiscal cliff talks kept
Increased central bank buying developed in July and potential investors away from gold. By year-end, the
dollar gold prices remained steady, in ever-narrowing price had unwound 57% of the August-October rally,
ranges, through to mid-August. Investment grew in the despite the announcement of a further round of stimulus
exchange traded products and on Comex (along with in November. The outcome of the US presidential
short-covering), while healthy implied investment levels election was neutral, but disappointing economic figures
for the September quarter reflected a swelling of interest from China and the IMF’s cut in its forecast for East Asian
in the OTC market, all helping to build support between growth helped put pressure on gold. Some support came
$1,560 and $1,600. This formed the springboard for the from official sector news, with Brazil emerging as a new
rally from the $1,600 region in mid-August to over $1,790 buyer and Korea continuing its purchases.
in early October, which was driven predominantly by an
investor response to fresh loosening in monetary policy. For the full year, official sector net purchases rose by
16% to 532 tonnes, which we feel important in helping
Part of the build-up of gold investment pressure in early to put a floor under prices. The jewellery sector behaved
September was in anticipation of QE3, especially after a in a similar fashion; not only did its demand fall by
weak August non-farm payroll number and the Jackson only 4%, but this also partly reflects very strong Indian
Hole investment conference in early September, at which demand in the first quarter of 2011. Stripping this out
Dr. Bernanke effectively telegraphed further easing. The leaves jewellery demand broadly unchanged, despite
announcement of QE3 came in mid-September and the higher overall prices and poor economic conditions. As
ultra-low interest rate policy was extended “at least for the impact of other fundamentals, prices were also
through mid-2015”, as opposed to the previous target of assisted by mine supply proving flat in 2012, despite the
late-2014. It was in this period that gold’s focus on US overall price rise and instead largely reflecting lower
economic announcements was starting to shift towards grades, often due to reserve husbandry. The turmoil in
the unemployment rate, rather than the employment South African mining, critical for platinum, in contrast
figures in the non-farm payrolls, and this changed focus had limited impact on the gold market. Prices were, in
has persisted into 2013. Meanwhile, there were already addition, assisted by producer hedging staying trivial,
differences in September 2012 among FOMC members as reflecting positive price expectations and miners’
to the likely efficacy of QE3. This was a key to gold’s price continued aversion to this. This meant that total supply
decline in the first quarter of 2013, but did not seem to actually fell, as scrap dropped for the third year in a row.
affect investor attitudes in September last year.
Gold closed 2012 at $1,657.50 and entered 2013 on the
Gold’s early-October challenge of the end-February high defensive, notably on a growing belief of an improving US
was driven by several factors. Positive sentiment was outlook, perhaps reducing systemic risk. The impact of
augmented by news that influential investment funds this on our price outlook is examined overleaf.
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GOLD SURVEY 2013
OUTLOOK REAL GOLD PRICE
2000
Gold has already faced a number of headwinds in 1980 Average: $1,677.49
2012 Average: $1,668.98
late 2012 and early 2013, and undoubtedly has more 1600
challenges ahead of it. Furthermore, we feel that

a secular bear market is eventually in prospect, but 1200
a number of elements in the current environment Period Average, 1970 - 2012:
$696.57
suggest that it is premature to argue that this is already 800
established. The weak price performance from October

2012 to March 2013, for example, suggests that the 400
“professional” market is already pricing in a negative
fundamental outlook and is not making much allowance 0
1970 1975 1980 1985 1990 1995 2000 2005 2010
for any potential economic derailments in the months to Source: Thomson Reuters
come.
In addition, the strengthening of physical demand in the proposal to allow the European Stability Mechanism
response to lower prices, and the continued reserve to invest directly in domestic banks is compounding
diversification in the official sector, point to a reasonably concerns over the financial outlook. Broader Eurozone
stoutly defended underside. While there are lingering stresses may not be directly bullish for gold as they are
GOLD PRICES
short term risks for the gold price, the background to some extent discounted, but the possibility for fresh
environment offers scope for a further bout of strength shocks, such as recent developments in Cyprus, and more
before a bear cycle starts to develop towards year-end. general persistent uncertainty, will maintain concerns.
A key element is that the prospects for the US economy, Meanwhile, the governor of the People’s Bank of China
or more specifically for the management of the country’s (PBOC) has now declared inflation control to be a
debt position, remain unclear. The “fiscal cliff” vote in priority. China’s CPI reached a ten-month high of 3.2% in
Congress in January merely postponed the resolution February 2013 and the PBOC now intends to implement
of the issue, by deferring an increase in the debt ceiling. neutral monetary policies, after a period of comparative
There subsequently appeared to be some pragmatism looseness. This may lead to some domestic uncertainty
developing over how to handle the issue of the debt as the government adjusts to a new, neutral policy, thus
ceiling and budget cuts, but there is still a legacy of underpinning an already vibrant domestic gold market.
politically-driven intransigence that is clouding the
position and the risk of a fiscal crisis has not been At a fundamental level, economic sluggishness is likely
averted. The markets are also finely attuned to any to weaken global jewellery demand in 2013, with the
nuances from the FOMC. Gold price moves related to exception of major consumers India and China. It should
FOMC developments were negative in early 2013 as also bolster scrap return, especially into price strength
expectations grew for an early end to monetary easing. and the gap between jewellery and scrap could be almost
Within the Committee, however, there is a wide diversity eradicated in 2013. With mine supply posting gains
of views over the unemployment outlook, which has and bar investment likely to be steady, official sector
direct implications for the duration of the programme purchases are again expected to be a key support for gold
and for the exit strategy. This could well serve to weaken this year although purchase volumes may slip compared
the dollar in the medium term. Any deterioration in with 2012. Global inflationary expectations are also likely
US unemployment, or dovish modification of FOMC pick up this year, fuelling fresh interest in gold.
members’ stances, could precipitate fresh gold buying.
Professional investment in gold has been pared
There is also a lack of clarity in Europe. The Italian substantially in early 2013, and any intensification of
elections produced political gridlock and undermined the sovereign debt risk or other financial dislocation is likely
Eurozone’s economic progress; Fitch has downgraded to generate fresh buying. This, with steady interest at
Italy’s credit and the spectre of further ratings the grass roots level and in the official sector, will help
downgrades hovers over the region. The ECB’s role as a gold towards a test of $1,850 in late 2013. We do feel,
lender of last resort has helped to ease tensions in the however, that this will herald the onset of a bear market
financial markets, but soaring unemployment is now as economic stability gains traction, bringing with it
a pivotal area of difficulty. Further, disagreement over higher yields and improved confidence.
20
GS 2013 CH2.indd 20 21/03/2013 15:33:19

GOLD SURVEY 2013
3. INVESTMENT
• World Investment eased 2% to a four-year low of 1,605 • By contrast, investor activity in the OTC and futures
tonnes in 2012, but the tonnage figure remained elevated markets remained broadly neutral on a net basis for 2012 as
by historical standards, with its share of total gold demand a whole, although their positions fluctuated dramatically
standing at 36%. over the course of the year.
• In value terms, World Investment still managed to rise • Investment demand for gold weakened notably in the
for the fifth consecutive year, hitting a new record high of first quarter of 2013, primarily as a result of a lack of fresh
approximately $86 billion last year. monetary stimuli, an absence of imminent inflationary
pressure and gold’s recently lacklustre price performance.
• Investor interest was fuelled by gold’s appeal as a safe Meanwhile, a recovery in risk appetite also encouraged
haven, in the wake of the continued sovereign debt crisis some investors to shy away from the yellow metal and to
in Europe, further monetary loosening by the major central move back to so-called risky assets, such as equities.
banks and growing fears about high inflation in the future.
OVERVIEW
• The persistence of deeply negative real short-term
interest rates in many countries kept the cost of carry on World Investment in gold in 2012 was at a very similar
gold at trivial levels, while a shaky global economy also level to that of 2011, at 1,605 tonnes compared with 1,634
undermined investor confidence in conventional assets. tonnes. This was a drop of just 1.8%. While this was the
fourth consecutive year in which investment declined,
• Nevertheless, the scale of gold investment last year it was nonetheless high by historical standards and the
seems to have been restrained by a number of factors, equivalent approximate value still rose by 4% to $86bn.
including a relatively strong dollar, periods of directionless
gold prices and the metal’s failure to break through Bar hoarding was again the largest investment element,
psychologically important resistance levels. These all although its dominance was reduced, at 62% of the
contributed to a fall in speculative activity in 2012. total; in 2011, bar hoarding had been exceptionally
high, accounting for 73% of World Investment, having
• Similar to previous years, the bulk of net investment averaged just 41% of the total in the preceding five years.
inflows went directly into physical bullion products last Bar hoarding in 2012 was the second highest on record.
INVESTMENT
year; despite a 14% decline, combined demand for gold bars Uptake was 19% lower in the middle two quarters of the
and coins amounted to 1,311 tonnes in 2012, accounting for year than in the first and last quarters, as some potential
82% of World Investment on a net basis. investors were deterred by the price fall of early March
to mid-May plus the lack of a clear price trend through
• After a major slowdown in 2011, the pace of net inflows the middle of the year. This latter factor was particularly
into gold ETFs picked up somewhat last year. With a significant in parts of East Asia and the Middle East.
healthy rise of 279 tonnes or 12% in 2012, total ETF holdings Gold’s failure to breach the psychological resistance at
amounted to 2,691 tonnes by year-end. $1,800 also undermined more speculative interest.
WORLD INVESTMENT (TONNES)
2008 2009 2010 2011 2012

Implied Net Investment* 10 1,130 607 103 294
Physical Bar Investment 622 498 886 1,197 998
Official Coins 192 234 213 245 200
Medals & Imitation Coins 70 59 88 88 113
World Investment 893 1,921 1,794 1,634 1,605
Indicative Value US$ (bn)** 25 60 71 83 86
* Implied Net Investment is the residual from combining all the other GFMS data on gold supply/demand as shown in Table 1.
By definition, it therefore captures the net physical market impact of all transactions not covered by the other supply/demand
variables.
** Indicative value calculated on an annual basis using annual average gold prices.
21
GS 2013 CH3.indd 21 21/03/2013 11:50:43

GOLD SURVEY 2013
Bar hoarding was also influenced by government policy, Reserve to maintain ultra-loose monetary policy until
with the government in India, for example, making at least late 2014, for example, liquidity injections from
efforts to reduce physical gold purchases as part of a the ECB were also a key element encouraging gold
programme to reduce the trade deficit. There was also investment in the first weeks of the year.
the Vietnamese government’s intervention in the market
that put domestic hoarding levels under pressure in the Geopolitical risk was again an influence in the market,
second half of the year. Reduced growth in the Chinese although to a lesser extent than 2011, when the Arab
economy also saw local bar hoarding growth falter. Spring was a significant force. Distress selling was a
notable factor in Syria, while Iranian demand remained
Implied net investment, at 294 tonnes, was almost strong on the back of high domestic inflation.
three times as high as in 2011, but substantially below
the heady levels of 2009 and 2010 when the financial Investor assessment of “risk” overall was another key
crisis held the world markets in its grip. Variations element during 2012. For much of 2012, gold’s short-
in implied net investment tend to be much wider term response to changing appetite for risk was that
than the fluctuations in bar hoarding, as the former of a commodity. On the whole, this meant that when
is a much more fluid sector than the latter. Indeed, investors became nervous, gold fell with the rest of
disinvestment flowed through the market in March the metals markets, while the US Treasury markets in
following Dr. Bernanke’s Congressional testimony that particular benefited from risk aversion. Over a longer
was interpreted by some as meaning that QE3 was period, however, gold proved to be relatively defensive
increasingly unlikely. In contrast to bar hoarding activity, within the sector. Thus, during the metals markets’ bear
implied net investment strengthened considerably in phase from end-February 2012 through to May, and the
the second and third quarters of the year, driven by the neutral period that ensued through to mid-August, gold
intensified stresses in the Eurozone along with some staged the smallest loss among the major metals, albeit
bargain hunting in response to lower gold prices. The that its fall was still reasonably substantial, at 10%. This
momentum waned towards year-end, however, especially compares with an (unweighted) average fall across the
in December in response to the sclerosis in Washington major base and precious metals of 19% over the period.
over the treatment of debt, which kept a considerable
number of investors on the sidelines of the gold market in While gold was defensive during this phase, in keeping
favour of cash and Treasuries. with its long-term history as a hedge against risk, there
was a shift in sentiment over the latter part of 2012 and
Monetary policy across the globe was a key determinant into the first months of 2013, largely reflecting increased
INVESTMENT
of sentiment during 2012, with investors becoming optimism for the US economy in particular. As the metals
increasingly attuned to any shifting nuances of policy in markets staged a gradual recovery, gold came under
the United States in particular. However, although the pressure, partly reflecting the reduction in inflationary
United States commanded increasing attention as the expectations over the course of 2012, the receding of
year wore on, it was not the only driving force. While the systemic risk and, in December especially, some concern
strong rally in the gold price in January and February about the prospects for political co-operation over
was attributable in part to the pledge from the Federal budget cuts and tax changes in the United States. Gold’s
WORLD INVESTMENT GOLD AND THE VIX
2000 2000 2000 100

Coins* Gold Price
Bar Investment
VIX
1600 Implied Net Investment 1600 80
1500
1200 1200 60
Real Gold Price
US$/oz
Tonnes
1000
VIX
800 800 40
500
400 400 20
0 0 0 0
2003 2005 2007 2009 2011 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
*Official coins and medals & imitation coins
22
GS 2013 CH3.indd 22 21/03/2013 11:50:45

GOLD SURVEY 2013
US FISCAL DEFICIT GOLD AND YIELD CURVE

4 2000 3.0 2000
Gold Price
2
2.6
US Fiscal Deficits as a % of GDP
0 1500

-2 1500
2.2
Benchmark curve
US$/oz
-4 1000 (2yr-10yr spread)
%
-6 1.8
1000
-8 500
Real Gold Price 1.4
The Benchmark yield curve reflects
-10 inflationary expectations
-12 0 1.0 500
1980 1985 1990 1995 2000 2005 2010 Jan-10 Jan-11 Jan-12 Jan-13
Source: Congressional Budget Office, Thomson Reuters GFMS Source: Thomson Reuters
relative lack of performance then helped to inform the Dr. Bernanke’s bi-annual Congressional statement on
investor sell-off that developed in January and especially 29th February reduced investor hopes for QE3, triggering
February 2013. very heavy gold liquidation on Comex, although ETF
investors were more sanguine. Dr. Bernanke had noted
As for the pattern of gold investment patterns over positive developments in the labour market and that
the course of 2012, the first few weeks of the year the decline in the unemployment rate had been more
saw investment boosted by the FOMC statement that rapid than might have been expected; expectations for
economic conditions would warrant exceptionally low QE3 thus receded. It is arguable that the markets over-
interest rates “at least through late 2014”. Fed Chairman reacted, especially as he had said in a question session
Bernanke also pointed to the crisis in the Eurozone, in the Senate that high long-term unemployment was
stating that it was putting the US recovery under “particularly troubling”. With interest rates on Treasuries
pressure and that the Fed would do all in its power to remaining at historically low levels, corporate bonds met
avoid contagion. He also insisted that the Fed would high demand over this period as investors sought yield.
not tolerate higher inflation. In Europe, meanwhile, the
ECB’s marginal lending facility (a funding mechanism for In Europe, Greece signed a debt swap in early March with
emergency borrowing) met exceptionally strong demand, a number of its creditors, which the International Swaps
while European commercial banks were active in the and Derivatives Association declared to be a “credit
INVESTMENT
covered bond market as it remained almost impossible event”, triggering a discounted pay-out on Credit Default
to sell unsecured debt. European nervousness was Swaps. In mid-month, Eurozone members signed off
exemplified by the fact that a German bond auction in on Greece’s bail-out with a programme amounting to
January produced negative yield as investors sought safe €130bn, while at month-end the Spanish government
havens. announced a new austerity plan. Retail gold investors in
Europe were relatively quiet over this period, not really
The IMF also warned that Europe posed “large and accelerating their purchases of investment bars until
tangible” risks to the Chinese economy. Chinese mid-year, when fears about Spain became more marked.
economic figures early in 2012 (and for much of the rest
of the year) were disappointing and the government cut May saw the Chinese government cut the domestic
domestic banks’ reserve requirement ratio in February. banks’ reserve ratio requirement for the third time in six
A liquidity squeeze had developed in China in early months in an effort to arrest the slowing in economic
2012, which the government eased with a reverse repo growth; then in June the Chinese benchmark interest rate
operation in February that the market took to mean that was cut by 25 basis points, taking the one-year lending
China would aim for a gradual monetary easing over the rate to 6.31% and the one-year deposit rate to 3.25%.
year, rather than an aggressive policy. This was the first Chinese rate cut since December 2008.
Chinese gold investment remained lacklustre, however,
Gold investment in the first two months of 2012 was with investors partly deterred by the metal’s price
strong on Comex, with the investor long position reaching performance, while inflation was largely on a downward
near six-month highs at the end of February, while ETF tack. In June, for example, Chinese inflation was just 2%,
investment was positive, albeit somewhat flaccid. compared with well above 6% in mid-2011.
23
GS 2013 CH3.indd 23 21/03/2013 15:34:45

GOLD SURVEY 2013
INVESTMENT IN COMMODITIES a weaker tone in the dollar, resulting in a rebound in long

positions in gold by $24 billion, silver by $7 billion and crude
The positions in index instruments rose by $39 billion or 87%, oil by $14 billion. Even copper returned to positive territory and
to the end-2012 level of $84 billion. However, markets were platinum saw an addition of $2 billion in investment. However,
fickle through the year, whilst funds made a rapid entry and as fiscal talks in the United States started to weigh on investor
exit depending on the prevailing macro economic situation. To sentiment in the fourth quarter, funds turned cautious on
get this in perspective, the aggregate value of net positions had commodities thus trimming bets by end of December. Most
jumped by 114% to $95 billion in the first quarter from the end of affected were agricultural commodities whose positions
2011. However, the recovery soon proved to be short-lived and declined from $35 billion as of end-September 2012 (the highest
nearly 40% of the value was shed in the second quarter alone. ever in six quarter) to $15 billion.
That was then followed by a rise in long positions to a record
of $121 billion by end-September before a another fall was Rising investor interest in agricultural commodities last year
recorded in the fourth quarter to close 2012 at $83 billion. makes us visit that sector separately. 2011 ended with the share
of agricultural commodities in total investment at a meagre
Looking at key macro-economic and geopolitical events that one percent. Later from mid-January 2012, the focus shifted
shaped these erratic moves in each of the quarters in 2012, the to the growing drought situation in North America and more
initial trigger was the dovish comments from the FOMC meeting specifically the yields of corn and soybean crops. As the drought
in January where they had decided to maintain rates near situation turned grim, the allocation to agricultural commodities
zero through to 2014, thus keeping the dollar trending lower. rose by 41% by end-June, with soybean complex and corn
Alongside, escalating tension between the West and Iran over altogether accounting for 31% of all investment in the second
the latter’s nuclear programme and with the EU planning to quarter. After supply concerns eased a little, their share of
push for an embargo from mid-2012, heightened fears of supply investment also dropped to around 25% by end-September.
tightness in the crude oil market. These factors helped oil price
rally to post-2008 peak of $128 per barrel, thereby increasing A look at the first quarter of 2013 shows that combined net
net long positions by near two fold in the first quarter. investor long positions as on 5th March 2013 ended at $67
billion, down 19% from the fourth quarter of 2012, primarily led
The crisis in Greece, tepid growth numbers from China, not so by liquidations in gold which shed nearly $10 billion in holdings.
encouraging job numbers from United States and the Fed’s Interest in gold has been waning since the beginning of 2013,
lack of commitment to a third round of quantitative easing on increasing hopes for a recovery in the US economy and on
shifted focus to the dollar’s role and demand-side economics in expectations that, as inflation fails to materialise as a threat,
second quarter This led to sharp liquidations dragging net long demand for gold as a natural hedge would decline. Also fears
INVESTMENT
positions in crude oil to just $9.6 billion. Easing inflationary of a demand slowdown from India, the largest consumer of gold
concerns saw gold post losses, leading to liquidations of $10 continued to bear heavily on the price.
billion in the second quarter. Copper was a notable casualty too,
as net short positions were the highest ever in a quarter, raising Looking ahead, commodity prices are likely to perform better
alarms about the state of the world economy. upon return of ‘risk-on’ investment. However, rallies could be
undermined by concerns of increased regulatory oversight and
That was followed by a new round of easy monetary policy also its fall out on the economy’s growth. That said, prices are
action from major central banks. This also coincided with still likely to trend north, but more so at a slow and steady pace.
VALUE OF SPECULATIVE POSITIONS IN 22 COMMODITY FUTURES GLOBAL COMMODITY INDEX INVESTMENTS

140 Other* 250
Livestock
120
Energy
200
100 Silver
Gold
US$ Billions
80
150
US$ Billion
60
100
40
20
50
0
-20 0
Q1-08 Q1-09 Q1-10 Q1-11 Q1-12 Q1-13** Q1-09 Q1-10 Q1-11 Q1-12
Source: Thomson Reuters GFMS Source: CFTC
*Other includes soft, agricultural and dairy commodities, platinum, palladium
and copper; ** includes early March 2013 data
24
GS 2013 CH3.indd 24 21/03/2013 11:50:47

GOLD SURVEY 2013
Global over-the-counter (OTC) investment strengthened although fears receded slightly over Spain, Moody’s and
considerably in the second and third quarters of Standard & Poor’s cut France’s rating, citing concerns
2012. By contrast, ETF and Comex saw disinvestment over France’s indebtedness (with public debt in excess
in July. Once again, monetary policy was a primary of 90% of GDP) and the uncertain fiscal outlook.
driver for OTC investment, while gold’s stagnant price Meanwhile economic indicators in China in the third
prompted liquidation on the exchanges. Weak US quarter led to some suggestions that the government
figures, especially non-farm payrolls, started to rekindle could implement fresh stimulus polices, but in the fourth
expectations for QE3, especially with Operation Twist due quarter the figures started to improve; in the first quarter
to expire at end-June. The Governing Council of the ECB of 2013 the government moved to a neutral stance from
warned of further risks to the European economy, while positive, citing inflation concerns.
affirming that it would continue to stand in the market
with refinancing operations. This was taken as a nudge There was a fresh shift in the complexion of gold
from ECB President Draghi to politicians to accelerate investment as the year drew towards its close. OTC
efforts to resolve the crisis. At the European Summit investment eased as investors were concerned about the
in June, European leaders did agree on measures to political brinkmanship over the fiscal cliff, and (especially
address the Eurozone’s problems, but this harmony soon with year-end approaching) preferred not to commit
ran into headwinds. The Bundesbank disagreed with the their funds. Bar purchases increased, partly for seasonal
proposal for fresh bond purchases so the ECB moderated reasons (especially ahead of the Chinese New Year) and
its position, saying that it would not start bond purchases partly because Indian dealers were expecting another
unless member governments committed to rescue fund increase in import tariffs in January. The falling price
programmes of their own. contributed to liquidation on Comex, and, while ETF
investors increased their holdings to reach a record at
Investment in gold in the third quarter included fresh end-year, some fissures were starting to appear.
institutional interest, as the FOMC extended its time
horizon for ultra-loose monetary policy to “at least The failure of Congress to address the fiscal cliff issue
though mid 2015”, while the IMF noted that the United properly in December saw the markets move into “risk-
States had room to ease its policy further. QE3 was off” mode that triggered investor selling early in 2013.
announced in mid-September, Operation Twist was Subsequently, a more bullish mood enveloped the
extended and the time horizon for exceptionally low markets, especially with respect to the US economy,
interest rates was pushed out again, this time to mid- and, with gold already in a negative mood, this extended
2015. Policy was amended further in mid-December the gold selling momentum as investors rotated into
INVESTMENT
with the target for interest rate changes moving to an equities. This selling, on Comex and in the ETFs in
unemployment rate of 6.5%. particular, was exacerbated by technical (chart-related)
factors. Although confidence had also improved in Asia,
Although the European banking sector was entering economic concerns had by no means been fully dispelled
calmer waters during this period, the European economy in the region and there was a positive undercurrent in
slipped into recession in the third quarter, while the retail markets with respect to gold. Uncertainty
uncertainty persisted over whether Spain would ask for also persisted in Europe and the proposal to levy a tax
a rescue programme. Standard & Poor’s downgraded on bank savings accounts in Cyprus prompted a rally to
Spanish debt in October; then in the fourth quarter, attack $1,600.
GOLD PRICE AND OTHER INVESTMENT INDICATORS
2011 2012 Change

Average Average y-o-y Intra-year
Gold Price (US$/oz) 1,571.52 1,668.98 6% 4%
US$ Libor (3-month annualised) 0.34% 0.43% n/a n/a
Contango (3-month annualised) 0.41% 0.45% n/a n/a
GSCI Index 669 653 -2% -3%
CRB Index 539 487 -10% 0%
S&P 500 Index 1,267 1,379 9% 12%
XAU Index 205 172 -16% -13%
25
GS 2013 CH3.indd 25 21/03/2013 11:50:47

GOLD SURVEY 2013
Last year saw a marked increase in the implied net

IMPLIED NET INVESTMENT investment figure, which rose to 294 tonnes, up by
184% from the previous year’s level. A close analysis of
— Substantial gains in gold ETFs, combined with quarterly developments suggests that last year’s robust
increases in investor positions on Comex for the performance was, in part, due to a lower disinvestment
year as a whole, led to a notable rise in implied net figure in the first three months of 2012 compared with
investment in 2012. the corresponding period in 2011. After the gold price
rally ran out of steam in late February, not surprisingly,
Thomson Reuters GFMS’ implied net (dis)investment the futures and OTC markets saw a sharp bout of profit-
figure, featured in Table 1 on page 8 as well as in the taking. Nevertheless, strong investment demand for gold
table on page 21, is not an independently calculated ETFs in the first quarter, which saw inflows of some 53
statistic. It is essentially a residual balance that brings tonnes over the period, helped to reduce the level of net
all other elements of our supply and demand analysis disinvestment to just 31 tonnes, which was 86% lower
into equilibrium. This residual is understood to broadly year-on-year. Once the implied net figure moved back
reflect the net impact of all investor activities (not into positive territory for the rest of the year, a substantial
accounted for by bar and coin investment numbers) on rise in investment activity in the third quarter, driven
the physical market. Being a balancing item, implied by fresh monetary injections from several countries,
net (dis)investment should not be viewed as a precise accounted for the bulk of the year’s total gains.
tonnage equivalent of net investor activity, but rather
as an indication thereof. There are instances when this It is interesting to examine how the implied figure
residual captures the impact of activity that would not, compares to information on activity on the different
strictly speaking, be classified as investment. arenas of gold investment over the year (although
given aforementioned limitations in this information, it
One added complication is the timing of transactions and is not possible to disaggregate accurately implied net
their impact on the physical market, information on which investment to these components). Due to the nature
is often unknown. This can affect the size of the residual of gold ETFs and other similar products, we are certain
balance and the way in which it ties into information the 279-tonne inflow into ETF holdings had a one-to-
provided by market participants. For instance, a one impact on implied net investment. The picture is
transaction that takes place in the latter part of a period somewhat more opaque when it comes to the futures
could theoretically elude our implied (dis)investment and OTC markets. As for the former, non-commercial
figure. Such issues are of course less pronounced over and non-reportable net positions in Comex futures
INVESTMENT
longer periods for which data are aggregated. Despite registered a robust increase of some 77 tonnes over 2012,
the above caveats, the implied net (dis)investment which also helped to explain the higher implied figure.
figure usually acts as a good indicator of investment However, it is hard to estimate the precise magnitude of
activity, both in terms of direction and magnitude. Using its physical market impact. Turning to the OTC market,
publicly available data and information collected through our information indicates that this saw modest net selling
our extensive network of contacts and field research, for the year as a whole.
Thomson Reuters GFMS apply a “reality check” to the
implied figures, which generally tends to confirm them.
GOLD AND THE S&P 500 INTEREST RATE SWAP SPREAD
2000 2000 2.5
1600 1700 2.0

S&P 500 Index EURIBOR - OIS Spread
S&P 500 Index
1200 1400 1.5

US$/oz
800 1100 1.0
400 800 0.5

Gold Price
0 500 0.0
Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
26
GS 2013 CH3.indd 26 21/03/2013 11:50:50

GOLD SURVEY 2013
EXCHANGE TRADED FUNDS measures from major central banks. Combined holdings soared
by 190 tonnes over the period, which represented more than
In 2012, gold exchange traded funds (ETFs) posted another two-thirds of the year’s total gains.
strong increase. Combined holdings of the ETFs and Canadian
funds grew by 12% or 279 tonnes over the year, closing 2012 at After reaching a reported peak of 2,642 tonnes on 12th October,
2,691 tonnes, a new record high. In value terms, the increase investor interest in gold ETFs continued to rise for the rest of
was even more pronounced at 21%, with total holdings at the year, albeit at a slower pace, posting successive record
year-end amounting to $143 billion. The greatest inflows took highs. Much of this robust performance was attributed to
place in the established entities; the largest fund, SPDR Gold growing concerns over the sovereign debt situation in many
Shares, saw the biggest increase of 96 tonnes, whilst iShares industrialised countries, particularly the United States.
COMEX Gold Trust, Source Physical Gold ETC and ETF Securities Holdings in gold ETFs grew by another 49 tonnes in the final
registered growth of 45, 30 and 21 tonnes respectively. three months of 2012, to a fresh record high of 2,691 tonnes
by end-December. Looking at individual funds’ performance,
Demand for physically backed gold accelerated in early 2012, iShares COMEX Gold Trust and SPDR Gold Shares saw double-
initially fuelled by lower gold prices, and then supported by digit tonnage growth during this period.
escalating fears over any Greek default. ETF holdings grew by
70 tonnes in the first three months of 2012, to a new record high After five consecutive months of growth, gold ETFs posted their
of 2,482 tonnes on 19th March. In tonnage terms, the chief first monthly decline in January this year, with total volumes
beneficiary of the increased interest in physical gold was SPDR dropping by nearly 20 tonnes from the end-year figure in 2012,
Gold Shares; its holdings rose by 39 tonnes over the period. to 2,672 tonnes by end-month. ETF holdings continued to
This was followed by a period of net selling, primarily driven by decline in February, registering a steep fall of 110 tonnes over the
profit-taking, which saw holdings fall back by nearly 60 tonnes, month. The chief reason behind the fall at the start of the year
to around the 2,400-tonne level by mid-May. In addition, was growing fears that the Fed might end its bond purchase
some investors may also have switched from ETFs to less costly programme earlier than previously expected on continued signs
allocated gold accounts. During that period, the SPDR Gold of improvement in the world’s largest economy. In addition, the
Shares fund registered the biggest decline at 28 tonnes. pace of investment, driven by safe-haven considerations, began
to abate somewhat on easing concerns over the debt crisis in
From this low level, the period between mid-May and early July the Eurozone and reduced inflationary pressures in advanced
saw investors gradually move back, driven by renewed concerns economies. This translated into heavy outflows from gold ETFs,
about the European sovereign debt crisis and the global with total volumes tumbling to 2,545 tonnes on 11th March,
economic slowdown, taking ETF holdings to 2,468 tonnes which was 148 tonnes below the start of the year. The largest
INVESTMENT
by 6th July. The bulk of last year’s increase was, however, decline over that period was recorded by SPDR Gold Shares,
concentrated in the period between August and early October, which saw an outflow of 111 tonnes, representing close to 75% of
when ETFs experienced a substantial rise in investment demand the period’s total losses.
on the back of a series of announcements about fresh stimulus
GOLD ETFS & OTHER SIMILAR PRODUCTS GOLD ETFS AND OTHER SIMILAR PRODUCTS
(tonnes) end-2011 end-2012
SPDR Gold Shares 1,254.6 1,350.8
ZKB Gold ETF 224.3 235.7 3000 2000
Other Gold Price
iShares COMEX Gold Trust 172.5 217.7
2500 iShares Gold
ETF Securities 140.1 161.3 1600
SPDR Gold Shares
GBS LSE 120.8 139.2 2000 NewGold
Julius Baer 104.9 111.7 1200
GBS (LSE listed)
US$/oz
Tonnes
Xetra Gold 51.0 51.0 1500
Sprott Physical Gold 38.0 50.3 800

1000
NewGold Gold Debentures 41.0 45.2
Central Fund of Canada 52.7 21.7 400
500
Claymore Gold Bullion ETF 10.5 10.8
Others 201.6 295.9 0 0
Total 2,412.1 2,691.1 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13
*Other includes DB Euro Hedged, GBS ASX, Royal Canadian Mint, DB Physical Gold ETC Source: Thomson Reuters GFMS, collated from respective ETF issuers’ data
(EUR), ETFS - Swiss Gold, iShares Gold Bullion Fund, Mitsubishi Tokyo, DB Physical Gold
ETC, ETFS Precious Metals Basket Trust, Goldist, ETFS Asian Gold Trust, Claymore Gold
Bullion ETF (Non-Hedged), Dubai DGX, DB Physical Gold SGD Hedged ETC, DB Physical
Gold GBP Hedged ETC, Central Gold Trust, Source Physical Gold ETC, Indian ETFs; Source:
Respective issuers
27
GS 2013 CH3.indd 27 21/03/2013 11:50:51

GOLD SURVEY 2013
GLOBAL ETF HOLDINGS
(end-period) Tonnes US$bn Tonnes US$bn Tonnes US$bn Tonnes US$bn

10.Q1 1,851 66.38 10.Q2 2,147 85.86 10.Q3 2,197 92.32 10.Q4 2,227 100.63
11.Q1 2,166 100.22 11.Q2 2,220 107.47 11.Q3 2,308 120.19 11.Q4 2,412 118.73
12.Q1 2,465 131.77 12.Q2 2,465 126.70 12.Q3 2,603 148.63 12.Q4 2,691 143.41
Source: Respective issuers
EXCHANGE LISTED STRUCTURED uncertainty, as these products, although linked to gold,

PRODUCTS failed to provide the direct exposure and security sought
by risk averse investors. For 2012 as a whole, investor
— Investor interest in exchange listed structured activity in exchange listed structured products seems
products remained lacklustre in 2012. to have been further restrained by a fall in gold price
volatility and periods of rangebound trading, which also
Exchange listed structured products on gold are reduced speculative interest.
standardised, normally cash-settled, derivatives on the
metal that are listed on stock exchanges around the Not surprisingly, given high market uncertainty and a
world. Warrants are essentially standardised vanilla generally cautious attitude towards leveraged paper
products. As indicated by their name, knockout warrants products, less complicated products such as plain vanilla
are barrier options that are active up to the point in calls and price trackers remained the most popular
time when the gold price reaches a set level, from which choice for investors.
point they are deemed worthless. Certificates include
all other exchange listed structured products, such as
price trackers, discount and quanto certificates and
fixed income-type products on the metal. Due to their
low entry level and the relative cost disadvantage to the ACTIVITY ON COMMODITY EXCHANGES
futures and OTC markets, certificates tend to be used by
smaller retail investors. — Major commodity exchanges posted a double-digit
decline in 2012.
Exchange listed structured products on gold can and — Other exchanges registered a robust performance
INVESTMENT
usually do have an impact on the physical market last year, with a substantial rise in trading volumes
through the process of issuers hedging against their reported by the Dubai Gold and Commodity
counterparties’ positions. This hedging is done on the Exchange.
physical, futures and OTC markets for gold.
COMEX
Investor activities in exchange listed structured products
once again turned out to be relatively quiet in 2012, with Following a robust increase in 2011, turnover in gold
their contribution to overall investment, and hence the futures traded on Comex dropped by 11% last year. Total
gold price, remaining tiny throughout the year. volumes reached 43.9 million contracts, equivalent to a
nominal 136,522 tonnes and to an average daily turnover
Consistent with the trend seen in previous years, the of 542 tonnes. Open interest stood at 427,991 contracts
investor interest that there was largely concerned to the at end-2012, equivalent to 1,331 tonnes, up by a small
ongoing sovereign debt crisis in the euro area, especially 2% from the previous year’s level. The fall in turnover
in the second quarter of the year when fears about a last year was in part due to a sharp drop in interest at
disorderly Greek default intensified and worries about end-March, when volumes fell from a high of 379,099
the health of the European banking sector surged. While contracts on the 28th to 97,189 contracts by 9th April.
such a deteriorating situation tended to favour gold Last year’s decline can also be explained by a period
purchases, the overwhelming bulk of these investment of lacklustre investment activity during the summer,
inflows went directly into physical bullion bars, coins when the average turnover from June through to August
and gold ETFs. By contrast, demand for warrants and fell well below the annual average. Despite a partial
certificates in fact dropped amid heightened market recovery in early September and November, turnover on
28
GS 2013 CH3.indd 28 21/03/2013 11:50:51

GOLD SURVEY 2013
NET ‘INVESTOR’ POSITIONS ON COMEX
(end-period) 2007 2008 2009 2010 2011 2012

Futures contracts 238,412 142,773 278,942 259,770 163,932 188,659
- equivalent in tonnes 742 444 868 808 510 587
- value US$ (bn) 19.9 12.4 30.6 36.5 26.1 31.6
Options contracts 15,846 14,056 22,389 17,812 9,627 1,236
- equivalent in tonnes 49 44 70 55 30 4
- value US$ (bn) 1.3 1.2 2.5 2.5 1.5 0.2
Source: CFTC (Non-Commercial and Non-Reportable Net Positions)
the Comex dropped again to close the year at 96,449 economic data and easing concerns over the Eurozone
contracts, 26% below the level seen at the start of the debt crisis. From 161,843 contracts at the start of the
year. Investor activity in Comex options, on the other year, the net investor long climbed by an impressive 52%
hand, fell by a modest 4% year-on-year to 9.1 million to 245,351 contracts by end-February. This resulted in
contracts. The year-end open interest in options was a dramatic recovery in the gold price, with it rising by
967,197 contracts, down by 3% from the end-2011 level. nearly $190/oz from early January through to February.
After the gold rally ran out of steam in late February, a
An analysis of the data published by the CFTC in its sharp bout of profit-taking then ensued, which saw net
weekly reports on non-commercial and non-reportable positions correct sharply to the year’s low of 130,709
net positions in Comex futures and options provides a contracts by the final week of May. This resulted in a
proxy for investor activity on the exchange. It should, steep fall in the gold price, which fell 14% over the period
however, be noted that CFTC reports are an imperfect to $1,540/oz, the lowest level for the year, by month-end.
gauge of investor/speculator activity, as there can be a
degree of investment hidden within the commercial side After a period of rangebound trading in the early
and vice-versa. summer, investor positions saw a notable increase of
87% during the period from mid-August through to early
As illustrated in the accompanying graph, net positions October, to reach a high for the year of 269,270 contracts
in Comex futures generally followed movements in the on 2nd October. Fresh stimulus measures from major
gold price. At end-2012, net positions stood at 188,659 central banks, coupled with a return of risk appetite, were
INVESTMENT
contracts, up by 15% on their end-2011 level. In value chiefly responsible for the strong recovery in investor
terms, the increase was even more pronounced at 21%. interest over the period. Thereafter, as the gold price
rally faltered in October, a heavy sell off materialised,
Looking at the intra-year trends in the futures market, the which despite a partial recovery in November, left the
year started on a bullish note, driven by lower gold prices year-end net position at 188,659 contracts.
and a return of risk appetite on the back of improving US
COMEX VOLUME & OPEN INTEREST COMEX INVESTOR NET POSITIONS
500 550 350 1800

Gold Price
Daily open interest (contracts, thousands)
300
Daily volume (contracts, thousands)
Net positions (contracts, thousands)
400
Comex settlement price (US$/oz)
Open Interest 500 1700

250
300 200
450 1600
150
200
100
400 1500
100
50
0 350 0 1400
Jan-12 Mar May Jul Sep Nov Jan-13 Mar Jan-12 Mar May Jul Sep Nov Jan-13 Mar
Source: Thomson Reuters Source: CFTC
29
GS 2013 CH3.indd 29 21/03/2013 11:50:52

GOLD SURVEY 2013
Looking briefly at this year, investor interest continued COMEX, NYSE LIFFE & TOCOM FUTURES
to trend lower through to early March, largely driven by
(total volume in nominal tonne equivalents) Change
growing speculation that the Fed might withdraw its 2010 2011 2012 y-o-y
asset purchase programme at a faster pace than it was Comex 139,125 152,937 136,522 -11%
previously expected. Net positions dropped by a quarter Tocom 12,198 15,194 11,895 -22%
from the start of the year to 133,798 contracts on 5th NYSE Liffe 3,623 2,318 1,126 -51%
March. This resulted in a steep decline in the gold price, *N.B.: Includes the 100-ounce and 33.2-ounce contracts
it falling by more than $100/oz over the same period. Source: Thomson Reuters
NYSE LIFFE
Turnover on the Liffe platform continued to trend lower contracts, which was down by a notable 22% year-on-
over 2012, with trading volumes falling by over a half year. In part, this was due to a period of low investment
over the year, to a nominal equivalent of 1,126 tonnes. during the summer lull, with the daily trading volume
Meanwhile, end-year open interest at a nominal seven from June through to August averaging 37,608 contracts,
tonnes was down by over 27% on the previous year’s well below the annual daily average. Since then investor
level. The lack of interest for the exchange’s 100-ounce interest rebounded strongly, driven by the announcement
contracts remained chiefly responsible for the subdued of additional stimulus plans by the Bank of Japan, which
investor activity last year. In 2012, total volume of impacted positively on market sentiment. Indeed,
100-ounce futures dropped by a sharp 84% to 16,595 trading volumes on the Tocom more than doubled in the
contracts, equivalent to a nominal total of just 52 final four months, rising from around 45,000 contracts
tonnes. Open interest also tended to decline last year, at end-August to over 96,000 contracts by the end
reaching 754 contracts or two tonnes by end-December, of the year, up by 40% on the end-year figure in 2011.
nearly 57% below the end-2011 figure. Demand for Open interest in gold futures ended the year at 145,738
the 33.2-ounce “mini-gold” contract dropped by 46% contracts, up by 18% on the end-year figure in 2011.
year-on-year, to 1.0 million contracts or a nominal 1,075
tonnes. End-year open interest stood at 4,155 contracts, Net investor positions in Tocom gold futures can be used
up by 15% on the end-year figure in 2011. as a proxy for speculative activity on the exchange. After
starting the year at 38,774 contracts, the speculative long
TOCOM fell heavily through to end-February. From this low level,
net positions quickly recovered to hit a high for the year of
INVESTMENT
The Tokyo based exchange offers one kilogramme over 62,000 contracts in mid-September. The rest of the
gold futures and options contracts, for which the price year saw a declining trend in net positions, with the year-
is quoted in yen. Following a robust increase in 2011, end net position falling back to levels similar to those at
trading volumes registered a poor performance in the start of the year.
2012, with the full year total dropping below 12 million
TOCOM VOLUME & OPEN INTEREST SHFE VOLUME & OPEN INTEREST
150 180 350 150

Weekly average open interest (contracts, 000s)
Weekly average turnover (contracts, 000s)
Open Interest
Open interest (contracts, thousands)
120 150 280

Turnover (contracts, thousands)
120
120 Open Interest

90 210 90
90
60 140 60
60
30 70 30
30
0 0 0 0
Jan-11 Jul Jan-12 Jul Jan-13 Jan-10 Jul Jan-11 Jul Jan-12 Jul Jan-13
Source: Tocom Source: SHFE
30
GS 2013 CH3.indd 30 21/03/2013 11:50:53

GOLD SURVEY 2013
OTHER EXCHANGES 9th January 2008 (with a standard trading unit of one
kilogramme/lot, a daily price limit of 5% either side
Over recent years, market liberalisation and related of the previous day’s settlement price and a minimum
developments in certain countries, coupled with growing margin requirement of 7%). Total volumes traded on the
investor interest in commodities, has led to the launch SHFE remained at robust levels in 2012 of 11.8 million
of a number of new commodity exchanges around the contracts, down by 18% year-on-year. At the end of 2012,
world, with several of these seeing a gradual expansion open interest on the SHFE totalled 111,424 contracts, up
in activity as well as wider participation. by 9% from the figure recorded at end-December 2011.
Since October 2002, the Shanghai Gold Exchange (SGE) There are currently a number of commodity exchanges
has been China’s only legal source of VAT free gold and in India that offer gold futures contracts, the leading one
platinum. Although at its inception the exchange only being Multi Commodity Exchange (MCX). MCX has
offered spot gold products in one kilogramme contracts, continued to remain the dominant exchange for trading
over the years the SGE has expanded its product range gold in India through to last year. Total volume on MCX
to include spot products of different sizes as well as a gold futures fell steadily from a peak of 2,659 tonnes (on
deferred delivery service within the spot trading format. a monthly basis) in September 2011 to just 756 tonnes
Due to the semi-closed nature of the Chinese gold in April 2012, generally following movements in the
market, the gold price quoted on the SGE is often at a gold price. Despite a partial recovery in the second half,
premium or discount to the international price. total volumes at year-end still fell short of its peak level,
registering 969 tonnes in December. Over the course of
Turnover for the spot contract registered a robust 2012, total turnover for the year reached 12,604 tonnes,
performance in 2012, with combined volumes for the two down by 18% year-on-year. A drop in arbitrage activities
purities of spot gold contracts (Au9995 and Au9999) between the MCX and Comex, as a result of a sharp
reaching a historical high of 1,901 tonnes, although up depreciation in the Indian rupee against the US dollar,
by a mere 1% year-on-year. Looking at the premium of was chiefly responsible for last year’s decline.
the SGE price over the London a.m. fix, this averaged
$6/oz last year, down by 18% from that recorded in Since the launch of the exchange in November 2005,
2011, broadly in line with the decline in volatility in gold futures have also been available on the Dubai
international gold prices in 2012. It is of note that the Gold and Commodity Exchange (DGCX). Despite the
premium soared earlier this year to reach an average of strategic location and organisation of the exchange (it is
INVESTMENT
$13/oz in the first two months, reflecting strong physical backed by, amongst others, the Dubai Multi Commodities
demand ahead of the Chinese New Year, coupled with a Centre and the MCX, and offers contracts priced in US
bullish investor sentiment towards the yellow metal in dollars), activity on the exchange remained very limited
the country. over the past few years. That said, total volume in gold
futures listed on the DGCX totalled 552 tonnes last year,
Turning to the SGE’s AU(T+D) futures contracts, total up by a notable 42% on the 2011 figure.
volume for the year recorded 4,226 contracts in 2012,
down by a notable 21% year-on-year. At end-2012, OTC MARKET
open interest stood at 145 tonnes, up from 134 tonnes
at the end of the previous year. Continuing with China, — The OTC market witnessed a small scale of net
it is worth discussing here the Shanghai Futures disinvestment in 2012.
Exchange (SHFE), which launched a gold contract on
The over-the-counter (OTC) market trades a variety of
OTHER EXCHANGES products linked to the gold price, including spot and
forward products, metal accounts, as well as vanilla
(total volume in nominal tonne equivalents) Change
2010 2011 2012 y-o-y options and other derivatives, which can be tailor-made
SGE Spot 1,604 1,881 1,901 1% to suit particular investment purposes. The OTC market
SGE Au(T+D) 4,111 5,354 4,226 -21% tends to be largely populated by institutional investors,
SHFE 6,794 14,444 11,834 -18% who are attracted to the flexibility inherent in products
MCX 13,577 15,382 12,604 -18% traded therein, the relatively low transaction costs and
DGCX 490 389 552 42% discrete nature of operations. In contrast, the high entry
Source: relevant exchanges level costs inherent in the market make it inaccessible
31
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GOLD SURVEY 2013
to retail players (with the exception of high net worth LONDON BULLION MARKET (LBM) AND COMEX TURNOVER*
individuals).
LBM LBM Comex LBM/
Number of Turnover Turnover Comex
Investors in the OTC market, in aggregate, were net Transfers Tonnes Tonnes Ratio
sellers in 2012, albeit of a limited magnitude. This net 2008 2,060 694 472 1.5:1
disinvestment figure was largely due to several bouts of 2009 1,674 636 438 1.5:1
heavy long liquidation, although part of these selling was 2010 1,734 571 553 1.0:1
2011 2,296 644 607 1.1:1
offset by a further rise in demand for metal accounts from
2012 2,678 616 542 1.1:1
long-term investors and buoyant bargain hunting on
* daily averages, Source: LBMA and Thomson Reuters
major price dips.
The main driver of fluctuations in investor positions, lack of progress in resolving budget issues in both Europe
particularly for those towards the more speculative and the United States, and a growing risk of a major
end of the spectrum, was the gold price itself. We thus rise in inflationary pressure in the future. Nevertheless,
saw some decent buy-side interest in the early months volumes of fresh inflows failed to match those seen in the
of the year before a sharp price retracement at end- previous years, due to the fact that investors that were
February triggered a wave of profit taking and stop-loss inclined to purchase gold may have already accumulated
selling. While investor confidence recovered somewhat sufficient bullion stocks since the onset of the financial
in the second quarter, growth in their positions seems crisis. This is of course not to say that the group were
to have been restrained by the metal’s uninspiring altogether absent from the market. Comparing demand
price performance and periods of a flight to ‘quality’ to that seen in 2011, for instance, healthy growth in
amid a renewed European sovereign debt crisis. It is allocated metal accounts is suggested by market
not until the mid-summer that a major rise in long side participants, reflecting investors’ growing desire to
interest emerged, due to growing expectations of further eliminate counterparty risk, while allocated gold’s lower
monetary easing ahead of the ECB and Fed’s September costs were also important to certain investors.
policy meeting. However, such a resurgence in buying
was more tactical and speculatively driven, and a good Even though western players continued to dominate
part of these long investments would have been closed the OTC market, the last few years have seen growing
out prior to end-September. participation by financial institutions and high net
worth investors from East Asia and the Middle East. In
In addition, the latter part of the year saw a sizeable part, this has been largely driven by a general rise in
INVESTMENT
number of players exit the OTC market. For instance, investor interest in gold investment in these markets,
the hedge fund community is believed to have largely and the process has also been facilitated by rapid market
shunned gold in the latter part of the year, mostly basis a liberalisation. For instance, in China, in its latest efforts
view that the metal’s potential upside is limited. Falling to develop Shanghai into a major financial hub in Asia,
interest in gold could also be partly explained by a hefty the country’s central bank launched interbank trading
drop in profits from broader commodity trades (oil in later last year in order to boost gold trading volumes
particular) last year, which encouraged many funds to and these have already grown rapidly in recent years.
shift to other assets. The unwinding of these OTC long
positions therefore is understood to have contributed
to several sessions of heavy price falls in late 2012. TURNOVER ON THE LONDON BULLION MARKET
However, anecdotal information also suggest that this 1000 60

selling was often followed by strong bargain hunting, Volatility
which helped to stabilise the price quickly. 800 50
Monthly gold price volatility (%)
40
Furthermore, it is worth stressing that, in spite of a 600
Tonnes
growing exit by institutional players in late 2012, a large 30
amount of core long positions are thought to have been 400

20
still held by reasonably firm hands by year-end. Indeed,
200
unlike short-term players, investors with a medium to 10
long perspective continued to expand their long positions
0 0
in 2012, especially from those who were seeking refuge in Jan-06 Jan-08 Jan-10 Jan-12
gold from a deteriorating economic outlook, including the Source: Thomson Reuters GFMS
32
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GOLD SURVEY 2013
In Turkey, still new to the general public, gold deposit EUROPE

accounts offered by local commercial banks continued to
enjoy rapid growth in 2012, as the amount of gold held European retail investment in 2012 fell a hefty 29%,
by investors under these accounts jumped by almost 45 although the volume achieved, 274 tonnes, was of
tonnes last year. a similar order of magnitude to those in the years
immediately after interest had exploded in the wake of
PHYSICAL BAR INVESTMENT Lehman’s collapse. Within that figure, investment in bar
form remained the dominant element and interest in
— 2012 saw a 17% drop in physical bar investment, coins fell more sharply.
although the global total remained the second
highest basis our records. The chief reason for 2012’s fall was the absence of
— Losses were widespread across much of the major bouts of intense concerns over the Eurozone’s sovereign
markets last year, led by Europe and India. debt. This is apparent in our quarterly statistics on
retail investment: in 2012, the ratio of the busiest to the
Physical bar investment slipped by 17% or 200 tonnes to quietest three month period was just 1.2:1, whereas for
998 tonnes last year, although it should be emphasised 2009-11 the quarter of greatest investment was at least
that this is against an exceptionally high base in 2011. twice the size of the smallest. The fact that volumes
Bearing that in mind, the global total in 2012 was the were still high historically was also due to the sovereign
second highest basis our records and remained by far debt situation in that it was perceived as being far from
the largest component of World Investment. Last year’s resolved. Another political factor to consider was the
drop was partly attributed to notably weaker demand absence of any real response in France to the election of
in Europe, concentrated in German-speaking areas, a socialist president, in this case Hollande. This stood
reflecting less acute concerns about the sovereign debt in marked contrast to the slightly panicked action of
problem especially in the latter part of the year. India investors when Mitterand took office in 1981.
also witnessed a heavy fall last year, due to volatile local
gold prices, a major slowdown in GDP growth and its Many investors also felt that longer term price trends
government’s ongoing efforts to curb speculative gold were less clear and this led to some investors, mainly
trading. In China, investment stalled in 2012 following at the high net worth end of the spectrum, jobbing the
an extraordinary rise in previous years. Elsewhere, losses market, according to their own take on short term price
were reported across much of East Asia and the Middle trends. However, even if that led to bouts of profit taking,
East, as gold’s relatively narrow trading range and its particularly during the September rally, there were few
INVESTMENT
persistent failure to breach the $1,800 mark undermined signs of any mass liquidation of positions, again helping
speculative interest. explain why net volumes remained relatively high.
ANNUAL RETAIL INVESTMENT DEMAND
(Thomson Reuters GFMS estimates, tonnes)

2007 2008 2009 2010 2011 2012
Germany 36 115 134 127 159 110
Switzerland 13 89 97 93 116 81
Austria 5 20 19 14 16 10
Belgium-Luxembourg -3 0 15 23 30 24
France -22 -3 1 1 7 3
Other Europe 6 18 27 40 56 46
Total Europe 36 238 293 299 383 274
Total North America 18 88 122 110 89 55
Caveat: The above estimates should be regarded as broadly indicative rather than truly definitive given
the subject’s opaque nature
Definition: Retail investment includes physical bullion as defined by the EU, individuals’ paper
transactions with a direct physical counterpart plus OTC activity and changes in metal account holdings
where measurable and retail-targeted. It excludes all forms of jewellery and fund purchases. Country
divisions are basis bullion location and not nationality of ownership.
33
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GOLD SURVEY 2013
Many contacts feel that there was a drop in press INDIAN SUB-CONTINENT
coverage of gold investment last year, due to less acute
Eurozone problems and lower price volatility, and this Indian bar hoarding in 2012 declined by nearly by one-
was felt to have cut interest from smaller investors. third from 2011’s record level to 206 tonnes (please note
However, the latter look to have become relatively more that this marks an upward revision from the 181 tonne
important, due to the reported satiation of many larger figure published in Gold Survey - Update 2).
players, and there was a drop in average bar size. That
said, bar size was not a perfect guide to class of investor As for intra-year developments, hoarding dropped by
as the rise in the euro gold price pushed larger bars more than half in the first two quarters, with the drop in
above limits for anonymous purchase, encouraging some the second quarter largely attributable to dishoarding by
larger investors to switch to higher margin smaller bars. traders as they readjusted their inventories. These losses
were then followed by an 8% decline in third quarter.
Another factor sustaining levels was the ongoing However, as prices stabilised above Rs. 30,000/10g,
introduction of new products and entry of new players. investor interest improved on positive price expectations,
This is suggested by the geographic split; the traditional with traders expecting the price to test Rs. 35,000 before
core of German-speaking countries continued to Diwali in November.
dominate investment but other countries’ share rose,
even if their absolute investment figure still fell. The price’s subsequent failure to do so led to gradual
However, we would caution that new dealers have the destocking through November, but as expectations grew
ability to distort statistics as their building of stocks will ripe for another increase in the import duty, re-stocking
create one-off but not sustained demand. began in mid-December, and more heavily from 2nd to
21st January (2013), thanks to the early warning from the
NORTH AMERICA Finance Minister. The indication of a possible duty hike
helped lift the forward premiums, which contributed to
North American retail investment fell by a hefty 38% last 4.4 tonnes of deliveries against the Multi-Commodity
year to just 55 tonnes. Within that, the drop for bars, as Exchange of India’s February futures, the highest ever
opposed to coins, was somewhat smaller, although coins since 2008.
continue to clearly dominate the overall picture. This
marks the third consecutive year of losses, with the 2012 Last year’s decline in hoarding has also been attributed
volume less than half the 2009 peak. This ongoing slide to efforts by the government to cut the force of
is chiefly felt due to there having been no shocks akin to speculation in the gold trade. The government wanted
INVESTMENT
the collapse of Lehmans and therefore being sufficient to banks to ensure that any lending to bullion dealers and
sustain interest; the Eurozone’s problems, for example, jewellers would meet their working capital requirements
are seen as too remote. The drop in 2012 was steeper and not go to speculative trades, but seldom this could
than in prior years, however, and we would ascribe that be ensured due to the vagueness of the law. Further
to the lack of a clear price trend, which fed through to restrictions came into effect from February 2013 and this
increased profit taking. There was in contrast little sign has currently kept retail demand on hold. Prior to this,
of cannibalisation by other arenas of investment. demand at the retail level was higher for 50 gramme
and 100 gramme bars. Looking ahead, we see such
restrictions as likely to keep the demand for bars lower as
RETAIL INVESTMENT it will not be easy to shift from a cash-centric business to
a fully transparent way of functioning overnight.
450 Other
North America
400
Europe Investment in bars were reported to be strong in
350
China Bangladesh and Nepal in 2012. Investment in the latter
300
India
last year was said to have increased by 15% on back of a
250
weakening currency and higher price expectations, and
Tonnes
200
150
demand in the first half of this year is projected to rise
100
by perhaps as much as another 15%. Bar hoarding in
Bangladesh more than doubled last year, if only to a still
50
0
modest 0.8 tonnes.
-50
Q1-08 Q1-09 Q1-10 Q1-11 Q1-12
34
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GOLD survey 2013
table 2 - physical bar investment
(tonnes) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Western Countries
Europe -5.9 -45.0 -15.7 -7.0 -2.3 192.2 211.2 215.2 312.8 231.5
North America 2.1 2.7 2.1 4.1 2.0 30.8 37.9 22.4 15.4 18.5
Total Western Countries -3.8 -42.3 -13.6 -3.0 -0.3 223.0 249.0 237.6 328.2 250.0
Latin America
Mexico 1.0 0.8 0.6 0.8 0.8 0.7 1.7 2.5 3.0 3.3
Other Countries -6.2 -0.9 -4.3 -3.6 -2.0 -0.6 2.6 2.3 2.5 2.5
Total Latin America -5.2 -0.1 -3.7 -2.8 -1.2 0.1 4.3 4.8 5.4 5.8
Middle East
Iran 12.0 12.8 11.9 12.0 20.2 30.6 15.8 33.8 40.4 44.2
Saudi Arabia & Yemen 4.9 5.2 7.3 8.0 9.0 13.5 10.9 14.5 17.4 16.3
United Arab Emirates 6.7 6.9 10.3 8.6 7.9 10.0 6.4 8.1 11.1 9.9
Iraq & Syria 0.7 0.8 1.2 1.3 1.1 1.0 0.7 0.7 6.1 -10.6
Kuwait 2.2 2.2 2.0 1.5 1.6 1.6 -0.2 1.6 1.9 1.7
Other Countries 4.8 5.5 5.0 5.3 7.0 6.2 2.9 7.3 16.4 11.7
Total Middle East 31.3 33.4 37.8 36.6 46.8 63.0 36.5 66.0 93.2 73.1
Indian Sub-Continent
India 65.6 76.2 102.8 139.8 148.6 159.9 117.5 266.3 288.0 205.9
Pakistan 3.5 3.1 3.4 2.1 2.6 -4.4 -19.4 7.0 14.6 12.3
Other Countries 1.9 2.4 1.9 1.1 1.2 1.0 0.4 0.3 1.8 2.5
Total Sub-Cont. 71.0 81.7 108.1 143.0 152.3 156.6 98.5 273.6 304.4 220.7
East Asia
China 2.0 6.7 9.0 10.1 21.0 60.8 102.3 178.6 250.3 249.3
Thailand 0.9 11.7 28.0 15.9 4.6 42.6 -10.1 63.0 103.6 77.9
Vietnam 36.0 39.2 34.0 69.5 56.1 96.2 58.2 67.0 87.8 65.4
Indonesia 1.6 5.0 3.0 -1.0 0.3 2.9 -6.0 15.3 24.8 22.1
Malaysia 0.3 0.7 0.7 0.1 0.1 1.2 4.4 5.6 12.3 8.8
Japan 42.0 61.0 37.0 -47.0 -56.4 -39.4 -30.8 -41.0 -47.2 -10.5
Other Countries -1.7 8.5 7.2 7.1 11.4 7.5 -17.1 2.0 16.3 17.7
Total East Asia 81.1 132.9 118.9 54.7 37.1 171.7 100.9 290.5 447.8 430.7
Oceania
Investment
Australia 1.3 1.4 0.7 0.8 1.0 2.9 4.4 10.2 15.5 14.8
Total Oceania 1.3 1.4 0.7 0.8 1.0 2.9 4.4 10.2 15.5 14.8
CIS
Russia 1.6 8.2 2.5 2.6 3.0 2.9 3.4 1.9 2.1 2.1
Other Countries - - 0.8 1.0 1.2 1.5 1.5 1.2 0.7 0.6
Total CIS 1.6 8.2 3.3 3.6 4.2 4.4 4.9 3.1 2.8 2.7
World Total 177.2 215.1 251.4 233.0 239.9 621.6 498.5 885.7 1,197.4 997.7
EAST ASIA a negative real interest rate environment. Alongside the

popularity of investment products there grew a supply
Bar investment demand in China last year reached 249.3 network of investment bars dealers. This included retail
tonnes, which, while an impressive figure, represents a banks with their large branch network, allowing access to
0.4% drop, ending a decade of gains. The trend in gold gold to an even wider public.
prices over the last decade was one of the major drivers
behind the explosive long run growth in demand. This Last year however, a combination of factors halted this
appetite for physical bars then became particularly acute growth. Firstly, the range bound gold price performance
from 2008 due to investors’ wish to diversify their assets left investors disenchanted as it tarnished the belief in
in a highly inflationary environment of a rapidly growing gold as an invincible investment. Additionally, inflation
economy. Within that period, CPI reached a record high last year eased significantly from the highs of 6.5% in
of 8.7% in February 2008, eroding wealth and producing July 2011 to 1.70% in October 2012.
35
GOLD SURVEY 2013
Thomson Reuters GFMS estimate that Vietnam’s bar As in 2011, the Japanese market continued to see
hoarding volumes declined by as much as a quarter last dishoarding last year, albeit on a much reduced scale,
year, sliding to a three-year low of 65 tonnes. Demand as selling back dropped by nearly 80% to the lowest
in the first half was almost 20% stronger year-on-year level since the trend began in 2006. The decline was
as market speculation about further devaluation of the largely caused by the depletion of near market stocks,
country’s currency and uncertainty surrounding gold following the aggressive dishoarding of 2011, as well as
ownership saw consumers look to gold as a safe haven expectations of higher gold prices. The flow of bars was
asset. In May, the government of Vietnam introduced uneven last year, with the strong first quarter followed,
new legislation (Decree No.24) on the management interestingly, by a period when the amount of bars
of gold trading activities which essentially placed the bought by the public was higher than sold back to the
production, import and export of gold, and trading trade, an abnormality caused by a near 15% price drop in
of gold bars/bullion in the hands of state-appointed the gold price in local currency terms. Dishoarding then
organisations. This attempt to limit gold as a medium grew in the second half of 2012, largely following the
of exchange had a significant impact on bar sales in domestic gold price trend.
the second half of the year, driving consumption lower
by over 45% year-on-year as the supply of investment MIDDLE EAST
bars was controlled by a single state-run company. Not
surprisingly, this opened the door for a rise in unofficial Following a surge in investment demand to an all time
imports with the black market again flourishing. high in 2011, demand across the Middle East declined by
over a fifth to 73 tonnes last year. Despite this sizable
Following record levels in 2011, bar hoarding in Thailand drop, investment in the region remained at its second
fell by almost 25% last year, slipping to 78 tonnes. The highest level recorded in our statistics. Iran again
healthy investment demand witnessed in the second accounted for the majority of offtake, with investment
half of 2011 carried over to the early stages of last year in gold products there rising 9% to over 44 tonnes (a
as lower gold prices followed by a rising gold price trend new record) as consumers looked to the yellow metal as
encouraged restocking and speculative purchases. a safe haven in an environment of substantial inflation
However, after several months of healthy retail activity, (rising to an estimated 27% in late 2012) and economic
demand stalled in mid-May as the gold price peaked uncertainty as the UN sanctions impacted on the daily life
then gave up most of its gains over the next few months, of the county’s citizens. These factors, coupled with the
limiting trading opportunities and tying up cash flow for slump in the value of domestic currency (the Iranian rial
those that bought at the peak and waited for a return lost more than half its value and hit record lows in 2012)
INVESTMENT
to higher prices before liquidating. Net demand in the saw demand for gold accelerate. Elsewhere, investment
second half slumped over 45% year-on-year as consumer demand declined as expectations of higher levels limited
expectations of a return to previous highs waned, leaving speculative purchases. The largest falls were seen in
some speculators looking for the exit in the final quarter. Syria, which moved into a net dishoarding environment
That said, a rising price trend, coupled with a volatile on the back of heavy distress selling.
market during that period provided the opportunity for
some Thai traders to re-enter the market to capitalise on
the rising price environment. OFFICIAL COINS
WORLD PHYSICAL BAR INVESTMENT — Global official coin minting slumped by 19% last year,
primarily driven by a hefty decline in Turkey and a
1500 70
notably weaker performance in western markets.
Value of Bar Investment
60
1200
In 2012, world official coin fabrication dropped by a heavy
50
19% or 46 tonnes to a four-year low of 200 tonnes. That
Value ( US$, bn)
900
40 said, offtake remained elevated by historical standards
Tonnes
last year, as the global total comfortably exceeded the

600 30
average from 2001–2008 by some 60%. On a regional
20 basis, double-digit losses were reported in many key
300
10 markets, in particular Turkey and North America. The
only bright spot worth mentioning is China, where
0 0
2003 2005 2007 2009 2011 demand continued to grow.
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GOLD SURVEY 2013
TABLE 3 - OFFICIAL COINS (INCLUDING THE USE OF SCRAP)
(tonnes) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Turkey 47.2 47.0 52.0 56.7 56.7 53.1 30.9 35.6 58.9 39.5
United States 16.1 18.0 14.0 27.5 19.0 31.8 50.9 45.2 37.6 28.0
China 5.0 4.9 3.6 6.9 11.2 7.9 10.7 12.7 20.5 24.9
Canada 6.7 8.8 10.2 8.3 9.0 27.6 38.2 35.0 36.2 24.2
South Africa 2.9 3.5 1.5 2.4 6.8 8.7 23.2 20.4 24.1 23.7
Austria 6.5 8.0 7.2 4.4 5.3 24.9 33.4 18.5 21.7 12.8
Australia 3.4 5.2 4.4 5.3 5.6 9.6 11.0 9.5 11.0 10.3
Iran 4.8 4.6 4.2 4.0 4.5 5.3 7.6 9.4 9.6 9.2
UK 3.0 3.2 3.3 3.5 3.4 4.3 4.7 4.4 5.8 6.9
Germany 6.2 6.2 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5
Russia 1.0 1.4 0.9 1.6 4.3 5.7 6.5 5.6 4.6 4.5
Mexico 1.0 1.3 1.9 1.4 1.2 2.5 3.4 3.8 1.9 2.3
Other Countries 3.6 3.7 2.7 2.4 3.2 5.3 8.2 7.5 8.0 8.0
World Total 107.3 115.7 111.7 130.0 135.6 192.1 234.1 213.0 245.2 199.6
The largest decline occurred in Turkey where coin side interest but also prompted a small rise in selling
minting dropped by a third or almost 20 tonnes to 39 back in the secondary market. Meanwhile, anecdotal
tonnes last year. However, it should be note that demand information also points to a modest shift in preference
in 2011 was exceptionally high and that, if anything, last towards small bars at the retail level, due to their low
year’s fall to a large extent only represents a return to premiums compared with bullion coins.
normality. In the wake of widespread losses elsewhere,
the country retained its position as the largest coin Nevertheless, it is of note that demand for bullion coins
manufacturer in 2012. rebounded strongly in the final quarter of the year,
thanks to growing inflation expectations following the
The chief cause of Turkey’s year-on-year decline stemmed announcement of QE3 by the Fed, plus rising worries
from a sizeable fall in investment related buying. In about the “fiscal cliff” and its potentially destabilising
essence, this reflected less bullish investor sentiment effects on the country’s economy.
INVESTMENT
towards gold after the price posted a downward trend
in the first half of the year and then remained largely Turning to Europe, consistent with the trend in the bar
rangebound over much of the summer. This was in stark segment, the notable 18% drop in coin purchases was
contrast to 2011 when a marked price rally prompted largely attributed to the relative calming of the sovereign
a surge in buy-side interest in physical gold. Despite debt crisis compared with 2011 (or at least as perceived
a brief price recovery in September, the metal’s failure by investors), coupled with somewhat rangebound gold
to surpass its 2011 peak soon prompt a further fall in
investment buying in late 2012, although there was some
OFFICIAL BULLION COIN SALES
decent bargain hunting on major price corrections. By
contrast, coin demand related to weddings and religious
events held up well last year, only falling by 3%, thanks to
60 2000
a less volatile gold price and growing price acceptance.
In local currency value terms, gift related purchases were 50
Gold Price
in fact up by a healthy 12% in 2012.

40 1500
Heavy losses were also recorded in western markets.

US$/oz
Tonnes
30
Starting with North America, our propriety quarterly
bullion coin survey shows that demand for newly minted 20 1000
coins dropped by 26% in the region. Much of the losses
10
were concentrated in the first nine months of the year,
as an uninspiring gold price and a lack of imminent 0 500
inflationary pressure not only restrained fresh buy- Q1-07 Q1-08 Q1-09 Q1-10 Q1-11 Q1-12
Source: Thomson Reuters GFMS Quarterly Bullion Coin Survey
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GOLD SURVEY 2013
TABLE 4 - MEDALS AND IMITATION COINS (INCLUDING THE USE OF SCRAP)
(tonnes) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
India 20.7 24.3 32.8 55.8 64.7 63.5 53.5 82.6 80.0 106.3
Other Countries 5.0 5.2 4.2 3.6 3.7 6.2 5.4 5.7 7.8 7.1
World Total 25.7 29.5 37.0 59.4 68.4 69.7 58.9 88.3 87.8 113.4
prices. That said, demand for coins remained well in MEDALS AND IMITATION COINS
excess of the pre-crisis level and profit taking was fairly
limited, as an uncertain economic backdrop continued — Indian offtake rose to a record 106 tonnes in 2012,
to encourage fresh purchases of physical gold. This partly at the expense of jewellery.
also helps to explain a rapid pick-up in buying in the
middle part of the year when the risk of a Greek default Indian offtake, which constitutes the bulk of demand
intensified and contagion fears spiked. Even though in this sector, rose by one-third in 2012, with demand
demand eased later in the year, there were still decent in the second half rising to the highest on record. One
volumes, primarily driven by rising worries about future factor leading to this surge was the growing interest in
inflation following the ECB’s OMT programme. On a coins as an investment instrument when prices crossed
regional basis, German-speaking Europe continued to the Rs. 30,000/10g level. Gradually, as positive price
dominate the market in 2012, but these countries were expectations grew with people targeting Rs. 35,000/10g,
also almost entirely responsible for the dramatic decline. retail buying became busier in the third quarter of 2012.
By contrast, demand in eastern European countries saw The fact that it coincided with the start of the wedding
some decent growth, albeit from a very low base. and festival seasons further fuelled buying interest in the
latter half of the fourth quarter. Traditionally, coin has
Finally, coin minting in China posted a healthy 12% been a source of investment for lower income groups
increase to a new record of 23 tonnes in 2012. This and, since 2008 financial crisis, many have developed
performance was due to resilient general investor interest a disciplined way of systematically accumulating every
in gold, which was reinforced by the Year of the Dragon month or quarter in tamper proof packages, by buying
being considered the most auspicious since this in turn 0.5 gram or 1 gramme of gold irrespective of the price.
INVESTMENT
meant that interest in lunar zodiac coins from collectors This practice is followed by people in order to protect
was particularly strong. Nevertheless, despite such a their investment portfolio and also to provide a better
robust performance, the absolute level seems to have average price level when exchanging against jewellery.
been restrained by coins’ high premiums.
Separately, worth mentioning here is the re-launch of
Turning to this year, following a recovery in late 2012, the manufacturing (on this occasion by MMTC-PAMP)
early 2013 saw a continuation of buoyant interest in and the sale of authentic Royal Mint commemorative
bullion coins, concentrated in North America. For sovereign coins in India after nearly 100 years. Whilst it
instance, total sales of US Eagle and Buffalo gold coins was a historic moment for India, the time required for the
stood at close to 10 tonnes through to end-February, up market to absorb the 50,000 piece limit that has been
by a massive 87% year-on-year. In Turkey, after a slump set for an initial rollout will say much about the potential
in the second half of 2012, demand has also started to for such coins in India.
improve since the start of 2013, as weaker prices have not
only helped the gifting segment but have also attracted Looking ahead, as the price has been languishing below
some bargain hunting. By contrast, demand for physical Rs. 30,000/10g for much of the first few months of the
bullion products (both bars and coins) has remained year, there is an increasing likelihood for investors to stay
relatively quiet in Europe, in German-speaking areas in away. However, occasion based buying like ‘Akshaya
particular. In spite of falling gold prices, especially in Trithiya’ and gifting for weddings will help drive sales for
euro terms, they have failed to draw fresh interest from a brief period. However, overall demand for first half is
bargain hunters, reflecting a growing satiation among expected to remain slack and possibly decline by 13%.
potential investors.
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GOLD SURVEY 2013
TOP 20 GOLD MINING COUNTRIES

4. MINE SUPPLY Rank Production (t)
2012 2011 2011 2012
• In 2012 global mine production was almost flat, rising 1 1 China 371.0 413.1
by a mere 0.8%, or 22 tonnes. Output rose to a third 2 2 Australia 258.5 250.1
successive all-time high, of 2,861 tonnes. 3 3 United States 233.0 231.3
4 4 Russia 215.6 230.1
• Increases came from a broad base of mines. For 5 6 Peru 187.6 185.0
example, the top five gains totalled just 26 tonnes. 6 5 South Africa 202.0 177.8
7 8 Canada 107.7 108.2
• Losses were more concentrated among a few of the 8 9 Ghana 91.0 95.8
9 10 Mexico 88.6 95.3
world’s largest gold producing properties; the top five drops
10 7 Indonesia 120.1 89.0
accounted for 45 tonnes of lost output.
11 11 Uzbekistan 71.4 73.3
12 12 Brazil 67.3 67.3
• Labour unrest accounted for at least 20 tonnes of lost
13 13 Papua New Guinea 63.5 56.5
output in South Africa alone, as the industry was hit by
14 14 Argentina 59.1 54.6
widespread strike action in the second half of the year.
15 17 Mali 43.5 50.3
16 15 Tanzania 49.6 49.1
• Global annual average total cash costs rose by 12%, 17 16 Chile 44.5 48.6
or $80/oz, to total $738/oz for the year. The main drivers 18 19 Philippines 37.1 41.0
were a reduction in processed grade, and a rise in the cost 19 20 Kazakhstan 36.7 40.0
of labour. 20 18 Colombia 37.5 39.1
Rest of World 452.9 465.0
• Global All-in Costs, which include all cash and non- World Total 2,838.1 2,860.6
cash costs, sustaining capital expenditure, indirect costs Source: Thomson Reuters GFMS
and overheads, rose by a similar percentage, to $1,211/oz.
• Producer de-hedging was recorded at 40 tonnes, MINE PRODUCTION

leaving the outstanding producer hedge book at 123 tonnes
at end-December. Much of the activity was concentrated in INTRODUCTION
the fourth quarter.
Representing a change from the recent trend of notable
• Looking to 2013, pending a recovery at several growth, mine supply rose only marginally in 2012, by 22
operations and expected new starts elsewhere, mine tonnes, or 0.8%. Regionally, growth came from Asia
production is expected to continue to grow. (+18t) and the CIS (+12t), with strong gains in China and
Russia, while Latin American production also increased
• Producer hedging is expected to remain on the (+3t). North American output was down (-1t), output
periphery of supply and demand, given the limited size of from Oceania also fell (-10t), while growth in west Africa
the outstanding hedge book at end-2012. was outweighed by losses in South Africa, leading to an
overall fall in African production (-4t).
GLOBAL GOLD PRODUCTION
Australia Russia Other

From an expected position of growth at end-2011, this
3600
flat outcome for global supply came about as anticipated
MINE SUPPLY
Other Africa Latin America Other Asia

3000 South Africa North America China additions in 2012 either failed to materialise, or did
so later than expected, while elsewhere the industry
2400
experienced a spate of operating interruptions at
established properties. For example, geotechnical issues
Tonnes
1800
caused large losses at Kumtor (-8t), where pit instability
1200 and ice movement caused delays in accessing high-grade
areas of the pit, and at Goldex (-4t), where ground water
600
inflow forced the premature closure of the mine late in
0 2011. At Newcrest’s Cadia Valley operations (-5t) we had
2003 2005 2007 2009 2011
anticipated a faster ramp-up of the Cadia East mine,
39
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GOLD SURVEY 2013
MINE PRODUCTION WINNERS AND LOSERS, 2012 VERSUS 2011
-6 t -4 t -2 t -0.5 t +0.5 t +2 t +4 t +6t

and at Veladero (-6t), equipment availability issues were whereby governments continue to seek a “bigger slice
partially responsible for lower gold output. Globally, of the pie”. This is evidenced across various jurisdictions
instances of operational disruption built on a backdrop such as Mali and Ghana, by reviews of precious metal
of declining grades, which fell by 7% year-on-year, to royalty rates, proposals for corporate tax rate increases
1.33g/t, although part of this decline can be ascribed or windfall profits taxes, and reviews of license laws.
to the start and ramp up of large-scale, lower grade 2012 has also seen the expropriation of gold assets in
operations within the population of producing mines. Venezuela, import/export controls in Argentina, legal
challenges to mining agreements in Egypt and attempts
Labour disruption played a significant part in holding at investment agreement negotiations in Kyrgyzstan,
growth back in 2012, with the most significant strikes Mongolia and, recently, Dominican Republic for example.
seen in South Africa. The unrest began in the platinum Correspondingly these events signify an increase in the
industry, although this soon spread to the country’s gold general level of political and operational risk globally.
mining operations. Elsewhere, a significant loss was
seen at Grasberg (-19t), where unrest early in 2012 was These moves towards increased sharing of mining profits
responsible for a meaningful portion of this lost output. have also encouraged debate about the rising cost of
production, the all-encompassing cost of mining an
The severity of these disruptions has further heightened ounce of gold, and how this is reported by the industry.
awareness amongst commentators of the issue of the Production costs increased once again in 2012: total
MINE SUPPLY
social and economic contributions of mining (South cash costs (a useful measure of mine site profitability, if
Africa being a notable example). Through activities somewhat open to distortions) rose by 12% year-on-year,
under the umbrella of corporate social responsibility to $738/oz, and All-in Costs (a Thomson Reuters GFMS
programs, local skills training and local infrastructure metric designed to fully reflect the costs of sustaining
investments, mining companies seek to return to gold mining activities) grew by a similar amount, up to a
countries benefits in excess of the “tax take”. Mining weighted average of $1,211/oz (an increase of $133/oz).
often contributes a significant portion of GDP Contrast this with the annual average gold price, which
(particularly in smaller and developing countries) and is grew by only $97/oz. The primary drivers of the cost
a significant foreign exchange earner and employment increase last year were falling head grades, and the rising
creator. Nevertheless, over 2012, a trend has continued cost of labour globally. Since Gold Survey 2010, when we
40
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GOLD SURVEY 2013
began analysing costs on an all-in basis, this measure of

industry costs has risen by 69% from the period 2009- AFRICA
2012.
Output in Africa fell back by 1% last year to buck a three
Of note is that many of the globally significant producers year trend of growth, as sharply lower output from South
have, in 2012, begun to move to adopt a similar metric Africa and softer production from Burkina Faso and
in their reporting in 2012, eventually to be based on a Eritrea prevailed over solid gains among the western and
standard devised by the World Gold Council, which is central African countries of Ghana, Mali, Sudan and the
planned to be finalised this year, which aims to promote Democratic Republic of the Congo.
homogeneity and transparency in producers’ reports.
We welcome this growing trend of increased reporting South African output tumbled lower again last year,
transparency and, perhaps, granularity. by 24 tonnes, to slip to the position of sixth largest
global gold producer. Exceptional strike events, amid
Development costs to fund the new generation of inter-union warring between the National Union of
projects have also continued to escalate. There were Mineworkers (NUM) and Association of Mineworkers and
several prominent capital cost estimate hikes in 2012, Construction Union (AMCU) in the second half of the year,
for projects under development, which when combined and fourth quarter in particular, were a major driver of
with heightened funding challenges have led to a the fall, but far from the only cause. Woeful year-on-year
refocusing of miners’ priorities. Out are bumper M&A production levels were also evident in the first half, partly
deals, replaced by the rationalisation of portfolios. Out due to a hangover of heightened issuances of Section
is the focus on production volumes, in is an increased 54 notices by the Mines Inspectorate. Nevertheless,
emphasis on cost containment and efficiency. These the systemic propagation of labour unrest through over
progressive changes in attitude over the year carry some half of the country’s gold assets is charted below, as an
implications for long term mine supply. If producers are expression of production capacity taken offline.
focusing on what they already have in development, and
placing more early stage projects on the back burner, Losses were widespread across the country’s largest
we could see mine supply falter further down the line. operations as a function of AMCU’s apparent aim to
However, with regard to 2013, many of the developments create maximum impact by targeting many of the most
in the immediate pipeline already have the vast majority high profile operations. The country’s largest gold
of construction capital committed, and we therefore do mining complex, KDC, proved comparatively resilient,
not expect supply growth in the next year to be derailed. given the challenges it faced (a fire at Ya Rona in June
While 2012 has brought some additional challenges and and July led to a drawn-out shaft closure as well as
further cost pressure to the fore, the evolution of the temporary suspensions of adjacent shafts). Output
industry landscape over the last year has also brought at KDC ‘only’ contracted by 15% but still represented
an additional degree of pragmatism to capital allocation the largest fall in tonnage terms. Localised seismicity
and investment priorities. at Mponeng and development bottlenecks at Moab
Khotsong and Kopanang adversely impacted extraction
rates which, coupled with labour unrest, led to a
combined eleven tonne fall between the three mines.
SOUTH AFRICAN MAJOR STRIKE ACTIVITY, 12.Q4 SOUTH AFRICAN MINE PRODUCTION
55 Kusaselethu 500
MINE SUPPLY
50
Ezulwini
45 Blyvoor 400
% of Total South African Output
40 Savuka
35 TauTona
300
30 Mponeng
Tonnes
25 Moab Khotsong
Vaal River 200
20
15 Great Noligwa
Kopanang 100
10
Beatrix
5
KDC
0 0
09-Sep 23-Sep 07-Oct 21-Oct 04-Nov 2003 2005 2007 2009 2011
41
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GOLD SURVEY 2013
WORLD GOLD MINE PRODUCTION
(tonnes) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Europe
Finland 1.7 1.3 1.2 1.1 1.5 1.7 3.8 5.6 6.4 8.9
Sweden 5.6 6.6 6.1 6.7 5.0 4.9 5.5 6.3 5.9 6.0
Bulgaria 2.3 2.4 2.3 2.8 2.9 2.8 3.3 2.5 3.4 4.3
Spain 5.7 4.0 1.4 2.2 0.5 0.0 0.0 0.0 0.4 1.5
Romania 1.3 1.2 1.1 0.7 0.6 0.5 0.4 0.4 0.4 0.4
Greenland 0.0 1.6 2.5 2.7 1.8 1.7 0.9 0.0 0.1 0.1
Other 3.0 2.4 1.8 2.1 3.4 3.6 3.3 2.7 2.0 2.0
Total Europe 19.6 19.6 16.4 18.3 15.8 15.2 17.2 17.5 18.7 23.2
North America
United States 280.8 260.3 262.3 251.8 238.0 233.6 221.4 229.7 233.0 231.3
Canada 140.5 128.5 119.5 103.5 102.2 95.0 96.0 103.5 107.7 108.2
Total North America 421.3 388.8 381.8 355.3 340.2 328.6 317.4 333.2 340.8 339.5
Latin America
Peru 178.3 181.2 217.8 213.5 183.6 195.5 201.4 184.8 187.6 185.0
Mexico 20.4 21.8 30.6 39.0 43.7 50.8 62.4 79.4 88.6 95.3
Brazil 43.0 42.9 44.5 49.2 58.1 58.7 64.7 67.5 67.3 67.3
Argentina 29.7 28.5 27.8 43.4 42.5 40.3 48.8 63.5 59.1 54.6
Chile 38.0 40.0 39.6 40.4 41.5 39.2 40.8 38.4 44.5 48.6
Colombia 25.3 23.6 24.8 26.0 26.0 26.0 27.0 33.5 37.5 39.1
Venezuela 23.6 20.5 21.1 26.5 24.3 24.3 24.8 24.9 25.5 24.5
Suriname 7.5 16.3 18.2 16.9 16.1 17.9 20.4 20.5 20.2 19.9
Ecuador 8.6 10.8 11.9 14.0 14.0 14.0 14.0 17.2 17.6 17.8
Guyana 15.7 15.2 10.1 8.4 9.7 10.5 11.9 12.8 14.4 14.4
Nicaragua 2.8 4.5 3.9 2.9 3.1 2.9 2.6 4.9 6.3 6.8
Guatemala 0.0 0.0 0.7 5.2 7.7 8.0 9.0 9.4 12.1 6.6
Bolivia 9.9 4.8 8.0 9.6 8.8 8.4 7.2 6.4 6.5 6.4
Dominican Republic 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.5 0.5 4.1
Panama 0.1 0.1 0.1 0.1 0.1 0.1 0.9 1.8 2.1 2.3
Honduras 4.5 5.7 4.4 3.9 3.1 1.9 2.6 2.4 1.9 1.9
Other 5.8 5.2 6.8 8.0 8.1 6.4 6.0 5.6 5.7 5.9
Total Latin America 413.2 421.0 470.2 507.0 490.7 505.0 545.0 573.6 597.4 600.6
Asia
China 210.6 217.3 229.8 247.2 280.5 292.0 324.0 350.9 371.0 413.1
Indonesia 163.7 114.2 167.0 114.1 149.5 95.9 160.5 140.1 120.1 89.0
Papua New Guinea 70.4 76.1 70.9 61.7 61.7 70.3 70.6 69.7 63.5 56.5
Philippines 33.6 31.7 33.3 36.1 38.8 35.6 37.0 40.8 37.1 41.0
Turkey 5.5 5.0 5.1 8.1 10.1 11.4 14.5 16.6 24.1 29.6
Mongolia 11.1 19.2 18.4 18.9 18.4 16.5 14.1 13.9 12.4 12.8
Laos 5.2 4.4 6.7 6.5 4.5 4.7 5.4 5.5 4.4 6.9
Japan 8.1 8.3 8.3 8.9 8.9 6.9 7.7 8.5 8.7 6.7
North Korea 6.3 6.3 6.3 6.3 6.3 6.3 6.3 6.3 6.3 6.3
MINE SUPPLY
Malaysia 5.7 5.2 5.7 4.9 4.3 3.8 4.2 5.2 5.0 5.3
Thailand 5.2 5.3 5.2 4.3 3.3 2.5 5.4 4.2 3.2 5.2
Saudi Arabia 8.8 8.2 7.5 5.2 4.5 4.0 5.1 4.5 4.6 4.7
Vietnam 2.2 2.3 2.4 2.5 2.7 2.7 3.1 3.4 3.7 3.9
India 3.5 3.5 3.0 2.5 2.9 2.6 2.1 2.8 2.3 1.7
Other 4.0 5.3 4.8 4.3 4.3 4.3 4.6 4.6 4.6 6.1
Total Asia 543.8 512.3 574.4 531.7 600.8 559.4 664.7 677.1 671.0 688.7
Africa
South Africa 398.3 363.3 315.1 295.7 269.9 233.8 219.8 202.9 202.0 177.8
Ghana 68.9 57.6 62.8 69.9 77.3 80.4 90.3 92.4 91.0 95.8
Mali 47.2 39.6 46.7 56.9 51.9 47.0 49.1 43.9 43.5 50.3
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GS 2013 CH4a.indd 42 21/03/2013 11:54:18

GOLD SURVEY 2013
WORLD GOLD MINE PRODUCTION
(tonnes) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Tanzania 44.6 47.9 49.3 44.8 40.1 35.6 40.9 44.6 49.6 49.1
Burkina Faso 1.5 1.6 1.7 2.1 2.9 6.9 13.8 25.3 34.1 31.3
Sudan 5.6 4.7 5.6 3.6 3.1 2.7 4.0 10.1 22.5 27.9
Dem. Rep. of the Congo 4.8 5.1 5.3 5.6 6.5 7.2 10.0 17.0 22.0 26.1
Zimbabwe 20.6 24.3 19.5 17.2 13.5 8.9 9.8 16.3 19.0 19.7
Guinea 16.8 13.4 14.3 16.6 18.0 23.9 22.5 20.4 19.7 18.4
Côte d’Ivoire 3.5 2.5 3.0 3.0 3.0 5.3 8.6 7.3 13.4 14.0
Ethiopia 4.8 4.6 3.8 4.0 3.9 3.8 5.5 6.6 11.5 12.0
Eritrea 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 12.8 10.2
Mauritania 0.5 0.5 0.5 0.6 1.9 6.8 8.4 9.1 8.7 8.2
Egypt 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.7 6.3 8.2
Senegal 0.1 0.1 0.1 0.1 0.1 0.1 5.2 4.5 4.3 6.8
Other 11.3 12.8 20.0 18.2 20.3 23.1 21.1 23.5 23.1 23.9
Total Africa 629.0 578.4 548.4 538.9 512.9 486.0 509.3 529.1 583.4 579.8
Oceania
Australia 283.4 258.1 262.2 246.8 247.4 215.2 223.5 260.8 258.5 250.1
New Zealand 9.3 10.2 10.6 10.6 10.6 13.4 13.4 12.2 11.2 9.7
Solomon Islands 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 1.7 2.0
Fiji 3.6 4.0 2.9 1.5 0.1 1.1 1.1 2.1 1.6 1.6
Total Oceania 296.3 272.3 275.7 259.0 258.2 229.9 238.2 275.2 273.1 263.4
CIS
Russia 182.4 181.6 175.4 172.8 169.3 188.7 205.2 203.4 215.6 230.1
Uzbekistan 80.0 83.7 75.5 74.1 72.9 72.2 70.5 71.0 71.4 73.3
Kazakhstan 13.0 15.0 19.2 21.8 22.6 22.0 22.5 29.9 36.7 40.0
Kyrgyzstan 22.7 22.1 16.6 10.6 10.5 18.4 17.0 18.5 19.7 11.3
Tajikistan 4.1 3.9 2.4 2.3 2.3 2.9 2.6 3.2 3.4 3.4
Other 5.2 5.2 4.2 3.6 1.6 1.6 2.6 7.3 7.1 7.2
Total CIS 307.4 311.5 293.4 285.2 279.2 305.9 320.3 333.3 353.8 365.4
World Total 2630.6 2504.0 2560.3 2495.4 2497.8 2429.9 2612.0 2739.0 2838.1 2860.6
South Deep was one of the stand-out large assets to fifths, while production at Chirano increased by one tonne
avoid a meaningful production drop, remaining steady due to improved head grades and process recoveries.
year-on-year at over eight tonnes, amid a longer term
ramp-up. Somewhat perversely, South Africa’s strongest At the country’s two largest producers, Tarkwa and
gain at the mine level was recorded at Burnstone, which Ahafo, production was flat year-on-year, at 22 and 17
commenced in January 2011 and had been ramping up, tonnes respectively. In the case of the latter, this was
but was suspended in September as working capital despite the closure of the high cost South Heap leach
requirements could not be met by Great Basin Gold. operation in the fourth quarter. Meanwhile, output
declined at Damang, by two tonnes, as the milling rate
Output in Ghana rose by 5%, to 96 tonnes, with a was moderated to ensure plant reliability. Upgrades
full year of operation from two new mines, Edikan to increase the feed size and crushing rate are ongoing
MINE SUPPLY
and Nzema, the main influence behind this outcome. and expected to be completed towards the end of 2013.
Edikan contributed an additional five tonnes, while at Output from both Obuasi and Iduapriem was around
Nzema production increased by 18%, to three tonnes. 10% lower year-on-year. Lower processed grade was
Recommissioning activities at Bibiani continued behind the fall at Iduapriem, while at Obuasi mining
throughout the year with the mine contributing modestly rates deteriorated due to inadequate underground
to production. Although the plant is operational, development, that led to a shift from a mining contractor
commercial production levels have yet to be achieved. to owner-operator model.
Other gains included a one tonne increase at Bogoso as
the result of the recommissioning of its oxide plant in In Mali, gold production increased by 16% in 2012, to
early 2012, that saw overall processing rates rise by two- 50 tonnes. Significant growth came from Syama and
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GS 2013 CH4a.indd 43 21/03/2013 11:54:18

GOLD SURVEY 2013
the Loulo-Gounkoto complex, with lesser increases Bulyanhulu, Buzwagi, Golden Pride and Tulawaka. At
from Kalana, and Tabakoto. At Syama, both grade Golden Pride, the mine is approaching the end of its
and throughput rose year-on-year. Meanwhile, life, with plant maintenance during the fourth quarter
Gounkoto continued to ramp up production following constraining throughput. Among the other three
commissioning in June 2011, and Loulo saw increased operations, lower grades were the common factor leading
production on higher grades, compensating for lower to reduced production. These losses were partially
throughput last year. These production gains were offset by growth at Geita and North Mara. At Geita,
sufficient to outweigh decreases at Morila, Sadiola and while grades fell, this was offset by higher throughput.
Yatela. Lower grades led to reductions in production at The increase in production at North Mara was due to
Morila and Sadiola, whilst fewer tonnes stacked at Yatela mining of higher grade zones in the Gokona pit and a
prevailed over higher mined grades. consequent reduction in processing of ore from lower
grade stockpiles. Another slight offset was provided
After strong growth in 2011, gold production in Côte by New Luika, where production began in August 2012,
d’Ivoire increased again, by 5%, to 14 tonnes. This adding modestly to the country’s total.
was thanks to a one tonne increase in production from
Bonikro and a half tonne increase from Ity. Counteracting We estimate that artisanal and small-scale gold mining
some of these gains, Tongon’s production declined by activity continued to increase in several African countries,
over one tonne due to a drop in head grade and recovery many of whose formal gold industries remain in a state of
rates. Senegalese production increased by 59%, or comparative infancy, including the Democratic Republic
three tonnes, in tandem with sharply higher output of Congo (DRC) and Sudan. There were also reports of
at Sabodala, primarily a result of mining progressing higher small-scale mining activity in the more established
to higher grade sections of the pit. In addition, a mill gold producer, Mali. Sudanese output is estimated to
expansion was completed mid-year, lifting throughput. have risen further, although the assumed rate of the
increase is more moderate than that seen in 2011. The
Elsewhere in west Africa, a number of countries recorded country’s main formal mine, Hassaï, had reported steady
lower production year-on-year. In Burkina Faso output year-on-year production until the time of its acquisition
dropped by 8%, or three tonnes, due to a combination of by a privately owned investment vehicle and we assume
small losses at Essakane, Inata, Kalsaka and Mana. Inata output remained stable in the second half. In the
experienced equipment availability issues that inhibited DRC, the country’s first formal large scale gold mining
its waste stripping programme, with a consequent knock- operation, Twangiza, commenced production in late 2011
on to planned mining of higher grade sections of the pit. and declared commercial operations in August 2012, with
Output in Guinea fell by 6%, to 18 tonnes, as production two tonnes produced in the year.
declined at Lefa and Siguiri by a combined one tonne,
while supply from Mauritania fell by 6%, as lower grades In Egypt, in spite of a series of administrative challenges,
led to reduced output at Tasiast. output from Sukari grew by two tonnes thanks to a 26%
increase in tonnes processed, in part due to increased
Turning to the rest of the continent, in Tanzania volumes from the underground mine. Production in
output was essentially flat in 2012, at 49 tonnes. Eritrea declined as output at Bisha fell by two tonnes due
Losses collectively totalling three tonnes were seen at to the start of the exhaustion of the gold rich oxide cap,
the mining of which is expected to conclude during 2013.
OTHER AFRICAN MINE PRODUCTION
NORTH AMERICA
400
MINE SUPPLY
Mali Other
350 Tanzania Sudan North American gold production fell slightly last year,
Ghana Burkina Faso
300 with a decrease of one tonne. This decrease, following
250
two successive years of increases, was due to lower
output from the United States.
Tonnes
200
150 Mine supply in the United States fell by 1% to 231 tonnes.

100 Central to this decline were substantial decreases in
50
annual gold production at the Bingham Canyon copper-
gold operation, Ruby Hill and Cortez, of a combined 10
0
2003 2005 2007 2009 2011 tonnes. At the former two mines, lower grade was the
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GS 2013 CH4a.indd 44 21/03/2013 11:54:19

GOLD SURVEY 2013
significant factor, down by 38% in the case of Bingham which added two tonnes and one tonne of production
Canyon, which also experienced a decline in throughput. respectively. The LaRonde mine saw an increase in
At Ruby Hill, a greater proportion of lower grade heap gold production of almost 30% during 2012, as lower
leach ore was processed during 2012. At Cortez, a throughput was countered by an increase in grade as
change in the type of ore processed was also responsible production transitions to operations from the lower mine
for a decrease in gold production, although in this case extension, which achieved commercial production in late
the overall head grade was slightly higher than that 2011. An increase of almost three tonnes was achieved at
in 2011. At Newmont’s Nevada complex, the largest Meadowbank, as a result of improvements in operating
producer in the United States, 2012 production was efficiencies and equipment availability that were
largely unchanged year-on-year. achieved following the implementation of a significantly
revised mine plan in early 2012. This facilitated a 28%
There were, however, meaningfully stronger outcomes increase in throughput rate during the year.
at a number of other operations. In general, increased
production during 2012 was attributable to higher These increases were sufficient to offset production
volumes through expanded processing facilities. losses at various mines. Notable examples include Red
At Goldstrike for example, production increased by Lake, Canada’s largest gold mining operation, where
three tonnes due to higher throughput following the a near four tonne decrease in output was attributed to
installation of an additional mill, whilst at Bald Mountain an 18% decrease in head grade. Furthermore, Goldex
pit developments completed in late 2011 led to higher remains suspended following excessive ground water
grades mined and increased leach stacking. Expansion ingress in 2011 and the subsequent write-down of the
of leach pad capacity led to an increase in production of operation, reflecting a four tonne year-on-year shortfall.
almost a tonne at Hycroft, and installation of a new leach
pad at Rochester in late-2011 enabled 2012 production LATIN AMERICA
to increase by almost a tonne. An exception to this broad
theme was Golden Sunlight, where higher grades were Gold production from Latin America increased slightly in
responsible for the increase in production. Beyond 2012, to a total of 601 tonnes. Across the region, gains
Nevada, processing of higher grade ore was led to a two from new projects and recently commissioned mines
tonne rise in production at Fort Knox in Alaska. compensated for falls seen at other operations as a
consequence of lower grades and reduced throughput.
In Canada, production increased marginally last year.
Whilst the net increase in production was small, a The largest production increase in percentage terms was
number of new projects, or recently commissioned in the Dominican Republic, where two large scale gold
mines that are still in the process of ramping up to full projects entered production during 2012. The larger of
capacity contributed new supply to counter decreases these, Pueblo Viejo, produced over three tonnes, whilst
elsewhere. For example, a substantial increase in Las Lagunas provided a more modest addition to supply.
production of six tonnes was seen at Canadian Malartic,
which was commissioned in 2011. A number of new Mexican gold production increased by 8% in 2012, due
mines commenced operations during 2012; significant in large part to supply from new projects and recently
examples include Young-Davidson and New Afton, commissioned mines still in the process of ramping up.
New projects commissioned during 2012 included Noche
NORTH AMERICAN MINE PRODUCTION Buena and La Colorada, both located in Sonora state,
which together added three tonnes, while the Peñasquito
300
sulphide operation which commenced production in
MINE SUPPLY
United States Canada
250
2010, continued to ramp up to full capacity, with both
throughput and head grade having increased last
200 year. Meanwhile, Mercedes achieved its first full year of
production in 2012.
Tonnes
150
100 Mulatos and Pinos Altos both saw improvements over

2011 production levels. Whilst the grade of heap leach
50 ore decreased slightly at Mulatos, tonnage stacked
0
increased and production was further enhanced by the
2003 2005 2007 2009 2011 addition of a mill facility to process ore from the high
45
GS 2013 CH4a.indd 45 21/03/2013 11:54:19

GOLD SURVEY 2013
grade Escondida zone. Higher production at Pinos Altos in production were recorded elsewhere in Peru last year.
was due to higher gold grades, in both the heap leach The La Arena operation continues to ramp up following
and milled ore. Decreases in production were seen at commissioning in May 2011, with six tonnes produced in
a number of Mexican operations last year, including 2012. At Yanacocha, Peru’s largest gold mine, production
El Sauzal, Palmarejo and Soledad-Dipolos, each of was up slightly on last year due to higher grades and
which attributed the fall in production to lower grades. improved recovery.
At El Sauzal, the decrease was attributed to lower
throughput as well as a 15% fall in grade. Palmarejo also Brazilian gold production remained unchanged year-
experienced lower production on reduced gold grades, on-year, at 67 tonnes. Fazenda Brasileiro, AngloGold
whilst at Soledad-Dipolos, the decrease in production Ashanti Mineração, Paracatu and Sao Francisco all saw
was attributed to lower grades and consequently lower increased production last year, collectively adding almost
recovery and processing rate. three tonnes to Brazilian mine supply. At Fazenda
Brasileiro, grade, recovery and throughput were all
Production in Chile increased by 9% in 2012. A number higher, whilst at AngloGold Ashanti Mineração and
of projects contributed to this outcome, most notably Paracatu, higher throughput compensated for falls in
Esperanza, which produced an additional three tonnes head grade. In the case of Paracatu, project expansion
in its first full year of production. Other mines that saw in the form of a third ball mill enabled this increase in
significant production increases in 2012 included El Toqui processing capacity, whilst new projects and expansions
and La Coipa. At El Toqui, production shifted last year to added supply elsewhere in the country. For example,
ore from higher-grade gold ore bodies, rather than zinc at Tucano, the first gold was poured in December
ore bodies. At La Coipa, throughput, head grade and 2012, following commissioning of the new SAG mill
recovery were all up on those of 2011. These increases in in November, and the Salobo copper-gold mine was
output were more than sufficient to compensate for the also commissioned last year, producing half a tonne.
fall in gold production at Escondida. The Aurizona mine, which commenced operations in
2010, continues to expand towards full capacity and
Elsewhere, a supply increase of half a tonne was seen in contributed over two tonnes of gold last year. Decreases
Nicaragua, with both the Limon and La Libertad mines in production elsewhere in Brazil balanced other gains,
achieving higher production due to improved recoveries with lower grades being the common factor behind lower
and gold grades, while we estimate that Colombian output at Chapada, Serra Grande and Andorinhas.
output grew modestly again last year, with gains in both
the formal and informal mining sectors. Argentinian mine supply decreased by 8% in 2012, to
55 tonnes. The principal driver of this decrease was a
In Peru, Latin America’s most significant gold fall in production of almost six tonnes at Veladero, due
producer, output was down 1% last year, to 185 tonnes. to lower grades as well as a reduction in throughput,
Contributing to this outcome were operations including attributed to equipment availability issues. Decreases
La Zanja, Orcopampa and Pierina. Lower tonnage in production due to lower grades were also seen at
processed was responsible for the falls in production at Manantial Espejo and at Gualcamayo, which underwent
both Pierina and La Zanja, whilst lower grades led to a planned transition between mining phases, as a
lower production at Orcopampa. Significant increases consequence of which production was mainly from
MAJOR LATIN AMERICAN PRODUCTION REST OF LATIN AMERICAN PRODUCTION
500 Brazil Chile Colombia 120 Ecuador Guatemala Other

MINE SUPPLY
Mexico Argentina Suriname Guyana

Peru 100 Venezuela
400
80
300
Tonnes
Tonnes
60
200
40
100
20
0 0
2003 2005 2007 2009 2011 2003 2005 2007 2009 2011
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GOLD SURVEY 2013
stockpiled material during the fourth quarter. Delays in recommissioned in 2011, added one tonne. Yilgarn South
licencing and construction of a heap leach pad during also saw production rise by two tonnes or 22%, year-on-
early 2012 were also cited as a reason for the fall in year, thanks to both increased tonnes processed (+16%)
production at Gualcamayo. Partially countering the and higher grades (+4%). At Mount Monger and Mount
overall decrease in supply were increases in production Magnet production also rose by over a tonne at each
from Alumbrera, Casposo and Cerro Vanguardia. At operation.
Alumbrera, higher throughput and slightly improved
recoveries were sufficient to counter the slight decline Production from Boddington, the country’s largest
in gold grade. Production at Casposo increased as producing mine, was flat at 23 tonnes as a small drop
problems encountered in 2011 during commissioning of in grades processed and recovery rates was countered
the dry tailings filters were overcome, with the facility by a 5% increase in tonnes processed. At Sunrise Dam
achieving design throughput in the fourth quarter. At production was marginally higher at eight tonnes; an
Cerro Vanguardia, there were improvements in both increase in underground production rates helped pull the
grade and throughput. average grade of ore treated up by 11%, which more than
compensated for an overall 6% fall in tonnes treated.
Production from Guatemala fell by almost 50% due
to the reduction in output from the Marlin mine, where Gold production from New Zealand continued to decline
operations at the open pit were concluded in late-2011. in 2012, falling by 14% to 10 tonnes. Lower production
The mine plan included processing of lower grade was recorded across all three of the country’s major
material from stockpiles subsequent to completion of the operations. In particular output at Waihi fell by a
open pit. In Venezuela we estimate output fell modestly tonne on the back of a near-two-thirds drop in tonnes
last year. Although we estimate the large scale sector milled, activities at the open pit continued to focus on
has held up in the wake of 2011’s part-nationalisation waste stripping activities during the year. Elsewhere,
of the mining industry, reports of clamp-downs on production in the Solomon Islands was marginally
unlicensed small scale miners by the army is thought to higher thanks to higher production at Gold Ridge, while
have reduced output. in Fiji production was flat year-on-year.
OCEANIA ASIA
Gold production in Oceania declined to 263 tonnes In 2012 Chinese mine production rose for the thirteenth
last year, down from 273 tonnes in 2011. Australian successive year, up by 11%, or 42 tonnes: the largest gain
production dropped by eight tonnes, or 3%, to 250 globally. The lift came mainly from domestic primary
tonnes. Despite this decline in output Australia remained gold mining and smelting operations, which grew by a
the second largest gold producing country, behind China. total of 24 tonnes, but additionally from gold produced
Production from Cadia Valley and the Kalgoorlie Super as a by-product of the non-ferrous metal smelting
Pit fell by around four tonnes each; the main driver of industry, which accounted for a further four tonne
this was a decline in the grade of ore processed which increase.
fell by 28% and 14% year-on-year at the two operations.
Production from Ernest Henry fell by three tonnes year-
on-year, owing largely to the completion of mining from
a low cost open pit mine in December 2011, with the AUSTRALIAN MINE PRODUCTION
operation now in the process of ramping up production

from the underground mine. At Telfer, production
MINE SUPPLY
350
declined 9% year-on-year, to 16 tonnes as plant recovery 300

rates were adversely impacted by the more refractory
250
nature of feed from the West Dome pit that started
production in the second quarter. 200
Tonnes
150
Providing a partial offset to these losses was new
production from a number of sources as projects 100
ramped up. Regis Resources commissioned Garden 50

Well in August 2012, adding two tonnes, while a full
0
year of production from the Ballarat mine, which was 2003 2005 2007 2009 2011
Source: Thomson Reuters GFMS,
GFMS BREE
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GOLD SURVEY 2013
Looking first at the country’s listed miners, however, facilities. These gains were the primary drivers behind
production from their own vertically integrated mining/ the net increase of 10 tonnes, or 18%, in Shandong
refining enterprises was lackluster. Zijin Mining reported province; both the biggest gain and the largest producing
an increase of just under two tonnes of “mine produced province in China in 2012. Overall, the general thrust
gold” during the first nine months of 2012, but when of Chinese growth remains continued investment in the
excluding its acquisition of Norton Goldfields, output development of new resources, the modernisation of
was essentially flat. Elsewhere, Zhaojin Mining reported technology and the consolidation of smaller resources
growth from its own mining operations of just 2% in the and operating units to achieve greater efficiencies within
first half of 2012. Eldorado Gold’s Chinese assets all saw the primary gold space.
production fall last year, most notably at Jinfeng, where
output fell by 39%, or two tonnes, due to waste stripping Output from the country’s nonferrous smelters, which
activities and pit wall instability impacting mining rates produce gold as a by-product from the mining of other
from the open pit. Real Gold saw challenging geological metals such as copper, grew by 6% in 2012, or four
conditions in 2012 which resulted in additional dilution tonnes. Of these smelters, the largest gain was in Gansu,
to ore grades; in the first half output fell by one tonne at Jinchuan Nonferrous Metals, where output more than
at the Shirengou-Naintazi processing plant. Full-year doubled, to eight tonnes. A 23% rise in gold output was
throughput also fell markedly because of capacity reported at Yunnan Copper, where output recovered
constraints caused by interruptions to electricity supplies. by over one tonne following smelter downtime in the
first half of 2011. Daye Nonferrous Metals saw a similar
There was, however, some positive news among this rise in gold output, due to a streamlining of production
group. Production from China Gold International’s CSH processes, such as the implementation of continuous
mine increased by 4% in 2012, to total four tonnes. production, combined with an increase in metallurgical
Lingbao Gold saw an increase of 8%, or half a tonne, recoveries. Daye also commenced commissioning of a
in the first half of 2012, while work in 2012 progressed precious metal production facility in the third quarter.
on the company’s new gold refinery in Xijiang Uyghur
in northwest China. In relation to the country-wide Outside of China, aggregate output from Asia was lower
increase, however, these gains were limited. year-on-year. Production from Indonesia hit a multi-
year low of just 89 tonnes, down from a recent high of
The top ten gold producing companies produced half 161 tonnes in 2009. Output fell by 31 tonnes, or 26%,
of total Chinese output last year, but growth continues which represented the heaviest global country loss for a
at the smaller and mid-sized stages of the Chinese third consecutive year. Output at the country’s largest
industry, as evidenced by rising output from the country’s producer of gold, Grasberg, fell by 40% to 27 tonnes.
gold smelting industry, which toll treats ores on behalf This was firstly due to mine sequencing and geotechnical
of other producers, and which rose by 20 tonnes. The factors which led to lower gold grade ore being mined
biggest year-on-year gain was seen at Zhaojin Mining’s from the open pit. Gold head grade fell by 37%. This
smelting business, where refined output increased by was also exacerbated by the impact of labour unrest
23% over the full year, or seven tonnes. Shandong in the first quarter, and the consequent interruption to
Henbang also saw output rise, by five tonnes, realising processing activities, which resulted in an estimated
gains from the refurbishment of several processing four tonnes of production lost. Production at Batu
CHINESE MINE PRODUCTION INDONESIAN MINE PRODUCTION
450 200 50 Grasberg's Share of Other

MINE SUPPLY
Total Production (%)

Grasberg
400 60 64
58
54
350 150 42
300 38
42 50
250
Tonnes
Tonnes
38
100 30
200
150
50
100
50
0 0
2003 2005 2007 2009 2011 2003 2005 2007 2009 2011
GFMS China Gold Association Source: Thomson Reuters GFMS, Freeport McMoran
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GOLD SURVEY 2013
Hijau fell by 78%, to just two tonnes. Mining continued Artisanal production is also estimated to have increased
to focus on a waste stripping phase and the consequent slightly, although we estimate that this flow has
processing of lower grade stockpiled ore. Average shifted from central bank buying stations to less formal
processed gold grades fell to just 0.1g/t from 0.4g/t in distribution routes, following the enactment of a tax on
2011. Gosowong’s output contracted by 4%, due in part sales to buying stations in 2011.
to continuing challenges with soft ground conditions
impeding access to higher grade ore in the Gosowong Elsewhere, mine supply from Thailand rose, by two
open pit and the Kencana underground mine. tonnes, thanks to higher output from Chatree where
throughput continued to ramp up following completion
Gold production in Papua New Guinea contracted for of the Chatree North plant expansion. Output in Laos
the third successive year, by 11%, to total 57 tonnes. was boosted by the start of commercial production at
Production at both Lihir and Porgera, the country’s two Ban Houayxai on 1st June 2012; the mine produced
largest operations, fell by two tonnes each. At Lihir, a two tonnes. Phu Kham also had a strong finish to the
combination of both lower grade ore and throughput year with record throughput thanks to the recently
led to a 10% drop in production. At Porgera, output commissioned process plant upgrade project, which has
was down by 13% due to pit wall remediation activities, increased plant capacity from 12 million to 16 million
which prevented mining in higher grade zones of the pit, tonnes of ore per annum.
power supply interruptions, labour issues and a decrease
in underground mining activity. Gold output from the COMMONWEALTH OF INDEPENDENT STATES
Ok Tedi copper mine was 3% lower year-on-year. The
current mine is scheduled to close during 2013, however Production in the CIS rose by a total of 12 tonnes, or 3%;
a feasibility study is currently underway which would see the fifth successive annual increase. A 15 tonne gain
the mine’s life extended out to 2022. At Hidden Valley in Russia was the primary driver, with output lifted by
gold production fell by 23%, to five tonnes, as a result of a series of new starts coupled with the first full-year
the processing of lower grade ore. Grades dropped by of operations, and continued ramp-up, at properties
nearly one quarter year-on-year but this was partially off- which commenced in 2010-11. Among the increases
set by an increase in tonnes processed. were Albyn and Albazino, at three tonnes apiece, and a
gain of just under one tonne at Asacha. 2010’s project
Turning to the increases, Turkish gold production grew starts also continued to contribute, with a total of five
by six tonnes, or nearly one quarter. This growth is tonnes of additional output from Kubaka, Blagodatnoye,
wholly attributable to new mining operations, from Verninskoye and Malomir. For all these operations, the
the ramp up of operations at Kaymaz and Efemçukuru, key theme was an increase in throughput. Turning to
which began in 2011, combined with the Tepeköy project, the more established operations, Olympiada saw a three
where precious metal production began in January 2012. tonne gain from improvements in the flotation and bio-
Output from the Philippines also increased, by 11%, or leaching circuits, allowing gold recovery rates to rise to
four tonnes. Behind this gain the primary driver was 74%, while higher throughput rates at Kuranakh drove its
increased production at Masbate, which saw output rise output up by 19%, or half a tonne. Elsewhere, volumes of
by two tonnes due to a recovery in throughput following gold recovered as a by-product from the country’s base
the failure of the SAG mill in the second half of 2011. metal mines also rose, by 21%, or three tonnes.
OTHER ASIA MINE PRODUCTION RUSSIAN MINE PRODUCTION
240 250
MINE SUPPLY
Philippines Mongolia Other

Papua New Guinea Turkey
200
200
160
150
Tonnes
Tonnes
120
100
80
50
40
0 0
2003 2005 2007 2009 2011 2003 2005 2007 2009 2011
Source: Thomson Reuters GFMS Source: Thomson Reuters GFMS, Russian Union of Gold Producers
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GOLD SURVEY 2013
The most significant loss, of one tonne, came from result of the cessation of mining at Central Mukur mid-
Kupol, where production was sharply lower in the first year, and the resultant move to stockpile processing.
half of 2012, due to lower gold grades. For the full-year,
processed grade was down by an average of 10%. Providing a partial offset to the region’s gains, production
in Kyrgyzstan fell markedly last year, by 42% or eight
Output in the second largest producer in the region, tonnes, as output from Kumtor contracted sharply.
Uzbekistan, is estimated to have risen modestly, by 3%, Glacial creep continued to cause geotechnical issues and
or two tonnes. 2012 saw the first full year of operation problems with opening up access to further high grade
of a conveyor in the open pit at Muruntau, which led to areas of the pit, necessitating a revision to the mine plan.
increased productivity through shorter haul times, and
the completion in late-2012 of a bio-oxidation facility to EUROPE
enable increased processing of refractory ores. Navoi
MMC has also been pursuing a policy of expansion Production from Europe rose by 24% last year, to
and modernization of the haul fleet, and commenced 23 tonnes, and much of this can be attributed to
construction of a new explosives plant to support supply from new mining projects in Finland. Kittila
expanded blasting activities. continued its trend of increasing annual production
since commissioning in 2008, with 2012 output over
Kazakh mine supply grew for a fourth successive year, a tonne higher than that of 2011. New and recently
setting a new record high at 40 tonnes. The bulk of this commissioned projects also contributed to the increased
gain can be attributed to Kazzinc, where production production, including the Laiva mine, which began
from the company’s own mines rose by just under three operating in November 2011 and scaled up production
tonnes, thanks to a second full year of output from significantly last year, to almost one tonne. Pampalo was
Altyntau, which did not reach full capacity in 2011. also commissioned during 2011 and saw an increase in
While total refined output from Kazzinc rose by a larger output during 2012. New projects Kevitsa and Kylylahti,
amount, this simply reflected in the main a change in both commissioned during 2012, collectively added
metal flows. In 2011 a bill was passed granting the minor volumes.
National Bank of Kazakhstan the right to purchase
domestically produced mine output. Furthermore, Spanish production more than tripled, thanks to the
import/export controls on gold bearing material were ramping up, and full year of production at the re-
enacted late in 2011, and VAT on domestic gold sales to commissioned El Valle operation that was mothballed
the National Bank was abolished in January last year. in 2006. Sweden remains Europe’s second most
These have led to domestic gold producers shipping their important gold producer after Finland, with a total
material to one of the two refineries in-country, rather output of six tonnes in 2012, marginally higher than that
than abroad for refining, as has been the case historically. of 2011. Increases in production at Bjorkdal and Boliden
Area were sufficient to counter Aitik’s half tonne fall in
Small gains were also recorded at Suzdal, Varvarinskoye production due to lower grades. Bulgarian production
and Sekisovskoye, although these totalled less than one increased by almost a tonne last year, on increased
tonne. Conversely, the other major refiner in the country, supply from Chelopech. Whilst grade was down slightly
Kazakhmys, saw its gold output fall by one tonne as a on 2011, throughput was considerably higher.
OTHER CIS MINE PRODUCTION EUROPEAN MINE PRODUCTION
160 25
Kyrgyzstan Other Sweden Spain
MINE SUPPLY
140 Uzbekistan Kazakhstan Finland Bulgaria Other

20
120
100
15
Tonnes
Tonnes
80
10
60
40
5
20
0 0
2003 2005 2007 2009 2011 2003 2005 2007 2009 2011
50
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GOLD SURVEY 2013
CORPORATE ACTIVITY IN 2012 2012 TOP 10 GOLD PRODUCERS
Rank Output (t)

The prominence of gold-focussed M&A activity at the large- 2012 2011 2011 2012
cap end of the scale was more moderate in 2012. After a 1 1 Barrick Gold 238.8 230.8
swathe of multi-billion dollar transactions undertaken in the 2 2 Newmont Mining 160.7 154.8
gold industry over the past couple of years, the largest deal 3 3 AngloGold Ashanti 134.7 122.6
completed last year was Eldorado Gold Corp’s acquisition of 4 4 Gold Fields 102.0 95.9
European Goldfields Ltd for around US$2.4bn. A distant second 5 7 Kinross Gold 1 72.7 76.2
has been the more recently proposed combination of B2Gold 6 5 Goldcorp 78.2 74.5
Corp and CGA Mining, approved by shareholders in December 7 8 Navoi MMC 1 66.5 68.0
2012 and completed in February 2013 in an all shares deal 8 6 Newcrest Mining 76.9 64.5
that values CGA at around C$1.1bn. To put these transactions 9 9 Polyus Gold 46.5 52.2
10 10 Harmony Gold 40.9 39.3
in perspective, 2011 was the year that saw Barrick Gold Corp’s
1
Estimate
C$7.3bn acquisition of Equinox Minerals (a copper play) and,
Source: Company Reports; Thomson Reuters GFMS
in 2010, the takeover of Lihir Gold (for A$9.5bn) and Red Back
Mining Inc. (for US$7.4bn), by Newcrest Mining and Kinross Gold
Corp respectively. the gold miners, and furthermore motivated a stronger call by
shareholders for reduced spending and enhanced returns.
This apparent slow-down in ‘blockbuster deals’ over the past
year or so has been influenced by decreasing confidence Nevertheless, it has been a much busier year at the small-to
around the sustainability of a commodities ‘super cycle’ as mid-cap level, with a flurry of deals valued in the order of half
well as a widespread (and growing) list of earlier acquisitions a billion dollars; many of which were motivated by regional
that with hindsight appear regrettable, from the perspective expansion plans or local consolidation. At the upper end of
of strategic value addition through synergies or reserve upside this scale was the announcement of AuRico Gold Inc’s sale of
that have led to frequent disappointment when it has come to much of its Mexican portfolio to Minera Frisco, S.A.B. de C.V.
project execution. Furthermore, the growing number of case for US$750M in cash, which included the operating Ocampo
studies where the sharply escalating capital development mine and adjacent Venus and Los Jarros exploration projects,
costs of the next generation of organic growth serves as a all proximal to Frisco’s El Concheño project that will be
sobering benchmark for companies eyeing growth through the commissioned this year. In September Australian-focussed St
acquisition of large, undeveloped deposits. Barbara Ltd closed its US$650M cash & share acquisition of
Allied Gold Mining Plc, expanding St Barbara’s footprint into
These factors have played a key role in the downward valuation the South Pacific with the Gold Ridge (Solomon Islands) and
of the carrying value of many acquired assets. In turn this has Simberi (PNG) mines.
been a major influence that has precipitated a wave of senior
management changes that has been a clear theme in the A theme of regional consolidation was present in several mid-
resources industry over the past year, spreading far beyond just sized deals that included in Latin America, Yamana Gold Inc’s
acquisition of Extorre Gold Mines Ltd, to gain control of the
GOLD EQUITIES VERSUS GOLD AND THE S&P 500 Cerro Moro gold-silver project in Argentina, while Endeavour
Mining Corp. continued to expand its West African footprint
130 through the takeover of Mali-focussed Avion Gold Corp; both
120 Gold deals were valued at over US$400M.

MINE SUPPLY
Index, 3rd January 2012 = 100
110
Other important deals that were tabled in 2012 have been the
100
(since abandoned) bid for African Barrick Gold by China National
S&P 500
90 Gold Group in the second half of the year, and more recently
80 the plan announced by Gold Fields Ltd to spin-out its KDC and
HUI Gold
BUGS Index Beatrix assets in South Africa to a separate vehicle, Sibanye
70
Gold, whose shares commenced trading on 11th February. More
60
recently, a hostile bid for Aurizon Mines Ltd. by Alamos Gold Inc
50
was followed by a bid by Hecla Mining Co, favoured by Aurizon’s
Jan-12 Apr-12 Jul-12 Oct-12 Jan-13
Source: Thomson Reuters board, valuing the company at around C$800M.
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GOLD SURVEY 2013
PRODUCTION COSTS PRODUCTION COST REPORTING
• Global average gold mine total cash costs increased in Total cash costs and total production costs, as referred in this
report, conform to the Gold Institute standard for cost reporting.
2012, rising by 12%, or $80/oz, to $738/oz. Where data reported by miners does not conform, adjustments,
and in some cases estimates were made. Readers should
note that cost analysis undertaken in Gold Survey 2013 draws
• Average total cash margins increased, by just $17/oz,
on annual data within our Gold Mine Economics service, and
from $914/oz to $931/oz, despite average gold prices being incorporates both data for primary gold mines and significant
$97/oz higher for the year at $1,669/oz. gold producing by-product gold producers (costed on a co-
product accounting basis). Earlier data has been restated to
reflect this change, from analysis which in the past has been
• Total production costs (including depreciated capital presented for primary gold mines only.
expenditure) increased by 11%, up $92/oz to average
Co-product costs are derived by multiplying the total cash cost
$928/oz.
by the percentage revenue contribution from gold. This is in
contrast to by-product costing, whereby non gold revenue is
• All-in costs, which include all cash and non-cash costs, netted off as a credit against the total cash cost. The co-product
analysis method has been employed where gold represents 65%
sustaining capital expenditure, indirect costs and overheads or less of a mine’s revenue.
rose by 12% year-on-year, to $1,211/oz.
Total cash cost comprises mine site cash expenses (mining, ore
• Mine site input cost inflation continued to put upward processing, on-site general and administrative costs), refining
pressure on costs, with labour, energy and consumable charges, royalties and production taxes, net of by-product credits.
costs all increasing.

Total production cost is total cash costs, plus depreciation,
amortisation and reclamation cost provisions.
• Upward cost pressure was once again exacerbated
by lower processed ore grades with the average grade All-in cost is a proprietary Thomson Reuters GFMS cost
dropping by 7% year-on-year. parameter, designed to reflect the full marginal cost of gold
mining. In addition to total production costs, it includes ongoing
capital expenditure, indirect costs and overheads.
• Over the balance of the year, cost inflation was partially
offset by favourable exchange rate moves.
WORLD TOTAL CASH AND ALL IN COST CURVES
2000
2000
2012 Average Gold Price ($1,668.98/oz)

1600
1600
2011 Average Gold Price ($1,571.52/oz)
MINE SUPPLY
1200
1200
US$/oz
US$/oz
800
800
400 2012 All-in Cost

400
2011 All-in Cost
2012 Total Cash Cost
2011 Total Cash Cost
0
0
0 10 20 30 40 50 60 70 80 90 100
Source: Thomson Reuters GFMS Cumulative Production %
52
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GOLD SURVEY 2013
GOLD PRODUCERS’ CURRENCIES AGAINST THE US$
135 120
Rand

120
110
MXN
Rouble
105
CAD
100
90
PNG Kina AUD
75 90
Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13
Source: Thomson Reuters Source: Thomson Reuters
YEAR-ON-YEAR COST CHANGES Of the key producing countries the sharpest exchange
rate-driven cost driver was experienced in South Africa,
Global average gold mine production costs rose during where the rand weakened by 13% relative to the US
2012, by an average 12%, year-on-year. Once again dollar. The next largest exchange rate movement of
the impact of declining head grades was the largest the major producers was experienced in Russia where
individual influence on costs, followed by labour, which the rouble declined by 6% over the year. Both, the
also continued to be a dominant factor. Other mine Canadian dollar and Australian dollar were flat year-on-
site costs, including fuel, electricity and consumables year against the US dollar. In contrast the Papua New
continued to rise, albeit at a slower pace. Guinean kina was one of the few currencies to strengthen
against the US dollar strengthening by 12%.
Based on the detailed mine-by-mine analysis in Thomson
Reuters GFMS’ Gold Mine Economics service, the main The largest factor pushing costs higher during 2012
drivers of year-on-year changes in $/oz mine production was once again falling processed ore grades. Average
costs can be isolated and quantified, in the form of a grades (weighted by ore tonnage processed) dropped
year-on-year variance analysis. by nearly 7% year-on-year, to 1.33g/t, which effectively
applied $41/oz of upward pressure to total cash costs.
The first step in the variance analysis process is to Miners continue to maximise throughput and reduce
quantify the effects of exchange rate changes, by cut-off grades, in order to take advantage of the
calculating the extent to which mine site production historically high gold prices, processing higher volumes
costs would have changed from one year to the next in of lower grade ore at the expense of higher $/oz costs.
dollar terms, were exchange rates the only driving factor. Among the larger mines, grades were significantly lower
The net effect of exchange rate changes over the period at Tasiast, Alumbrera, Veladero, Newmont Nevada,
was a $21/oz drop, in total cash costs, on a production- Olympiada and Kupol, with higher grades at Cortez and
weighted basis. Yanacocha.
TOTAL CASH COST VARIANCE, 2012 VERSUS 2011
780
MINE SUPPLY
+22 -21
760
+2 +2 +1
740 +3 +3
+5
FX
Miscellaneous
By-Product Credits
+22
Strip Ratios
Process Recovery
Power
720
Royalties
Fuel
US$/oz
+41
700
Labour
680 738
660
Grades
640
658
620
2011 2012
53
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GOLD SURVEY 2013
On a global basis, labour costs (which in our analysis 2012. In Peru and Ghana the effect of increased royalties,
includes contractor costs, ‘on-costs’ such as bonuses, sick brought in during 2011, were realised for the full year.
pay, insurance), account for around $240/oz, or 34%, of
mine site cash costs; making it by far the largest mine Strip ratios increased by just 1% during 2012; this caused
site cost item. During 2012 labour costs continued to upward cost pressure of $2/oz in 2012. As with falling
push mine site costs upward, with labour cost inflation head grades, higher strip ratios are made possible
amounting to $22/oz on a global average basis, an by higher gold prices, as miners revise mine plans,
increase on the $18/oz recorded in 2011. African Barrick expanding ultimate pit sizes or developing satellite pits,
reported that labour costs were 5% higher in 2012, and in the process moving more waste while maintaining
mainly as a result of year-on-year inflationary increases healthy margins.
and increased national employee headcount.
Power (electricity) costs caused a slight upward pressure
Average WTI crude oil prices were marginally lower ($3/oz) on costs in 2012, as they did in 2011. Widespread,
year-on-year, averaging $94/bbl in 2012, compared to long term tightness in electricity supplies is expected
$95/bbl in 2011. On a global average basis however gold to continue as an ongoing issue. Power disruptions in
mine cash costs increased by $5/oz, with fuel comprising Tanzania during the first half of the year, resulted in lower
$75/oz, or just under 11% of mine site cash costs in hoisting capacity at Bulyanhulu, African Barrick’s energy
2012. Centamin Egypt was hit by the decision that a and fuel expenses increased by 31% over 2011, driven
fuel subsidy of $150/oz of production would be removed primarily by increased fuel usage for self generation of
and mining at the Sukari mine was also temporarily power and increased Tanesco rates.
suspended during December following a dispute over a
retrospective claim from the Egyptian General Petroleum Average process plant (mill and heap leach) gold
Corporation for $65M. recoveries fell during 2012, to 86.0% from 86.3%,
increasing total cash costs by $2/oz.
Royalty payments are mostly based on a gold price-
related formula, and as such vary in step with the gold By-product credits declined by $1/oz on average in 2012,
price. Accordingly, royalties rose by $3/oz on an industry to an average $26/oz credit for the year. This was due to
average basis in 2012. The average royalty paid on an declining metal prices, silver and copper prices were 11%
ounce of production globally during 2012 was $50/oz, and 10% lower than the prior year and accounted for the
an 8% increase year-on-year. The trend of increasing bulk of the decline.
state royalty and tax rates also continued; the Ivory
Coast parliament, for example, approved a new tax on Of the drivers which pushed costs up in 2012, the
gold profits during December, coming into force during remainder falls into the miscellaneous category.
the 2012 tax year. In Tanzania, African Barrick agreed This $22/oz of cost inflation compares with $4/oz of
in May to an increase of 1% in the royalty rates paid, to miscellaneous cost pressure in 2011. In carrying out a
4%. Royalty rates on gold production in Zimbabwe were variance analysis of this type, a remnant cost category of
increased from 4.5% to 7%, with effect from 1st January this sort is unavoidable, as some cost drivers cannot be
2012 GLOBAL AVERAGE ALL IN COST BREAKDOWN
$/oz Au
Mining Mining 346
Ore Processing 231
Ore Processing
MINE SUPPLY
General & Administration 122

General & Admin Mine Site Cash Cost 699
Smelting and Refining 15
Smelting & Refining
By-Product Credits -26
Royalties By-Product Royalties 50
Credits
Depreciation/Amortisation (-$26/oz)
Total Cash Cost 738
& Inventory Changes
Depreciation/Amortisation, Inventory Change 190
Corporate Admin
& Interest Total Production Cost 928
Extraordinary Costs Corporate Administration, Interest 59
Extraordinary Costs 89
Sustaining Capex Sustaining Capital Expenditure 135
Source: Thomson Reuters GFMS All in Cost 1,211
54
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GOLD SURVEY 2013
2012 ALL-IN COST CURVE

Total Cash Costs Variance
2500
Sustaining Capex, Indirect costs & Corporate Overheads
Depreciation & Amortisation
2000 Total Cash Costs
1500
US$/oz
1000
500
0
0 10 20 30 40 50 60 70 80 90 100
Cumulative Production (%)
satisfactorily dissected. There has also been consistent Pinos Altos ($682/oz). Of the population covered, 28%
mention of rising reagent prices, higher mine site of the mines had all-in costs of below $1,000/oz, these
consumables and increasing maintenance costs inside mines represented 46% of gold production. The number
producer’s reporting literature. of mines analysed that had all-in costs above the annual
average gold price increased to 13% from 10%, this
Much of the impact of costs associated with strike action represented 7.4% of gold production. Several large write-
falls into the miscellaneous category by default. The downs occurred during 2012, this once again skewed the
most prominent being the labour unrest in South Africa overall average all-in costs higher. Most notable was the
where strikes started in the platinum industry in August non-cash goodwill impairment at Tasiast of $3.1 billion,
and quickly spread across the mining sector. In Egypt which caused the mine’s all-in cost to exceed $20,000/
two bouts of labour unrest occurred at the Sukari mine as oz. An impairment of $907.7 million was also recorded
a result of a breakdown in on-going discussions involving at the Meadowbank mine, which pushed all-in costs to
general salary increases and other benefits. $4,029/oz. At Tulawaka a non-cash impairment charge
of US$44.5 million pushed all-in costs up to $3,003/oz.
GOLD MINE PROFITABILITY: KEY ISSUES If Tasiast and Meadowbank are removed from the global
population, the global average all-in cost would have
Although total cash cost is a useful gauge of been $1,121/oz.
competitiveness at the mine-by-mine level, it does not
account for a substantial portion of the cost required to REGIONAL TRENDS
develop and sustain gold mining operations. Therefore,
its utility as a measure of ‘real’ industry margins, or the Of the key producing regions, Latin America remained
long term gold price required to incentivise gold mine the lowest cost region in 2012, with total cash costs
production growth is limited. With this in mind, Thomson averaging $614/oz, up a substantial 15%. Part of the
Reuters GFMS developed its ‘all-in cost’ parameter. In reason that cost inflation was above the industry average
addition to total production costs, all-in cost includes increase of 12% is that many mines in the region benefit
corporate administrative costs (head office overheads), from by-product credits, which declined year-on-year.
interest charges, mine site exploration expense,
MINE SUPPLY
extraordinary charges (such as retrenchment costs, asset North American cash costs rose by an average of 12%
carrying value write-downs), plus sustaining/on-going year-on-year, to $639/oz. Canadian average total cash
capital expenditure. This ‘stay-in-business’ capital costs rose strongly, for the third year, up by 13% to $742/
cost is that expenditure necessary to maintain current oz, this was in part because of higher costs at LaRonde
production rates. The global average all-in cost for 2012 where costs rose due to fewer processed tonnes, as
was $1,211/oz, up a substantial $133/oz or 12% on 2011. well as general cost pressures and significantly lower
by-product revenue. A full year of production at the
Lagunas Norte was once again one of the lowest cost relatively high cost Canadian Malartic (909/oz) also
mines with all-in costs of $467/oz, Kisladag, at contributed to higher average costs. Meadowbank
$633/oz was also one of lowest cost producers, as was however, bucked the trend thanks to record production
55
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GOLD SURVEY 2013
being recorded during the year with total cash costs GOLD PRODUCTION COSTS
falling from $1000/oz to $913/oz.
2011 2012
North America Total Cash Costs 570 639
In the United States, average costs increased by 11% from Total Production Costs 749 823
$519/oz to $574/oz. Total cash costs from the largest
operating unit Newmont’s Nevada and Goldstrike the Latin America Total Cash Costs 533 614
country’s third largest producer rose by 6% to $638/ Total Production Costs 711 822
oz and $541/oz respectively. This was thanks to higher
mill throughput at both operations and higher average Australia Total Cash Costs 807 857
processed grades by 4% at Goldstrike. At Cortez total Total Production Costs 1010 1065
cash costs rose from $245/oz to $282/oz, due in part
to the lower throughput (14% lower than 2011), this was South Africa Total Cash Costs 922 1,029
partially mitigated by the processing of higher grade ore Total Production Costs 1,114 1,232
(10% higher than 2011).
Other Total Cash Costs 638 740
In South Africa producers continued to struggle to control Total Production Costs 801 913
costs, this was in spite of the depreciation of the South

World Total Cash Costs 658 738
African rand by 13% year-on-year against the US dollar.
Total Production Costs 836 928
Total cash cost rose by 12% year-on-year-to $1,029/
All-in Costs 1,078 1,211
oz. The fourth quarter was also hit by strike action, at
its peak in mid October a little over 55% of the gold
mining industry was offline. During the fourth quarter
AngloGold Ashanti’s total cash costs were $1,009/oz; Tanzania continued to experience high cost inflation,
they estimated that without the strike the costs would with year-on-year total cash costs increasing by 24%, to
have been $852/oz. Total cash costs at South Africa’s $791/oz. Costs rose at Buzwagi, North Mara, Tulawaka
largest producing mine, the Kloof Driefontein Complex, and Bulyanhulu due to increased maintenance and G&A
rose by 14% to $1078/oz. costs, increased fuel and energy costs in particular at
Buzwagi due to the increased self generation of power
Australian cost inflation was 6% year-on-year, with costs and increased Tanesco rates. This was all compounded by
rising to $857/oz. Part of the cost pressure came from falling processed grades.
the introduction of a carbon tax in July; the tax levies a
A$23 per tonne of greenhouse gasses emitted by major Of the top twenty largest producing countries, Peru
industrial businesses. The Jundee mine was the lowest was the best performing country, with total cash costs
cost mine with total cash costs of $536/oz an increase down by 3%, the main driver was Yanacocha where costs
of 28% year-on-year. This was in part due to processing decreased 10% due to higher production and lower
of lower grade ore which pushed unit costs higher. At mining costs. Total cash costs rose sharply in Argentina,
Boddington costs applicable to sales increased by by 36%, production declined once again at Veladero due
33% per ounce, due to a higher strip ratio, higher mill to the processing of lower grade ore which pushed unit
maintenance costs and the impact of the carbon tax. costs higher by 51%.
COMPANY REPORTED QUARTERLY TOTAL CASH COSTS COMPANY REPORTED ANNUAL TOTAL CASH COSTS
1800 Gold Price 1800

Gold Price
MINE SUPPLY
World Total Cash Costs

1600 1600
Australia
South Africa 1400
1400
North America 1200
1200 Latin America
1000
US$/oz
US$/oz
1000
800
800
600
600
400
400 200
200 0
08.Q1 09.Q1 10.Q1 11.Q1 12.Q1 2002 2004 2006 2008 2010 2012
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GOLD SURVEY 2013
COMPOSITION OF THE DELTA-ADUSTED HEDGE BOOK NOMINAL COMPOSITION OF THE PRODUCER HEDGE BOOK
(tonnes, end-period) 2012

11.Q4 12.Q1 12.Q2 12.Q3 12.Q4 yoy
Fwd. Sales & Gold Loans 119 120 120 117 100 -16%
Total nominal position at
Options 43 41 33 36 36 -15% end-Q4 2012: 205 t
Total 163 161 153 155 123 -24% Forward Sales
Net Puts *
PRODUCER HEDGING Net Calls **
* Bought puts, less sold puts

** Sold calls, less bought calls
• The outstanding delta-adjusted hedge book fell by 40
tonnes in 2012, with cuts concentrated in the fourth quarter. Source: Thomson Reuters GFMS
In 2012 gold mining companies retained a cool attitude WEIGHTED AVERAGE STRIKE PRICES OF HEDGE CONTRACTS
toward hedging, as the volume of gold delta-hedged
(weighted by number of contracts, end-2012) USD AUD
against producer’s hedge positions fell by nearly one
Bought Puts $1,108 $1,471
quarter. This left the outstanding hedge book at just 123 Sold Calls $1,878 $1,637
tonnes at end-December, and confirms the view that 2011 Bought Calls $1,300 $2,100
was a temporary hiatus in an ongoing trend of reduction, Forward Sales $1,217 $1,586
as the volume of deliveries and options maturing Source: Thomson Reuters GFMS
outweighed new hedges.
price protection, given the distribution of the respective
The continued unfavourable attitude towards hedging contract prices around the gold spot price.
is also evidenced by the drop in the nominal (number of
contracts) volume of the hedge book, which fell by one During 2012 a total of 36 companies saw reductions to
third year-on-year to total 205 tonnes. This provides us their positions, while 14 entered into new hedges. The
with an idea of the degree of producers’ price protection most significant reduction in hedge cover came from
relative to production, with a total of 155 tonnes of future Minera Frisco, which saw a drop of 24 tonnes. The bulk
output protected to some degree against downward of the cut came from a 17 tonne fall in its forward sales
price movements, through forward sales or the purchase position, which the company had retired completely by
of put options. Correspondingly, 150 tonnes of future end-February. Second came Great Basin Gold, which saw
production also has some exposure to price upside a series of collar option structures closed out following
capped, through the same forward sales or through the insolvency of the company in the fourth quarter.
written call options. But these figures represent only 5% Sumitomo Metal Mining’s delta-adjusted position fell by
of one year of annual mine supply, a low level indeed. an estimated five tonnes, as its collar option structures
matured throughout the year. St Barbara and Teranga
An examination of the strike prices of these respective Gold both saw their positions decline by four tonnes,
contracts shows that the hedge book is operating more as St Barbara’s option positions matured, and Teranga
as a cap to price upside than as materially effective began to deliver and repurchase its forward sales.
DISTRIBUTION OF OPTION HEDGE COVER BY STRIKE PRICE

US dollar denominated strikes Australian dollar denominated strikes
30 20 10 0 10 20 30 6 4 2 0 2 4 6
MINE SUPPLY
2,201-2,300 2,201-2,300
2,101-2,200 2,101-2,200
2,001-2,100 2,001-2,100
1,901-2,000 1,901-2,000
1,801-1,900 1,801-1,900
1,701-1,800 1,701-1,800
1,601-1,700 1,601-1,700
US$/oz
1,501-1,600 1,501-1,600
A$/oz
1,401-1,500 1,401-1,500
1,301-1,400 1,301-1,400
1,201-1,300 1,201-1,300
1,101-1,200 1,101-1,200
1,001-1,100 Sold Call Options Sold Call Options
1,001-1,100
901-1,000 Bought Put Options 901-1,000 Bought Put Options
801-900 801-900
701-800 701-800
30 20 10 0 10 20 30 6 4 2 0 2 4 6
tonnes tonnes
57
GS 2013 CH4b.indd 57 21/03/2013 11:51:55

GOLD SURVEY 2013
EVOLUTION OF THE GLOBAL HEDGE BOOK TOP HEDGING ACTIVITY IN 2012
2500 (delta-hedging) % of Gross: Change

Company Hedging (tonnes)
Options
2000 Crocodile Gold 29% 9
Forwards & Gold Loans
Saracen Mineral Holdings 21% 6
1500 Beadell Resources 10% 3
Tonnes
Millennium Minerals 10% 3

1000
Company De-hedging (tonnes)
Minera Frisco 34% -24
500
Great Basin Gold 7% -5
Sumitomo Metal Mining 7% -5
0
03.Q4 05.Q4 07.Q4 09.Q4 11.Q4 St Barbara 6% -4
Note: Delta-adjusted volumes are calculated on the basis of
published company data. As such disclosures are not exhaustive,
Other de-hedgers during the year included Boliden, the GFMS calculated position may not exactly correspond to the
delta position reported by the company. In addition, GFMS values
New Gold, Gold One International and Evolution Mining, the contracts on a spot delta basis, whereas some companies
which removed a total of nine tonnes between them. report positions on a forward delta basis. This can lead to minor
discrepancies between the calculated and reported delta-adjusted
volumes. Where published data was unavailable, an estimate
Significant additions to the global hedge book were few based on the scheduled expiry of contracts has been made.
in number, with the most prominent activity being an 11 Source: Thomson Reuters GFMS
tonne forward sale by Crocodile Gold, as a condition of
securing a credit facility. The company also purchased
call options covering six tonnes of production to return hedgers included Reed Resources, Lonmin, Straits
some upside potential for half its hedged production. Resources and Veris Gold, which added a combined eight
By end-year Crocodile had begun to deliver into these, tonnes between them.
resulting in a net delta-adjusted addition of nine tonnes
to the global hedge book. In tandem with the net cuts to the outstanding global
hedge book, the aggregate marked-to-market liability
Saracen Mineral Holdings entered into six tonnes of of producers’ hedge positions contracted in 2012, by
forward sale contracts connected to a finance facility for 36%, to negative $0.79 billion. This came despite the
the company’s expansion at Whirling Dervish. Beadell 6% increase in the end-year gold price, used to value the
Resources and Millennium Minerals also entered into contracts, and represented the lowest value since our
hedges, with Beadell having added a net three tonnes of quarterly records began in 2002.
forward sales and options by end-year associated with
the extension of its Tucano project finance facility, and Our database of hedge positions indicates that, as
Millennium Minerals entering into forward sales covering currently structured, approximately half of the hedge
three tonnes of output from Nullagine. Millennium book is due to mature in 2013. That said, with current
also purchased put options covering 10,500 ounces industry talk centring around the issue of cost reporting
of production; these had expired by year-end. Other and cost inflation, and when coupled with a gold
price which has disappointed so far in 2013, if prices
DELIVERY PROFILE AS AT END-2012 fail to increase sufficiently on a year-on-year basis,
it is conceivable that producers could become more
60
amenable to the concept of hedging within the year.
MINE SUPPLY
Options
50
Forwards & Gold Loans We would suggest the probability of this to become a
2013 story to be low, given strong shareholder pressure
40 against the idea and, with our price forecast taken into
account, we therefore do not expect a meaningful return
Tonnes
30
to hedging during 2013. Instead, we expect a limited
20 level of de-hedging to persist given the small size of the
outstanding book and ongoing project finance/lending
10
related hedging. Producer hedging will therefore remain
0
on the periphery of the supply/demand balance.
2013 2014 2015 2016 2017
58
GS 2013 CH4b.indd 58 21/03/2013 11:51:55

GOLD SURVEY 2013
5. SUPPLY FROM ABOVE-GROUND STOCKS

• Above-ground stocks, by definition cumulative OVERVIEW
historical mine production, grew by 1.7% to around 174,100
SUPPLY FROM ABOVE-GROUND

tonnes by end-2012. Supply of gold into the market can be sourced either
from new mine production or from the recycling or
• Stocks of fabricated products (excluding all coins) mobilisation of existing above-ground stocks of metal.
rose by 684 tonnes on a net basis in 2012 to approximately The former (as well as producers’ hedging activities) is
STOCKS
105,800 tonnes by year-end. This was equivalent to 61% of discussed in detail in Chapter 4 of this Gold Survey, while
total above-ground stocks. the latter is covered in this chapter, where we start by
looking at changes in gold bullion stocks held by the
• Accounting for the bulk of stocks of fabricated official sector and then go on to examine the recycling
products, jewellery increased by a net 277 tonnes last year. of scrapped fabricated products. The other possible
At end-2012, these stocks stood at almost 84,600 tonnes, source of supply from above-ground stocks of gold,
or roughly one half of all above-ground stocks. namely bullion held by private individuals and non-
official institutions, is discussed in Chapter 3, although
• Combined bullion stocks held by the official and private the investor side of the market was, on a net basis, once
sectors expanded by 2,177 tonnes to 64,700 tonnes by again a major source of demand last year.
end-2012, equal to over 37% of total above-ground stocks.
Private holders accounted for 54% of these bullion stocks. The table on the next page provides a summary of annual
supply to the market from mine production and above-
• Official bullion stocks, excluding bullion lent to the ground stocks (the latter divided into its bullion and
market, rose by 572 tonnes in 2012, due to buoyant net fabricated products components) over the 2010-2012
official sector purchases of 532 tonnes coupled with modest period. As illustrated in this table, overall supply from
net producer de-hedging of 40 tonnes. above-ground stocks dropped in 2012 by a modest 3%
or 52 tonnes year-on-year, against a small increase of
• Investors’ stocks of bullion recorded a robust net 22 tonnes in mine production. Above-ground stocks’
increase of 1,605 tonnes in 2012, taking the total amount contribution to total gold supply therefore fell slightly to
of bullion bars and coins held by private individuals and 36% last year from 37% in 2011.
non-official institutions to 34,700 tonnes by end-2012,
equivalent to an approximate $1,849 billion. This lower supply from above-ground stocks was largely
attributable to a continued fall in scrapped fabricated
• Last year, there was 1,616 tonnes of supply from above- products, although a return to net producer de-hedging
ground stocks, accounting for 36% of total supply and was also important to the outcome. Meanwhile, for the
coming solely from scrapped fabricated products. third year in a row, central banks as a whole remained net
buyers of gold bullion during 2012, with their contribution
GOLD TRANSFERS (NET) TO AND FROM GLOBAL ABOVE-GROUND STOCKS, 2012
Above-ground Stocks, end-2012 = 174,100t

Private Investment*
To Stocks Jewellery
(1,605t)
(4,437t) (1,893t)
Jewellery
(84,600t)
Other Fabrication
Unaccounted (407t) Official Sector
(3,600t) Official Holdings** Purchases (532t)
(30,100t)
Transformed/Transferred
Other Fabrication (4,437t)
Old Scrap (mostly jewellery)
(21,200t) (1,616t)
Private Investment*
(34,700t) Changes in lending***
(40t)
*Includes bar investment, implied net investment and coins
** Excluding gold lent or supplied Mine Production
*** Includes changes in lending from both the official and private sectors (2,861t)
59
GS 2013 CH5.indd 59 21/03/2013 11:53:06

GOLD SURVEY 2013
SUPPLY OF GOLD TO THE MARKET
2010 2011 2012

tonnes share tonnes share tonnes share
Mine Production 2739 61% 2,838 63% 2,861 64%
Above-Ground Stocks 1723 39% 1,680 37% 1,616 36%
- Net Official Sector Sales - - - - - -

- Net Producer Hedging - - 11 0.2% - -
- Net Implied Disinvestment - - - - - -
- Sub Total Bullion - - 11 0.2% - -
STOCKS
- Fabricated Products (Scrap) 1,723 39% 1,669 37% 1,616 36%

to total gold demand rising to the highest level since Turning to this year, total supply from above-ground
mid-1960s. stocks is set to recover lost ground. This forecast is based
on the assumption that scrap supply should rebound
Looking at each component, in spite of a further rise strongly later this year in response to renewed strength
in the average annual gold price, scrap supply slipped in the gold price, with the global total likely to exceed
by 3% to a four-year low last year, although the total its 2009 peak. By contrast, the official sector once
remained elevated by historical standards. The decline again is expected to remain on the buy side of the gold
was a largely a result of bullish price expectations and market, as central banks in emerging market economies
the depletion of near-market stocks, particularly in the will continue to accumulate bullion holdings in order to
industrialised world. The main exception is India, where diversify their foreign exchange reserves. Furthermore,
scrap grew strongly thanks to record prices in Indian a favourable gold price outlook limits the scope for
rupee terms. Turning to the official sector, last year strategic hedging from gold mine producers. Modest net
witnessed a growing appetite for the yellow metal from de-hedging will therefore persist during 2013. Taking
central banks in the developing world. This, combined into account a further rise in mine production, total gold
with the continued absence of major sales from supply is forecast to hit a fresh record of well above 4,600
signatories to the Central Bank Gold Agreement (CBGA), tonnes this year.
sent net official sector purchases to a 48-year high of 532
tonnes in 2012. OFFICIAL SECTOR
For the second consecutive year, producer hedging — Net official sector purchases jumped by 16% in 2012,
activity remained on the sidelines in 2012, largely due rising to a 48-year high of 532 tonnes.
to the small outstanding hedgebook coupled with — The outstanding amount of bullion lent to the market
continued anti-hedging sentiment among mining by the official sector remained broadly flat in 2012.
companies. At the moment, our estimate shows that net
producer de-hedging amounted to 40 tonnes last year, Thomson Reuters GFMS’ estimates for official sector
as deliveries into contracts and maturing option positions transactions are based on a combination of publicly
outweighed any fresh project hedges. available information, such as the statistics regularly
published by the IMF and information extracted from
WORLD OFFICIAL SECTOR SALESPtAND
Tocom
PURCHASES individual central banks’ websites, plus our own
800 proprietary data on undeclared central bank activity,
Net Purchases 532 compiled using information collected through field
600 457
research. Due to the lag that often exists between
400 77
activity taking place and being identified, it is possible
200 Purchases that our estimates will be revised in the future.
Tonnes
0 210
Sales
-200 Last year witnessed strong central bank interest in gold.
Net official sector purchases are estimated to have
-400 -235 -34
-365 totalled 532
100% tonnes
OPACITY TR in 2012,
Dark up by
Red Tints TR 16% against
Light Red Tints 2011 and a
-600 -479 -484 Colour 6 in 1964.100%
-620
Net Sales level last visited From 2010,100% when central banks
-663
Colour 5 80%
-800 in aggregate switched to become net80% buyers for the first
2003 2005 2007 2009 2011 Colour 4 60% 60%
Source: Thomson Reuters GFMS time in over two decades,
Colour 3 40%
they added40% a net 1,066 tonnes
Short
Colour 2 20% 20%
Colour 1
60
GS 2013 CH5.indd 60 21/03/2013 11:53:06

GOLD SURVEY 2013
NET OFFICIAL SECTOR GOLD PURCHASES/SALES

to their bullion holdings through to end-2012, with their
600 Net Purchases
contribution to total gold demand rising to 12% last year. IMF on-market sales
400 Rest of World**
In assessing the impact on the gold price of such a 200
CBGA*
jump in central bank purchases, we would argue that

0
investors seem to have become increasingly accustomed
Tonnes
to growing buy-side interest from the official sector. -200
News and announcements on fresh purchases therefore

-400
appeared to have a less profound immediate impact on
STOCKS
Net Sales
investor sentiment, and hence the dollar gold price, in -600
2012 than that seen in previous years. Having said that, -800
2003 2005 2007 2009 2011
it should be borne in mind that central banks as a whole Source: Thomson Reuters GFMS
were persistent sellers from 1989 to 2009, with their *signatories to the Central Bank Gold Agreements
**all other countries
sales reaching a peak of 663 tonnes in 2005. With a
swing of almost 1,200 tonnes in gold’s supply/demand
equation within just seven years, such buoyant buy-side interest in opportunistic sales outside the CBGA bloc was
interest has undoubtedly helped to lighten investors’ lacklustre.
burden to absorb a massive surplus in the gold market
(defined as mine production plus scrap less non-coin Looking ahead, central banks in the developing world
fabrication). Furthermore, unlike some investors who are expected to continue their moves into gold. Despite
can tend to switch their gold positions quickly, reserve a lack of fresh easing from major central banks in
managers typically maintain a much longer horizon and the near term, monetary policies are likely to remain
therefore are less price-sensitive to short-term price ultra-loose for a while. In addition, we would argue
developments. Official sector interest helped to provide a that the sovereign debt situation in Europe is far from
firm floor for the yellow metal in 2012, particularly during being resolved while budget deficits in the United
heavy investor sell-offs. States and Japan are likely to remain elevated for an
extended period. The yellow metal will therefore remain
a useful means of reserve diversification and a hedge
ANNUAL NET OFFICIAL SECTOR PURCHASES (TONNES) against currency debasement. On the other hand, with
2008 2009 2010 2011 2012 the peripheral European sovereign bond market still
-235 -34 77 457 532 vulnerable to further shocks, sales from the current
Source: Thomson Reuters GFMS CBGA group are set to remain tiny this year. As such, it
is probable that gold purchases by the official sector will
continue at a similar pace to that seen in 2012, at roughly
Turning to reasons behind robust central bank purchases, 100-150 tonnes per quarter, throughout this year.
the key driving force remained the growing desire by
emerging nations to diversify their huge foreign exchange SALES
reserves. Given a lack of material improvements in fiscal
consolidation and a new round of aggressive monetary Last year represented the fifth consecutive year of
easing in many advanced economies, it is not surprising declines in gross official sector sales. From an already
that some developing countries chose to convert a small depressed level in 2011, total disposals are estimated to
portion of their reserves into gold last year. Moreover, have fallen by over 60% to 23 tonnes last year, a mere 3%
gold’s impressive performance over the last decade and of that seen in 2005.
its safe haven appeal certainly drew fresh interest from
countries that had historically maintained a very low level As mentioned in previous Gold Surveys, the marked
of bullion holdings. Indeed, apart from countries that decline in total sales over last few years was primarily
had already made gold purchases in the past, last year driven by a collapse in sales from CBGA members.
also witnessed a couple of countries making their first Consistent with the trend since the start of the third
strategic gold purchases in almost a decade. CBGA in September 2009, Germany remained the only
country within the CBGA group to cut gold reserves in
Last year’s high net purchase figure was also boosted 2012. The five-tonne fall in the country’s bullion holdings
by a further drop in gross sales, as disposals from is believed to have been related to its ongoing official
signatories to the third CBGA remained trivial and coin minting programme.
61
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GOLD SURVEY 2013
GOLD AND OTHER RESERVES (END - 2012)

Elsewhere, a good part of gross sales came from some
countries that have been active in trading gold on both Gold Total %
Reserves Reserves Held in
sides of the market in recent years. For instance, Sri (tonnes) (US$ bn)* Gold*
Lanka sold a combined nine tonnes in January, February, United States 8,134 572.57 75.7%
August and September, but the country was also a Germany 3,391 248.15 72.8%
modest bullion buyer during periods of price weakness, IMF 2,814 n/a n/a
mainly concentrated in the second quarter. The balance Italy 2,452 181.16 72.1%
of total sales emerged from a limited number of changes France 2,435 184.01 70.5%
STOCKS
in reserves of trivial amounts. China, P.R.: Mainland 1,054 3,387.29 1.7%

Switzerland 1,040 531.08 10.4%
PURCHASES Russia 958 537.62 9.5%
Japan 765 1,267.93 3.2%
After a major rise in 2011, gross official sector purchases Netherlands 612 54.69 59.7%
continued to grow in 2012, albeit at a slower pace. At the Source: IMF
moment, our estimate shows that total sales amounted *Gold valued using market prices
to 555 tonnes in 2012, up by 7% on a year-on-year basis.

Three major bullion buyers in 2011, namely the
Russia was the largest announced buyer last year. Philippines, South Korea and Mexico, continued to build
Through a series of monthly purchases (concentrated up their gold holdings over the course of 2012.
in the domestic market via acquisitions of local mine
production), the Russian central bank lifted its gold The Philippines boosted its gold reserves by 34 tonnes
holdings by 75 tonnes during 2012. At year-end, the last year, of which 32 tonnes was acquired in March.
country’s official gold reserves stood at 958 tonnes, While the country tends to buy gold from local mines,
accounting for 9.5% of its total international reserves the scale of such purchases suggests that at least part of
at the market price. While this was already very close these transactions took place in the open market.
to the medium-term target of 10% previously set by the
government, the First Deputy Chairman of the central South Korea expanded its gold holdings by 30 tonnes in
bank confirmed early in 2013 that the country would 2012. Furthermore, it is worth noting that the country’s
continue buying for reserve diversification purposes. central bank recently confirmed another purchase of
20 tonnes in February 2013. Since South Korea’s first
Smaller purchases were also reported by a number of CIS strategic gold acquisition since 1997 in mid-2011, its
countries. Kazakhstan bought 33 tonnes in 2012, in line bullion holdings had grown by 90 tonnes through to end-
with the country’s plan to raise gold’s share of its reserves February 2013.
to 20%. The country also launched the construction of a
new gold refinery in mid-2012, adding enough capacity Mexico, the biggest bullion buyer in 2011, slowed its
to ensure that it can refine all of its gold output for supply pace of gold accumulation last year. By end-year, the
to the central bank. Elsewhere, Ukraine, Belarus and country’s total bullion reserves amounted to 125 tonnes,
Tajikistan also built up their gold reserves in 2012, by up by more than 19 tonnes year-on-year.
seven, five and two tonnes respectively.
OFFICIAL SECTOR DEVELOPMENTS AND QUARTERLY NET PURCHASES IN 2012
Spain seeks Brazil reveals first

banking rescue purchase since 2002 2000
200 IMF data shows
Greek disorderly
Fed launces QE3 an increase in
default surges
ECB launches Iraq’s gold holdings
OMT Programme 1800
Gold Price
150
1600
US$/oz
Tonnes
100
1400
50 1200
0 1000
Jan-12 Mar May Jul Sep Nov
62
GS 2013 CH5.indd 62 21/03/2013 11:53:08

GOLD SURVEY 2013
THE NEW WORLD OF CENTRAL BANK GOLD Under such circumstances, it is not surprising that gold has
PURCHASES drawn increasing interest from reserve managers, given its
impressive price performance over the past decade. Such
A central bank ‘supply shock’ was one of the key features of developments have been given an additional stimulus by the
the market in the 1990s and early 2000s. This had obvious financial turmoil and then the sovereign debt problems in major

consequences for gold prices, not only because of the additional economies. The traditional view of gold as the ultimate asset
volume of bullion that had to be absorbed, but also because has been clearly gained weight, as bullion not only provides
of the impact that these sales had on investor sentiment. The a currency hedge, but carries no default risk. Furthermore,
STOCKS
past few years, however, have seen the pendulum swing all the various empirical studies show that in the very long run a
way from heavy net central bank selling to significant purchases portfolio containing gold could reduce volatility over several
on a regular basis. Such a fundamental change has not only business cycles, which also enhance the metal’s appeal as an
given investor sentiment a strong boost, but has also helped excellent diversification for currency assets.
to provide a solid floor for the gold price over the last couple
of years, particularly at times when investor buying moderated Looking ahead, yields will remain abysmal on traditional
while jewellery demand remained lacklustre. reserve currencies. This means that any reserve managers
keen to boost returns will continue to diversify away from the
As discussed in the Overview, an increasing desire by emerging major international currencies. Furthermore, concerns about
market countries to diversify their huge foreign exchange the sovereign debt problem in mature economies will remain
reserves has remained the dominant driver behind rising central supportive of a continued move into gold. Despite improving
bank buying. Benefiting from a decade of high commodity sentiment towards the euro since last summer, recent political
prices and trade surpluses generated by booming export woes in Spain and Italy with a rise in both countries’ bond yields
sectors, foreign exchanges reserves held by the developing clearly indicates that the region’s debt crisis is still far from
world have swollen to successive record highs in recent years. resolved. Moving across the Atlantic, the threat of a further
Over the same period, given that most of these reserves US credit downgrade also remains real. Even though such a
have been invested in US dollar assets, a marked fall in the development is unlikely to trigger heavy selling of US Treasuries,
American currency means that accumulating reserves has this will at least encourage certain countries to divert a portion
become increasingly costly for many countries. In addition, the of their holdings into other assets, such as the yellow metal.
reluctance of the US government to cut huge fiscal deficits and
the willingness of the Fed to monetise a significant proportion of Nevertheless, it is worth emphasising that the scale of
these deficits have also raised growing worries about the long- purchases by central banks in aggregate is unlikely to be well
run stability of the US dollar. above the current pace (100-150/tonnes per quarter) in the
short term. One important reason for our caution is that the
While there was a gradual shift towards the euro over much gold market is far too small to allow many developing countries,
of the last decade, this process seems to have stalled more especially China, make more than a very modest diversification
recently in response to a rapidly worsening sovereign debt of its foreign exchange reserves. We would expect, instead,
situation in the region. Meanwhile, the scope for a major move further discreet and modestly sized operations to be carried out
to other traditional currencies, such as the yen and the Swiss in the international market, coupled with the purchase of local
franc, is also limited, as many countries now adopt a “weak” mine supply by some countries where domestic mine production
currency policy in order to keep their export sectors competitive. is available.
COMPOSITION OF WORLD OFFICIAL RESERVES MAJOR FOREIGN HOLDERS OF US TREASURY SECURITIES
100 6000
Other
Oil Exporters
Japan
80 5000
China
4000 Rest of World

60 Foreign Exchanges
US$, Billion
3000
%
40
2000
20
1000
Gold
0 0
1980 1985 1990 1995 2000 2005 2010 Oil Exporters 2000 2002 2004 2006 2008 2010 2012
Source: IMF Source: Department of the Treasury
Japan
China
63
GS 2013 CH5.indd 63 21/03/2013 11:53:08

GOLD SURVEY 2013
CBGA: SALES REMAINED TINY IN 2012 As we are in the penultimate year of the third CBGA, there
is already some discussion about whether the Agreement
Sales from signatories to the Central Bank Gold Agreement should be renewed after the current programme expires next
(CBGA) in 2012 were entirely accounted for by Germany where year, especially given very low levels of sales in recent years.
five tonnes were released to provide gold for the country’s However, it is of note that many countries within the group
ongoing official coin programme. From the start of the third are still arguably “overweight” in gold. Once the region’s
CBGA in September 2009, cumulative sales from the group debt situation stabilises, it is possible to foresee a recovery in
(excluding the IMF on-market sales) through to end-2012 stood strategic disposals from certain countries and an upper annual
STOCKS
at 16 tonnes, dominated by Germany. Not only is this massively sales limit should remove market uncertainty. Those arguing for
below the 400-tonne annual quota, but it is only a tiny fraction a renewal of the CBGA will have seen their case still enhanced.
of the amount of gold sold under the previous two CBGAs, when
sales averaged over 390 tonnes per Agreement year. SALES UNDER CBGA
(tonnes) Amount Sold end-2012 % Held

As has been discussed in previous Gold Surveys, the recent lack Under CBGA1 & 2 Gold Reserves in Gold
of interest among CBGA members in launching new gold sales Austria 127 280 55.0%
should be viewed within the context of the considerable decline Belgium 30 227 39.5%
Cyprus1 - 14 62.2%
in the bloc’s bullion holdings since the late 1990s. Indeed, we
Estonia1,2 - 0 4.4%
would argue that those who were inclined to cut gold reserves
Finland - 49 23.7%
may have already done so in the last decade. Meanwhile, gold’s France 589 2,435 70.5%
price performance in recent years has also seen certain central Germany 61 3,391 72.8%
banks become more gold-friendly. This is in stark contrast to Greece1 - 112 82.4%
the late 1990s and early 2000s when anti-gold sentiment was Ireland - 6 18.7%
prevalent following an extended gold bear market, particularly Italy - 2,452 72.1%
Luxembourg - 2 12.1%
given the metal’s non-interest bearing characteristics. In
Malta1 - 0 2.4%
addition, the absence of significant CBGA sales over 2010-12
Netherlands 399 612 59.7%
could also be explained by a worsening sovereign debt situation Portugal 224 382 90.3%
in the Eurozone, as some central banks may have decided Slovakia1,2 - 32 67.4%
to postpone sales plans in order to avoid putting additional Slovenia1 - 3 17.8%
pressure on government bond yields. Spain 242 282 29.7%
Sweden 60 126 12.8%
Switzerland 1,550 1,040 10.4%
Looking at this year, the recent election gridlock in Italy clearly
United Kingdom2,3 352 310 15.7%
indicates that a full recovery in the region’s debt problem is still
ECB 272 502 32.8%
far away. With a gloomy economic outlook, investor sentiment
Total 3,906 12,259 40.9%
in the peripheral sovereign bond market should remain fragile. *Hyphen indicates zero or less than 0.5t.
We would therefore not be surprised if total CBGA sales remain 1 not a signatory to CBGA1; 2 not a signatory to CBGA2;
3 not a signatory to CBGA3; Source: IMF, Thomson Reuters GFMS
subdued for the rest of 2013.
Turning to new buyers in 2012, after keeping its gold included an eight-tonne increase in Paraguay’s reserves
reserves essentially flat from early 2002 onwards, and a rise of less than one tonne from a few countries
Brazil launched its first strategic, albeit modest, gold including Jordan, Mongolia and Greece.
acquisition in September last year and further major
purchases were announced in the following two months. As with previous years, a significant portion of gross
With an increase of 34 tonnes, the country nearly doubled purchases were accounted for by undeclared activities
its gold holdings in late 2012, though the yellow metal’s in 2012, details of which cannot be given due to
share of its total reserves remained tiny at end-2012. confidentiality. At the moment, our estimate shows that
around 300 tonnes of gold were bought quietly by certain
Perhaps more surprisingly, Iraq revealed a rise of 24 central banks, either via open-market transactions or
tonnes in its gold reserves in August last year, its first accumulations of domestic gold mine output. Regarding
purchase since at least 2004, which took its total the drivers behind these purchases, part of these were
bullion holdings to 30 tonnes by end-year. The balance related to sagging confidence in the major international
of central bank buying in the public domain in 2012 currencies, while others reflected growing concerns over
consisted of small increases in gold reserves. These geopolitical risk.
64
GS 2013 CH5.indd 64 21/03/2013 11:53:08

GOLD SURVEY 2013
LEASING RATES SUPPLY OF GOLD LIQUIDITY FROM THE OFFICIAL SECTOR
3.0 5000 2000

Real Gold Price
2.5 12-month
4000
2.0 1500

Lease Rate (%)

1.5 3000
Tonnes
1000
1.0
2000
0.5
STOCKS
5-year 500
1000
0.0
-0.5 0 0
Jan-07 Jan-09 Jan-11 Jan-13 2003 2005 2007 2009 2011
Source: Thomson Reuters GMFS Source: Thomson Reuters GFMS
Finally, it is worth stressing that the IMF statistics showed The marked drain on gold liquidity from the official sector
a massive rise of 164 tonnes in Turkey’s official gold over the last decade or so has not helped to prevent a
holdings in 2012. However, instead of fresh purchases, sharp fall in leasing rates (notwithstanding the spike in
this reflected a change in the country’s legislation in late late 2008 following the collapse of Lehman Brothers).
2011, which allowed local commercial banks to store gold In part, this is related to the rapid increase in supply of
at the central bank’s account. The increase is therefore liquidity from unallocated long positions held by the
not included in our estimates for gross official sector private sector, which has partly offset the ongoing decline
purchases for 2012. in central banks’ aggregate lending book.
MOBILISATION Of greater importance though was lacklustre demand for

borrowing gold by jewellery fabricators in recent years,
At end-2012, outstanding gold liquidity lent by the especially in western markets, itself a result of elevated
official sector remained under the 700-tonne mark, and volatile gold prices, weak consumer spending and
little changed on a year-on-year basis, as a slowdown a limited access to financing capital by the jewellery
in withdrawal of liquidity from the official sector was trade. In Italy, for instance, increasingly tight credit lines
broadly offset by a rise in very short-dated gold lending offered by commercial banks mean that borrowing gold
from some countries. is no longer worthwhile for local fabricators when making
jewellery. Fresh producer hedging activity, another
The dominant drivers behind the ongoing decline in major end-user of borrowed gold, also remained muted
traditional lending were the persistence of depressed in 2012, as expectations for a strong gold price outlook
leasing rates and a flattening yield curve. Central banks gave mining companies little incentive to lock in future
have been increasingly reluctant to engage in new long- revenues against their output. Going forward, given that
term lending, with fresh interest only appearing on the these unfavourable demand-side conditions are likely to
very short-term end of the time spectrum in order to earn persist in the short term, we believe that leasing rates are
some extra yield. Moreover, concerns about counterparty set to remain at very low levels for a while.
risks seem also to have deterred many countries from
entering the gold lending market. Illustrative of this
trend was the decision by the Bundesbank to repatriate GOLD LEASING RATE YIELD CURVES
a large portion of its gold holdings stored in overseas

0.6
vaults. However, a reasonably high proportion of
outstanding loans are on a multi-year basis and so a End-2009
0.4
relatively small percentage is maturing in any given year.
Gold Lease Rate (%)
0.2
End-2010
AVERAGE GOLD LEASING RATES
0.0
1-mth 3-mth 6-mth 12-mth End-2011

2010 -0.08% -0.05% 0.05% 0.34% -0.2 End-2012
2011 -0.15% -0.07% 0.06% 0.32%
2012 -0.15% -0.02% 0.17% 0.45% -0.4
1M 6M 2Y 5Y 9Y
Source: Thomson Reuters Source: Thomson Reuters GFMS
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GS 2013 CH5.indd 65 21/03/2013 11:53:10

GOLD SURVEY 2013
SCRAP SUPPLY year basis. In addition, supply from this key market was
boosted by legislative changes that saw ratios on gold
— Global scrap supply declined 3.1% last year to a four- loans lowered, encouraging consumers to liquidate gold
year low of 1,616 tonnes, as bullish price expectations assets. If we exclude the Indian anomaly from the global
and price acclimation saw heavy falls in several total, world scrap supply dropped a more pronounced 6%
markets, although scrap in the Indian Sub-continent last year.

surged to near record levels.
Elsewhere in the developing world, scrap supply eased,
STOCKS
Last year, global scrap supply defied expectation to slipping 3% in the Middle East, with sizeable flows from
record a surprise drop of 3.1% to reach 1,616 tonnes, in a Egypt (following the near cessation of flows during
somewhat counter-intuitive outcome given the 6% rise the crisis in 2011), offsetting significant falls across the
in the dollar gold price, and not forgetting that the rise in majority of the region. In East Asia, scrap supply dropped
the dollar price was often far exceeded in many countries by over 13% last year, led lower by a sharp drop from
in local currency terms. In addition, the decline last year Japan, although significant falls were widely spread
occurred against a fragile economic backdrop in several across the region, largely due to a depletion of close to
regions. Despite the drop, recycling levels remained at market stocks and, to a lesser extent, expectations of a
historically higher levels, slipping only 7% from the record return to higher levels.
highs seen in 2009.
The drop in scrap supply in 2012 was by no means EUROPE

uniform with sizeable falls in some key markets
countered by a sharp rise in others. Supply from the Scrap supply in Europe dipped by 3% in 2012, although
industrialised world, which has witnessed almost the volume achieved, 388.9 tonnes, was still the second
uninterrupted growth over the last six years on the back highest on record and almost five times that seen a
of the fractured economic environment and firm prices, decade earlier. Furthermore, the region’s share of the
saw supply ease in 2012. Scrap receipts from Europe global total remained steady at 24%.
recorded a smaller drop in supply of 3%, as ongoing flows
motivated by distress selling were apparent. Across the It might surprise that scrap should fall in a year when
industrialised world, price appeared not to be the primary the euro price of gold set a record daily high (October’s
catalyst (the Euro gold price rose 15% last year), with a €44.5/g) and the annual average rose by 15% (the
depletion of near market stocks the main driver for the average sterling price went up a less interesting 7%). It is
decline in these countries. certainly clear that price strength assisted volumes and
this becomes apparent if we look at quarterly volumes;
In contrast, supply from India surged by more than 90% scrap rose by a little over 10% in the first quarter with its
last year to fall just short of the 2009 record level. Price year-on-year gain of 27% in the euro gold price but fell
activity was the chief culprit, with the strong performance in the fourth quarter by around 15% when the gold price
underpinned by surging rupee prices, which rose by over increased by just 6%.
a third (in average terms) in the first half on a year-on-
ABOVE-GROUND JEWELLERY STOCKS BY REGION ABOVE-GROUND JEWELLERY STOCKS & % RETURN OF SCRAP
100 2.5
Other
Above-ground Jewellery Stocks (000 tonnes)
Europe
Scrap %
90 2.0
Middle East
Scrap return rate (%)
80 1.5
North America
70 1.0
East Asia
Jewellery Stocks
60 0.5
Indian
Sub-Continent
50 0.0
2003 2005 2007 2009 2011
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GOLD SURVEY 2013
It might also surprise that scrap should fall in a year still be higher if sold via novel channels such as online or
when the EU’s GDP contracted by 0.3% and at a time television discount operators. Nonetheless, the ongoing
when the economic outlook was still so uncertain. Again, weakness of consumption and the rise in the euro gold
this is not to say that economic distress selling had no price sustained the attraction of the remelt option,
role to play as there were ongoing gains in the likes of particularly for pieces several years old where a profit was

Italy and Spain, while German scrap fell. still possible, and this was felt by some to have proved
material in southern Europe.
Nonetheless, that still leaves us seeking answers to why
the full year’s scrap trended differently to the gold price However, any possible rise from the trade overall looks to
STOCKS
and economic developments. One possibility actually have been outweighed by losses in France. These were
concerns the price; several contacts felt that the drop in a product of the rapid swing in that country from 18 to
price volatility was a contributor to less press coverage, 9-carat pieces which fed through to many in the trade
which in turn meant fewer reminders to individuals about there selling back stocks of the former to fund similar
the possibility of selling back old pieces. or at times higher stocks of the latter. This process was
marked in late 2011 but fell away rapidly over the course
Another and more important factor is the stock of of 2012, thereby helping explain both why France saw the
old jewellery. This fell in 2012 as scrap exceeded largest decline throughout Europe in its scrap last year
consumption and so other factors would be required to and some of the region’s overall quarterly patterns.
lift the percentage of this stock being sold back in order
to raise the absolute volume of scrap being generated. A final consideration relates to rising consumer
However, our calculations suggest that the rate of return knowledge of what is possible and the share of the gold
held stable last year in comparison to 2011 (with both price they can expect to receive from a collector. Some
years seeing levels well in excess of historic norms). The contacts have noted that several aggressive players
fact that this rate failed to rise despite higher prices and (some postal operators for instance) have suffered of late
a recession we feel was largely due to much of the scrap as consumers awoke to such collectors’ high margins.
nearest to market (broken or old-fashioned pieces, single This in turn was said to have led to a period of reluctance
earrings and so forth) having already come out and this to sell as individuals sought out alternative collectors
depletion certainly helps explain the above noted swing who might pay a price deemed fairer.
for year-on-year changes in quarterly volumes. We would
therefore arguably need yet more interesting prices or NORTH AMERICA
renewed hardship for this ratio to rise, although it would
be a mistake to assume that volumes of loosely held Last year, old scrap supply generated in the United
material were now trivial. States is believed to have fallen by a hefty 17%, ending six
consecutive years of increases. We are certainly confident
Another sector to consider is remelt by the trade, since that a drop of substance occurred as significant declines
selling back by retailers and wholesalers can prove were invariably reported by our contacts at pawnbrokers
significant even if overall flows are dominated by sales and independent retailers, the two most important
coming from individuals. The former typically try to avoid supply routes for the recycling of old jewellery. However,
scrapping as margins on slow selling product should the picture is complicated by inflows of scrap from Latin
America, and such receipts are understood to have held
SCRAP SHARE
Ch5 Scrap OFofTOTAL
Share SUPPLY
Total Supply at more stable levels.
50 2000
The absolute level attained for US scrap, 128.5 tonnes,
40 was still, however, the second highest ever registered
Scrap Share of Total Supply (%)
1500 basis our records and still more than twice the volume
30 seen in 2005. That said, the scale of the rise over prior
Scrap Share of Total Supply
1000 years and the total reached are notably smaller than is
20 the case for Europe. This partly reflects the fact that the
United States has a far smaller pool of plain, high carat
500
10 jewellery (the pieces most likely to be recycled), even
Real Gold Price
though the total pool of jewellery is not dissimilar in size.
0 0
1991 1996 2001 2006 2011
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GOLD SURVEY 2013
TABLE 6 - SUPPLY OF GOLD FROM FABRICATED OLD GOLD SCRAP
(tonnes) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Europe
Italy 42.8 38.1 46.7 53.5 57.1 61.0 78.0 98.0 116.5 122.6
UK 4.3 4.2 4.5 10.7 11.7 38.7 59.4 69.8 76.0 69.0
Germany 5.8 5.9 7.6 11.4 18.8 24.4 32.7 44.1 45.5 40.3
Spain 5.5 4.1 3.7 6.1 5.8 10.6 20.1 31.9 32.7 36.0
France 6.2 8.6 12.1 18.6 16.8 21.2 24.9 29.2 40.3 33.5
Belgium 1.9 1.9 1.6 3.4 3.3 4.6 7.6 10.2 11.4 10.8
STOCKS
Poland 2.9 2.8 2.6 3.2 2.9 3.0 3.8 4.4 7.9 7.7
Austria 3.7 3.6 3.4 3.9 3.7 4.7 6.4 7.9 8.0 7.6
Switzerland 3.7 3.9 3.8 4.8 4.8 5.3 6.5 6.3 6.5 6.2
Yugoslavia (former) 2.2 2.3 2.2 2.6 2.2 2.4 3.3 3.9 3.9 3.8
Czech & Slovak Republics 1.7 1.8 1.9 2.1 2.1 2.2 4.2 3.5 3.6 3.5
Other Countries 8.4 8.5 9.7 16.4 15.8 17.1 22.6 38.1 49.0 48.1
Total Europe 89.1 85.7 99.8 136.5 144.8 195.2 269.3 347.4 401.2 388.9
North America
United States 67.6 62.2 60.4 81.0 84.5 93.5 124.0 143.0 155.6 128.5
Canada 5.7 5.4 5.0 7.5 6.3 6.9 9.2 11.1 10.8 9.8
Latin America
Mexico 6.0 5.7 7.2 12.0 17.6 28.1 50.3 58.0 66.7 62.5
Brazil 9.0 6.6 4.3 6.8 6.4 7.5 11.4 16.1 22.2 24.6
Colombia 3.6 3.7 3.8 4.1 4.3 5.1 6.6 8.1 8.7 9.5
Venezuela 2.8 3.3 3.7 4.3 5.7 6.0 7.1 8.3 8.7 8.1
Argentina 3.9 5.0 3.6 5.1 4.4 4.4 5.9 5.6 5.8 6.1
Other Countries 4.4 4.2 4.6 6.1 7.9 9.2 16.1 21.9 20.7 20.4
Middle East
Turkey 64.0 62.0 67.7 82.5 71.5 199.0 217.2 122.0 78.0 72.3
Egypt 98.0 71.3 72.7 77.5 56.5 35.8 65.0 48.0 47.6 53.6
Iraq & Syria 11.5 11.5 14.4 23.9 19.0 21.9 35.6 36.7 36.0 33.0
Iran 15.8 13.4 16.1 21.9 23.1 26.0 32.2 32.7 32.4 32.9
Lebanon 7.5 6.0 6.6 9.9 4.9 6.2 15.1 19.7 14.9 12.7
Jordan 7.5 5.5 4.6 8.7 7.0 5.6 9.2 12.7 10.8 9.7
Kuwait 14.4 11.9 12.4 21.8 9.8 10.2 10.4 8.5 7.7 6.1
Israel 7.6 7.1 5.2 11.4 5.0 6.1 6.6 8.3 7.0 5.6
Oman & Qatar 3.6 2.3 3.1 6.1 5.7 6.4 7.3 6.7 5.4 4.9
Bahrain 1.7 1.9 1.8 3.8 3.8 3.8 4.7 4.5 4.0 3.5
India 132.0 107.0 94.0 80.0 73.0 89.5 115.5 81.0 58.5 113.0
Pakistan & Afghanistan 34.3 32.5 30.9 33.4 31.7 35.5 53.9 50.4 42.7 47.2
Bangladesh & Nepal 3.9 3.3 3.2 5.1 4.2 4.5 4.9 4.5 4.3 4.0
Other Countries 1.8 1.8 1.8 2.3 2.8 3.0 2.7 2.4 2.3 2.3
Total Indian Sub-Cont. 172.0 144.7 129.9 120.8 111.7 132.5 176.9 138.3 107.8 166.5
East Asia
China 28.5 34.7 41.7 44.6 41.6 70.3 116.3 133.2 124.7 119.7
Indonesia 71.8 63.8 67.0 71.9 68.0 72.5 79.9 64.9 58.3 49.0
Thailand 50.1 19.0 12.4 19.1 37.4 51.7 66.0 44.7 52.4 43.6
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GOLD SURVEY 2013
TABLE 6 - SUPPLY OF GOLD FROM FABRICATED OLD GOLD SCRAP (TONNES)
(tonnes) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Japan 24.6 28.6 24.5 27.0 25.9 53.6 35.3 43.9 55.1 42.2
Vietnam 6.6 5.9 7.8 8.3 9.0 12.2 51.5 49.8 41.1 36.4
Malaysia 9.9 11.5 11.0 19.1 16.4 18.4 19.3 22.2 19.2 17.0
Taiwan 10.9 16.1 13.0 18.4 18.5 33.6 34.9 27.5 19.5 15.4

South Korea 22.3 26.2 17.5 30.7 13.7 20.5 21.3 18.1 17.4 13.9
Singapore 4.1 3.5 3.3 4.2 5.0 5.4 6.1 5.8 8.9 7.4
Hong Kong 8.3 7.8 6.5 7.1 7.5 8.0 8.4 8.0 7.6 6.8
STOCKS
Philippines 1.8 1.2 1.1 1.1 1.1 1.4 2.2 1.9 1.7 1.5
Other Countries 1.8 1.7 2.0 2.4 2.2 2.3 2.5 3.3 3.1 2.4
Total East Asia 240.6 219.9 207.8 253.8 246.3 349.7 443.7 423.1 408.9 355.2
Africa
Libya 3.7 4.0 4.6 9.7 9.5 10.4 13.4 15.8 16.6 14.4
Morocco 6.3 5.3 5.9 6.3 6.3 6.4 9.7 9.3 12.0 11.3
Algeria 2.5 2.5 2.7 2.8 3.4 3.6 5.8 6.1 7.9 7.6
Other Countries 4.0 4.5 4.5 11.0 8.5 8.9 12.2 12.7 14.7 14.2
Total Africa 16.5 16.3 17.7 29.8 27.6 29.2 41.1 43.8 51.2 47.4
Oceania
Australia 2.6 2.4 1.9 1.5 1.5 2.0 3.1 6.8 12.0 10.2
Total Oceania 2.6 2.4 1.9 1.5 1.5 2.0 3.1 6.8 12.0 10.2
CIS
Russia 18.6 18.1 18.9 19.3 20.7 21.4 28.7 26.4 23.5 24.2
Other Countries 4.8 4.6 4.6 4.8 4.7 5.3 6.6 6.4 6.6 7.0
Total CIS 23.4 22.7 23.5 24.0 25.4 26.7 35.3 32.8 30.1 31.2
World Total 991.0 881.4 902.4 1,132.8 1,004.9 1,350.1 1,735.2 1,723.2 1,668.5 1,616.1
Another key factor behind generally lower volumes than One factor behind this is the continued absence of
in Europe is that the United States has suffered far less notable remelt by the US distributive trades. This in
economic trauma. However, improvements last year in turn largely reflects many years’ destocking across the
the US economy were slight, with unemployment staying retail chain caused by the relentless decline in jewellery
stubbornly high, and so it would be wrong to ascribe too consumption. This was reinforced by the absence of a
much to this as a factor in explaining the marked fall in price shock, as witnessed in prior years, due to the gold
scrap supply. price, basis the annual average, only rising by 6% and
as a result of price volatility falling. This too would have
We would instead apportion more of the explanation to moderated the incentives for consumers to sell, and is in
the depletion of near-market reserves, typically those stark contrast to other markets, with the euro price rising
pieces, often inherited, that are no longer considered by 15% and the rupee price by 24%. A final apparent
desirable and those that are broken. The depletion driver of the decline is less intensive advertising by scrap
argument is certainly not undermined by scrap supply collectors.
reportedly turning weak as we moved into the fourth
quarter (with volumes staying weak in the first quarter
of 2013). The stock of old jewellery would certainly
have continued falling last year, as scrap continues to MIDDLE EAST
outpace the accumulation of reserves through jewellery
consumption, although the dip in stocks for 2012 in In Turkey, scrap supply retreated for the third year in
isolation at around 20 tonnes cannot explain much of succession, declining over 7% to an estimated 72.3
the drop in scrap. It was instead the decrease in the tonnes, an outcome almost 145 tonnes below the record
percentage of this stock of jewellery coming back that levels witnessed in 2009. Although most markets within
explained more of the decline. the region posted lower recycling volumes (with the
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GOLD SURVEY 2013
exception of Egypt and Iran), there were two key reasons ground, scrap supply in the second half increased by
why Turkey’s performance was somewhat unexpected. almost 20% year-on-year.
First, local gold prices rose by 14%, comfortably
exceeding the 6% lift in dollar gold. However given that Egyptian scrap flows rose by 13% or almost 6 tonnes in
Turkish lira (TL) prices failed to surpass the record level 2012 to 53.6 tonnes. This was the largest percentage
set in September of 2011, consumers, while still bullish gain in the region, with the average for the remainder
on their price expectations, appeared willing to wait of the Middle East (excluding Egyptian flows) declining
for a return to these previous highs before liquidating by 6% year-on-year. This counter trend outcome can
STOCKS
remaining gold assets. be explained by the near collapse of the Egyptian gold
market during the first half of 2011 as the political
Secondly, 2012 saw the introduction of a formal gold buy uprising there saw most in the gold trade temporality
back scheme by several local banks (in conjunction with close operations. While the impact of these closures
local refineries) that set out to mobilise the metal (mainly were not as severe on the scrap buyers as those in retail,
coins and old jewellery) by encouraging consumers to it certainly impacted on annual recycling volumes and,
place items into gold deposit accounts. This involved with 2012 returning to a more stable political landscape,
heavily promoted gold buy back days at local branches scrap flows picked up and were driven more by an 8%
that offered a lower discount on recycled gold than that jump in the Egyptian pound gold price than distress
available from their local jewellery retailer. Research selling, as was case the previous year.
meetings last year found that, while scrap flows from this
source are rapidly increasing (from a low base), volumes Saudi Arabian scrap supply was down by 10% last year to
to this point remain relatively modest. a four-year low, taking the 2012 level 75% below the peak
reached in 2006. The hefty decline since the record flows
Not surprisingly, Turkish scrap supply closely mirrored may appear counter-intuitive given the gold price has
the trend of the lira gold price. Following a broadly risen by more than $1,000/oz from this period. However,
sideways trading pattern in January, the domestic gold a large proportion of close to market gold assets was
price briefly surpassed TL 100/g in late February. This liquidated during first wave of higher gold prices and,
short-lived incursion delivered a brief wave of recycling due to declining jewellery consumption, the supply chain
that soon abated as gold lost momentum, trending down has never been fully restocked. Secondly, there remained
thereafter and limiting gold recycling for the remainder an expectation of yet higher prices so consumers have
of the half. To this end, scrap supply in the first six held on to gold assets, with prices above $1,800 required
months, according to our estimates, slumped by almost (in the case of last year) to tease out further liquidations.
a quarter on the previous year. In contrast, the second In the first six months of the year, there was a marked
half saw scrap flows pick up as gold tracked higher, again drop in scrap receipts, with supply falling by 15% during
breaching the TL 100/g level in early September. This this period. However, in the second half, as gold prices
time, the elevated price level was not just a brief spike pushed higher, there was indeed a price related rise in
and consumers were able to capitalise, liquidating assets recycling, though compared to previous price spikes
accumulated earlier during the year at lower prices. recycling remained at moderate levels.
Despite a decline in the final quarter, as gold again lost
WORLD SCRAP SUPPLY WORLD SCRAP SUPPLY
2000 2000 1500

Other Industrialised Developing
Real Gold Price
North America countries countries
1600 1200
Europe
1500
Indian SC
1200 East Asia 900
Tonnes
Tonnes
1000
800 600
500
400 300
Middle East
0 0 0
2003 2005 2007 2009 2011 2003 2005 2007 2009 2011
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GS 2013 CH5.indd 70 21/03/2013 11:53:12

GOLD SURVEY 2013
INDIAN SUB-CONTINENT in mid-September teasing out some of the tightly held

assets. Thereafter, scrap flows were muted as consumers
Indian scrap supply doubled last year to a new record waited for the next opportunity to profit from a return to
of 113 tonnes (although we have revised downwards higher prices.
this figure by 19 tonnes since the release of Gold Survey-

Update 2). Last year’s sales were mainly seen in a Looking firstly at Japan, we estimate scrap flows fell by
Rs.30,000-Rs.30,500/10g range, thus pushing scrap 23% last year to an estimated 42.2 tonnes (the largest
to 30 and 34 tonnes in the second and third quarters percentage drop in the region). Importantly, this followed
respectively. However, as prices continued to rally, selling record levels in 2011, which may well have exhausted the
STOCKS
interest waned on expectations that prices would test available pool of close to market supply. Similar declines
Rs.35,000/10g and this largely explains the drop in sales of close to a fifth were recorded in South Korea and
during the fourth quarter. Discussions with dealers and Taiwan while scrap volumes in Thailand declined by an
refiners revealed that people largely sold old jewellery estimated 17% last year. For the latter, a drop of almost
that was either clearly out of fashion or damaged, and 25% year-on-year in the second half dragged down
most of the pieces were at least a decade old. the annual total as declining prices in the final quarter
generated a sharp fall in consumer recycling.
The drought that hit Indian agriculture added to scrap
as farmers sold their holdings for survival and to trim Elsewhere, Indonesian scrap volumes retreated for the
debts. Also, a legislative change in March 2012 by the third year in succession, declining by an estimated 16%
Reserve Bank of India (RBI) reduced the options for last year to a ten-year low. Moreover, the declining pool
poorer households; the RBI reduced the cap on loan-to- of high carat jewellery, which is a function of the rapid
value ratios for gold jewellery applicable to non-banking migration to low purity jewellery across the country, is
finance companies from 90% to 60%. With loan interest now impacting on the fine gold volumes derived from
rates of around 18-21%, together with only modest price scrap. In Vietnam, Thomson Reuters GFMS estimate
expectations, the lower cap encouraged consumers to scrap volumes fell 11% last year. Despite the official
sell back old jewellery, rather than take a loan to make dong gold price rising 6% and black market prices by
up the shortfall created by the new legislation. significantly more than this, consumers were reluctant
to take advantage of higher prices to liquidate their gold
Looking ahead, there are growing consumer expectations assets; uncertainty surrounding the domestic currency
of an eventual fall in prices and this could result in a rise and rumoured gold ownership legislative changes saw
in scrap on any brief rally in prices. Another factor on many consumers hold on to their gold.
the radar is the proposal by the RBI to monetise the gold
holdings in the hands of the public, the success of which Despite the 4% increase in local gold prices, Chinese
will largely depend on the scale of household gold added scrap, largely dependent on jewellery recycling, declined
to supply. by 4%, reaching a total of 119.7 tonnes. The rising gold
price in the first quarter generated a healthy 5% year-on-
EAST ASIA year increase in recycling as the price exceeded RMB 350
per gramme. However, with prices easing and remaining
East Asian scrap supply declined by an estimated 13% range bound, scrap supply weakened as consumers
in 2012, slipping for the third year in succession to 355.2 waited for a return of higher prices. Scrap volumes
tonnes. The fall may appear counter-intuitive given began to grow again in the third quarter, delivering a
the 6% rise in the dollar gold price. However, the price brief surge in profit taking when gold traded well above
rise was largely offset by a shrinking pool of available RMB 350/g. As the price dropped at the end of the year,
near market stocks in some countries and expectations scrap volumes fell in tandem with it.
in many markets that prices would return to previous
highs, which saw many consumers postpone recycling.
Scrap receipts in the first half of the year were down
only marginally, with a modest drop in China ruling out
a greater decline. The second half delivered a drop of
20% year-on-year as weaker prices in the main saw scrap
volumes decline with only the brief foray above $1,770
71
GS 2013 CH5.indd 71 21/03/2013 11:53:12

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002948_Ad3_v2.indd 1 02/01/2013 16:16

GOLD SURVEY 2013
6. GOLD BULLION TRADE

• Last year saw the emergence of an interesting new EUROPE
bullion flow, that of supplies going into Turkey (whose
registered imports doubled), prior to shipment to Dubai as — Swiss bullion imports are believed to have fallen
part of Iran’s ‘gas for gold’ deals. marginally last year, while exports were stable.
— UK bullion imports are estimated to have risen
• Swiss bullion imports look to have fallen marginally notably while exports fell considerably.
last year, with the United States remaining the largest — Strong scrap and weak fabrication demand meant
reported supplier. Exports are thought to have been stable Italy remained a global net supplier.
despite reduced shipments to India, Hong Kong and
Thailand.
The rise in scrap and continuing slide in fabrication,
• Misleading or absent official data makes analysis which has been largely due to the collapse in Italian
complex, but it is understood that UK bullion imports rose jewellery offtake, has resulted in Europe ceasing to be
notably last year, while exports fell heavily. less major structural deficit area. Indeed, without the
approximate 200-tonne contribution from bar hoarding,
GOLD BULLION TRADE
• Despite total fabrication demand falling and scrap a notional surplus would have risen in 2012 as scrap
supply increasing, official Italian bullion imports rose 11% almost hit 390 tonnes (compared to just 89 tonnes
last year. This resulted in Italy continuing to supply the in 2003) and total fabrication demand fell 9% to 253
world market with gross exports increasing to 194 tonnes. tonnes (compared to 586 in 2003).
• US bullion imports fell markedly, primarily owing to Despite the above, bullion imports into Europe remain
lower cross-border trade with both Canada and Mexico, substantial since it is home to both the London terminal
whereas exports rose to a fresh all time high on the back of market and to some of the world’s largest refineries.
firmer shipments to the Middle East, India and East Asia. The latter means that in addition to refined output
(mainly from the CIS and South Africa), Europe takes in
• Canadian exports of gold bullion dropped 15%, sizable volumes of doré (mainly from west Africa and
following two years of exceptional strength. Imports the Americas) and scrap (largely from the Middle East
retreated by almost 10% chiefly on account of lower inflows and East Asia). The resultant surplus supplies often
from South America. then ends up as loco-London investment or exports to
fabrication centres such as Turkey or India.
• Gross Indian bullion imports fell 11% to a three-year low
of 1,071 tonnes despite the contribution from the re-start of Swiss bullion imports as reported by origin increased
unofficial flows. marginally (by less than 1%) in 2012, reaching 1,215
tonnes on a gross weight basis. However, if we look at
• The above meant that bullion imports into the Middle the figures on a calculated basis, volumes increased
East continued to increase in 2012 mainly due to higher by 3% to around 770 tonnes. Part of the gap between
volumes going into Turkey and Dubai. Bullion exports
firmed as well mainly on strong shipments to Switzerland. ITALIAN OFFICIAL BULLION IMPORTS’ SEASONALITY
15
• Strong Chinese imports dominated bullion flows in

East Asia, while weaker fabrication demand and investment 2010
2012
stalled imports elsewhere. A drop in surplus scrap supply 10
pushed regional bullion exports down.
Tonnes
2011
• In Australia, bullion exports to India fell 30% last year
5
to 58 tonnes while exports to mainland China surged 300%
to over 105 tonnes, suppressing shipments to the United
Kingdom.
0
Jan Mar May Jul Sep Nov
Source: ISTAT
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GOLD SURVEY 2013
these two weights can be explained by imports of silver- that do not disclose bullion movements are understood
containing doré from the likes of Argentina and Peru. to have been considerable, perhaps to the extent of
Much of the increase was due to higher inflows from Italy generating a rise in UK imports last year.
but the origin supplying the greatest volume, however,
remained the United States at almost 250 tonnes. Trade data in regards to UK exports again showed
However, as ever, not all countries report or fully disclose a divergence between volumes reported by the
bullion shipments and we feel true inflows were most UK authorities and by those in the metal’s various
likely far higher, perhaps double the above calculated destinations; the former’s figures, for instance, show
number. Sizeable volumes of material in scrap form just four tonnes (down 62%), whereas the latter (on a
is likely to have been received from East Asia and the calculated basis) show 42 tonnes (up 9% on 2012). The
Middle East, with indications that these grew in scale. bulk of this material went to Canada and Hong Kong.
With such information on trade patchy and contradictory,
Bullion exports on a calculated basis from Switzerland it is difficult to draw too much by way of conclusion from
are estimated to have made a significant plunge of 15% the above. However, industry sources suggest that true
to around 900 tonnes last year on the back of reduced inflows are more likely to have fallen considerably.
shipments to such destinations as India, Hong Kong and
Thailand. However, as is the case with import statistics, Basis calculated weights, official Italian bullion imports
real exports are likely to be considerably higher than in 2012 rose by 11% to 97 tonnes. This outcome might
GOLD BULLION TRADE

official figures indicate, mainly due to the exclusion surprise given that total fabrication demand fell by 7%. In
of several destinations from the trade statistics. We addition, with domestic scrap rising by 5% to 123 tonnes,
therefore estimate that when taking this under-reporting a clear apparent surplus is created, with fabrication only
into consideration, Swiss export volumes most likely reaching 96 tonnes and investment having been limited.
stayed stable in 2012 at a substantially higher number This clearly necessitated sizeable exports, which rose by
than the above 900 tonnes. 18% to 194 tonnes and in the process kept Italy as a net
supplier of bullion to the world market.
Last year official UK import data showed a largely
flat total reaching 32 tonnes. However, if we look at This all stands in marked contrast to the situation a
exports to the United Kingdom as reported by origin, the decade or so ago when Italy’s net imports stood at well
picture changes considerably. Indeed, on a calculated over 400 tonnes. This turnaround in the main reflects
basis, imports fell 10% year-on-year, but to a volume the painful contraction in its jewellery industry, but it also
15 times larger of around 490 tonnes. In regards to reflects the success of its refining industry. This is shown
the composition of suppliers, the picture remains fairly by the substantial and growing volume of scrap that is
similar to the year before, with the United States and imported into the country. Clues to this are that the gross
Canada supplying the bulk (around three-quarters) of weight of imports (110 tonnes in 2012) is notably higher
the material. Volumes from Germany, Spain and Mexico than the fine weight and that the third, fourth and sixth
all recorded significant improvements, with inflows of most important origins are Spain, Poland and Portugal
material from the latter increasing by almost 60% last respectively; none of these have mine production of
year. However, volumes coming from those countries consequence nor widely traded bullion brands (the origin
ITALIAN OFFICIAL BULLION IMPORTS AND EXPORTS CIS BULLION EXPORTS

Italian official bull imp and exports
25 300
Imports Exports 250

20
200
15
Tonnes
Tonnes
150
10
100
5 50
0 0
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 2003 2005 2007 2009 2011
Source: ISTAT
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GOLD SURVEY 2013
can get recorded basis a bar or coin’s stamp, rather than CANADIAN OFFICIAL BULLION EXPORTS
its immediate country of provenance). Some 75% of 400 Other
exports go to Switzerland, often as a result of imported East Asia
scrap needing to be re-exported for VAT to be reclaimed. Europe

300
USA
None of the above figures are believed to be materially
affected by shifts to or from the unofficial sector as the
Tonnes
latter’s volumes are said to have remained modest. 200
Turning to Russia, last year saw local gold supply (mine 100
production combined with recycling) rise by 6% year-
on-year to almost 209 tonnes. This total comfortably
0
exceeded domestic fabrication, which posted a 9% 2003 2005 2007 2009 2011
year-on-year increase, with volumes rising to 49 tonnes. *Calculated quantities based on reported export values.
Nevertheless, our information indicates that Russian
exports of gold bullion saw a modest drop last year, In the United States, reduced volumes from
primarily due to a marked decline in shipments to neighbouring Mexico and Canada, which were roughly
Europe, most notably Italy. This suggests that much one-tenth and one-third lower respectively, was the
of the excess metal was absorbed within the country. overriding influence behind a modest contraction in the
GOLD BULLION TRADE
Indeed, it appears that a large share of the surplus country’s gross imports in 2012. Nevertheless shipments
bullion was accounted for by official sector purchases. from Mexico, which spiked in 2009 coinciding with a
drawn-out production stoppage at the Met-Mex refinery
NORTH AMERICA in Torreón, have remained at historically elevated levels
subsequent to the restart of operations. This in our view
— US bullion exports edged up to a fresh all time high, has been reflective of growing supplies of mine doré
mainly on the back of firmer shipments to the Middle as well as rising scrap volumes from Mexico in recent
East, India and East Asia. Imports slid fractionally, years. Providing a large offset to the above-mentioned
primarily owing to lower cross-border trade with both weakness, US imports benefited modestly from both the
Canada and Mexico. increased capture of mine doré and re-routing of doré
— Canadian exports of gold bullion dropped 15% trade with a number of Latin American countries, most
following two years of exceptional strength. Imports notably Colombia and Peru. We also understand that a
fell back by almost 10% chiefly on account of lower fair volume of scrap from South America was shipped to
inflows from South America. the United States for refining.
From the record levels of North American gross bullion The United States’ exports of bullion were fractionally
trade seen in 2011, flows eased by around 4% in 2012, on higher in 2012, setting a new record volume, but, at
both the imports and exports side, with reduced inbound the country level, flows were mixed. Firmer shipments
and outbound shipments from Canada behind much of to the main demand centres, India and Hong Kong,
the weakness year-on-year. lifted the country’s outbound shipments into positive
US OFFICIAL BULLION EXPORTS* US OFFICIAL BULLION IMPORTS*
700 400
Other Other
East Asia 350 Peru
600
UK Colombia
300
500
Switzerland
250
400
Tonnes
Tonnes
200
300
150 Canada
200
100
100 Mexico
50
0 0
2003 2005 2007 2009 2011 2003 2005 2007 2009 2011
*Calculated quantities based on reported export values. *Calculated quantities based on reported import values.
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GOLD SURVEY 2013
growth territory. Exports to Hong Kong, itself often MIDDLE EAST

a proxy for underlying Chinese demand, rose by 14%,
while shipments to India from the United States more — Total Middle East bullion imports continued to
than doubled year-on-year. We believe part of this increase in 2012 mainly due to higher volumes going
strength can be attributed to a routing of low grade mine into Turkey and Dubai.
doré trade through the United States from third party — Bullion imports into Turkey surged last year primarily
countries, coupled with higher formal flows ahead of driven by the indirect use of gold to pay for gas
India’s widely anticipated gold import duty hikes in early imports from Iran.
2013. Shipments to the United Arab Emirates (UAE)
doubled last year, albeit from a comparatively low base. Last year, Turkish bullion imports jumped by an
Offsetting much of the above-mentioned strength was a estimated 17% to 147 tonnes (on a calculated basis).
20% drop in exports to the United Kingdom and a sharp Shipments registered at the Istanbul Gold Exchange
fall in shipments to Thailand after a strong year in 2011. (IGE) almost doubled to 120 tonnes, with the disparity
due to the imports of lower purity gold being captured
Imports into Canada fell back by around one-tenth in in the former number while being excluded from the IGE
2012, chiefly as several key Latin American gold trade figure as the shipments were below 995 purity.
partners lowered shipments to Canada (including Peru,
Argentina and Chile). These collectively exported around Given Turkish fabrication demand was broadly stable
GOLD BULLION TRADE

one-fifth less bullion to Canada year-on-year. In the case last year there remained another central reason that
of Argentina, this appears to be associated with a drop explains the sizable inflows. Looking back, the jump in
in mine production. However, providing some offset imports was generated by the much publicised ‘gas for
to these lesser flows, imports from the United States gold’ transactions that saw Turkey pay for its imported
increased markedly and, in spite of continued challenges natural gas from Iran in Turkish Lira (TL) because
in exporting mined doré from Egypt, Canada’s inflows sanctions prevented it from paying in dollars or euros.
from there were higher, which ties in with production These funds were then used to buy gold in the domestic
continuing to ramp up at Sukari. market, fuelling demand for the yellow metal, before
being shipped mainly (and largely hand carried) to Dubai
Gold exported from Canada fell comparatively sharply, to be sold for dirhams or dollars with these funds then
by almost one-sixth, including lower shipments to allegedly returned to Iran.
the terminal market in the United Kingdom and to
Switzerland. However, the stand-out contributor to the In terms of key origins, shipments from the UAE, at an
fall was lower dispatches to the United States, which estimated 60 tonnes, dominated supply at over 40% of
were one third lower than in 2011 and the lowest since the total, replacing Switzerland as the primary source of
at least the mid-1990s. This coincided with elevated net 995 investment bars. Moreover, deliveries from Zurich,
outflows of gold from the United States last year, the vast while easily remaining in second position, declined 18
majority of which went to Europe and the key consumer tonnes from the previous year. Finally, imports from
markets of Hong Kong, India and the UAE (mainly Dubai). South Africa saw a marked decline, retreating by almost
two-thirds.
MIDDLE EAST BULLION IMPORTS TURKISH

Ch6 TurkeyBULLION IMPORTS
Bullion Imports AND EXPORTS
and Exports
1000 150
Saudi Arabia Other
Turkey Egypt Exports
125
800 Dubai*
100
600
Tonnes
Tonnes
75 Imports
400
50
200
25
0 0
2003 2005 2007 2009 2011 Q1-07 Q1-08 Q1-09 Q1-10 Q1-11 Q1-12
*excludes round tripping and scrap related import
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GOLD SURVEY 2013
The bullion outflows last year were even more impressive, in 2012, surging on several occasions as prices peaked.
augmented by the aforementioned Iranian trade and The resultant surplus metal was largely exported to the
subsequent exports. According to available customs UAE and South African refineries. In addition to these
data, Turkish bullion exports jumped by more than 225 spasmodic flows, gold shipments from the Centamin
tonnes in 2012, reaching an estimated 257 tonnes. Based owned Sukari gold mine increased last year as production
on this trade data, direct exports to Iran surged to 125 from this operation increased by over a fifth to 8.2 tonnes,
tonnes. However, field research last year indicated much with this metal also shipped to foreign refineries.
of this material may have been incorrectly categorised
and was more likely to have been shipped to the UAE. Bullion shipments into the United Arab Emirates
The official export figure to the UAE (chiefly Dubai) (UAE), chiefly Dubai as the entrepôt for the Middle East,
was almost 90 tonnes, though this figure could have recorded a surge in imports last year, largely on the
perhaps been underreported. Elsewhere, shipments back of flows emanating from Turkey. Thomson Reuters
to Switzerland surged on the back of these flows as GFMS estimate genuine imports (excluding scrap, mine
surplus gold was purchased in the domestic market and supply, and the arbitrage linked medallion trade) jumped
redirected to refineries in Zurich (often in large bars), almost three fold in 2012, reaching a record level. Given
while direct shipments to the United Kingdom doubled. both jewellery fabrication and investment demand in the
region were largely weaker and, for the most part, Indian
Looking at this year, tighter US sanctions that limit demand was restrained, most of this additional flow was
GOLD BULLION TRADE
what Iran can purchase with the proceeds of their gas redirected back to Switzerland or the United Kingdom.
sales have seen bullion flows into and out of the country
subside from the heady volumes witnessed last year. In addition to the jump in the imports of good delivery
Trade in Turkish hallmarked bars in Dubai is already bars it’s worth mentioning the significant inflows of scrap
drying up with many traders reluctant to take these bars, and supply from artisanal origins across Africa. In the
wishing to avoid any risks associated with this trade. last few years, these flows have surged, driven mainly by
couriers hand carrying less the twenty kilograms per trip.
Egyptian bullion imports recovered in 2012 following the It was common place to see these traders lined up in the
near collapse of the fabrication industry in 2011 at the gold souk, each carrying a suitcase of alluvial or artisanal
height of the political unrest. Despite the healthy rise gold waiting to sell. The largest of these flows last year
in inbound shipments, Egypt remained a net exporter of was probably those from Sudan, though considerable
gold last year as a significant rise in the level of domestic imports from Tanzania, Ghana, and Suriname also
scrap supply easily serviced the requirements of the contributed to a total of several hundred tonnes.
recovering jewellery fabrication sector, limiting the need
for fresh bullion imports. The genuine bullion shipments (built around the
estimated 85 tonnes from Turkey) were of course
Most metal flows associated with Egypt were primarily interwoven with scrap gold, the above-mentioned
on the export front as the 8% increase in the Egyptian artisanal supply, and the round tripping flows from
pound gold price teased out tightly held gold assets. India and Pakistan. Thomson Reuters GFMS estimate
Scrap volumes are estimated to have risen almost 13% that these round tripping or arbitrage flows from India
TURKISH BULLION IMPORTS’ SEASONALITY DUBAI BULLION IMPORTS*
40 150 2000
Gold Price
35
30 2012
100 1500
25
Tonnes
Tonnes
US$/oz
20
2011
15
50 1000
10
5
2010
0 0 500
Jan Mar May Jul Sep Nov H1-07 H1-08 H1-09 H1-10 H1-11 H1-12
Source: Thomson Reuters GFMS Source: Various
*excludes various round tripping and scrap related imports
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GOLD SURVEY 2013
exceeded 170 tonnes last year (a slight decline on 2011 Detailing Indian bullion imports can be a useful exercise
levels). In previous years, healthy demand in India saw only if we strip out the round tripping and genuine
most of this material returned from its origins. However, jewellery exports as it helps derive net imports. Last year
a significant drop in Indian demand in 2012 saw most of round tripping was estimated at 170 tonnes, down from
this gold redirected to Zurich or to lesser extent Turkey. 189 tonnes in 2011. The drop in this trade was a result of
a legislative clause, which forced firms importing metal
Touching briefly on exports, we estimate shipments without an export order to first pay duty outright, export
to Switzerland exceeded 275 tonnes in 2012, while the product and then place a claim on the duty paid by
deliveries to India fell 30% year-on-year to 185 tonnes. producing a proof of export Holding back this portion
The only other major destination from the UAE was impacted profitability on this already thin margin trade.
Turkey with exports to this market estimated to have That said, genuine exports in the form of jewellery rose
exceeded 60 tonnes last year. by 15% in 2012 to 44 tonnes, with the United States and
Middle East being the largest markets.
A healthy rise in investment demand coupled with a
material fall in scrap supply explains the jump in bullion Moving to net imports, these declined by 13% to 857
imports to Saudi Arabia last year. Thomson Reuters tonnes in 2012; this includes unofficial imports of 102
GFMS estimate that fresh bullion imports rose by more tonnes- a topic discussed later in this chapter. Moreover,
than 45%. Direct shipments from Switzerland jumped the drop last year was largely a result of two increases
GOLD BULLION TRADE

almost 50% last year, while kilobar deliveries from in customs duty. Firstly, to 4% of imported value during
Dubai were also sharply higher. In contrast, exports (a the first quarter of 2012, followed by another hike to 6%,
combination of scrap and bullion) were again weaker which came into effect in January 2013. The fact that it
as any available scrap supply was largely recycled and happened in a scenario of a weakening rupee and the
consumed by the kingdom’s jewellery fabricators, with shift in duty structure to an ad valorem rate, furthered the
exports to Dubai and Swiss refineries at negligible levels. holding risk for a bullion trader and stockists.
INDIAN SUB-CONTINENT Looking at the monthly import trend (excluding unofficial

flows), imports were highest in January and December
— India’s gross bullion imports fell by 11% to 1,071 at 81 tonnes due chiefly to the anticipation of a customs
tonnes while unofficial imports re-emerged. duty hikes which resulted in increasing the forward
— Around 8% of supply destined for India’s domestic premium. As traders got acquainted to the two-phased
consumption came from imported and refined doré. rise in duty during the first quarter of 2012, it resulted in
offloading of stocks by bullion dealers and jewellers thus
India’s gross bullion imports reached an estimated 1,071 keeping the imports at a meagre 129 tonnes in second
tonnes last year, down 11% from 2011; this was despite a quarter, to the extent that imports in June fell to just 25
24% rise in the domestic gold price. However, the fact tonnes, the lowest since March 2009. Imports improved
that it held above 1,000 tonnes for the third consecutive in the third quarter, thus taking flows above 180 tonnes,
year, consuming almost 40% of the metal mined globally boosted by an uptick in doré imports. This was followed
last year, itself suggests resilience in the market. by a rise to nearly 228 tonnes in the fourth quarter,
GROSS INDIAN BULLION IMPORTS* GROSS INDIAN BULLION IMPORTS*
1400 Real Gold Price 30 400 35

Unofficial Other Imports
Gold Price
Official OGL
Constant 2012 Rupees/10g (thousands)
1200 30
25
300
1000
Rupees/10g (thousands)
25
20
800 20
Tonnes
Tonnes
15 200
600 15
10
400 100 10
200 5 5
0 0 0 0
2003 2005 2007 2009 2011 Q1-08 Q1-09 Q1-10 Q1-11 Q1-12
*including replenishment schemes, excluding exports *including replenishment schemes, excluding exports
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GOLD SURVEY 2013
GROSS INDIAN BULLION IMPORTS*
tonnes 2005 2006 2007 2008 2009 2010 2011 2012

Gross Imports* 808 753 862 880 779 1,123 1,211 1,071
Local Price (Rs./10g) 6,454 8,912 9,345 12,256 15,233 18,304 23,899 29,730
* including Direct Imports (imports by premier trading houses), NRI Imports, Export Replenishments for 2009 to 2012; 2012 also includes
unofficial imports.
largely as a result of seasonal demand. Looking briefly EAST ASIA & OCEANIA
to this year, January demand surged as it reacted to a
warning by the Finance Minister of a possible duty hike or — Bullion flows to East Asian markets were
quantity restriction, leading to heavy stocking. However, dominated by a surge in imports by China, while
volumes more recently are reported to be tepid despite a weaker investment and fabrication demand saw
price decline, driven by de-stocking. imports elsewhere mainly decline.
In another important development, refining of gold doré Strong demand in China dominated bullion flows across
commenced in India. According to field research findings East Asia last year, with the country recording a surge in
there are around twenty registered refiners, but not more imports. Moreover, bullion exports from Australia and
GOLD BULLION TRADE
than three are currently contributing 90% of the supply Hong Kong rose sharply as a result. Elsewhere, weaker
that is estimated at 65 tonnes. That said, doré enjoys a jewellery fabrication and a drop in consumer sentiment
differential duty structure (4% customs and 1% excise) which saw investment demand falter (particularly in the
versus gold bars (6%). This year it is projected to cross second half of the year) delivered a fall in fresh bullion
100 tonnes according to industry contacts. demand in several markets. Furthermore, the reduction
in two way speculative trading and a further drop in
Writing about India’s bullion trade in 2012 is incomplete surplus scrap supply saw bullion exports in most markets
without a summary of the unofficial imports; at 102 in the region decline last year.
tonnes, it contributed 12% of net imports. Looking at
the quarterly trends last year reveals these flows peaked South Korean bullion imports dropped 11% in 2012 to
in the third quarter at 43 tonnes which was followed by an estimated 22 tonnes (on a calculated basis). Looking
a sharp fall in the fourth quarter after heavy seizures. back, the decline resulted from weaker industrial
With India’s new duty structure of 6%, the incentive is Rs. demand, falling jewellery offtake, and an increase in
174,000 (~$3,200) a kilo. As a result, we have raised our domestic output from base metal smelters, which when
unofficial import estimates for 2013 by 10%. combined limited the need for fresh metal. Inflows were
dominated by an increase in shipments from Switzerland,
Analysing Pakistan’s bullion flows is a complex task replacing Hong Kong as the single largest trade partner.
given the quantity of unofficial flows that enter and exit Supply from Japan was largely unchanged while imports
the country. Thomson Reuters GFMS estimate that from Australia were notably weaker.
two-way bullion shipments rose significantly last year
as a result of a sharp rise in round tripping flows. As is According to Thomson Reuters GFMS’ analysis,
often the case between the India and the UAE, traders Singapore’s bullion imports fell 12% last year to
in Pakistan also took advantage of a currency arbitrage just below 140 tonnes. A notable slow down in Thai
opportunity that on occasion saw significant volumes investment demand, coupled with the cessation of
of gold bullion enter the country but exit as rough official flows to Vietnam explain most of the decline.
jewellery which is later refined in Dubai and returned Imports were dominated by deliveries from Switzerland
in a continuous loop. Moreover, these increased flows (at around 40% of the total), with Australia, Japan, and
mask what was a softer domestic market last year, with South Korea accounting for the majority of the remaining
genuine demand for fresh bullion weaker due to falls in share. On the export front, we estimate bullion flows (a
both investment and jewellery offtake, and a rise in local combination of investment bars and scrap) fell by over
scrap supply. 18% to 125 tonnes as demand outstripped supply with
disinvestment and scrap often recycled and sold back
into the domestic market.
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Gold bullion imports into China broke yet another record ORIENTAL GOLD GAUGE*
last year driven by healthy demand and weaker supply 180 2000
from scrap. Analysing gold imports to the Chinese
150 Gold Price
mainland poses a challenge as official imports statistics
are not readily available leaving the analysis of Hong 120 1500
Kong’s imports as a proxy for Chinese metal flows. The
US$/oz
Tonnes
trade flow between these two markets is often inter- 90
related, given the fact that neighbouring Shenzhen

60 1000
is the major hub for gold jewellery fabrication as well
as the largest entry point for gold destined for the 30
Shanghai Gold Exchange’s vaults and Hong Kong is the
regional centre for precious metals logistics, refining and 0 500
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12
financing, and is in most cases the final stop for the metal Source: Thomson Reuters GFMS
*Imports into Turkey, Dubai, Singapore, Hong Kong & Taiwan
before its entrance to mainland China.
Looking at Hong Kong’s trade statistics in isolation
As in the past, the flow of gold from Hong Kong to reveals a significant uptick in imports last year. Thomson
China dwarfed direct imports to China from other Reuters GFMS estimate that gold imports jumped almost
countries. Thomson Reuters GFMS estimate that 80% to over 912 tonnes on a calculated basis which
GOLD BULLION TRADE

China’s total imports almost doubled last year, reaching includes official flows, round tripping or arbitrage related
an extraordinary 892 tonnes. Imports peaked in the imports, and estimates for hand carried trade. Not
first quarter before easing in the second and third surprisingly, the sizable jump in imports was attributable
quarters only to surge to another record of 114 tonnes to the draw down on foreign supplies for mainland China,
in December, in the run up to the Chinese New Year with most of this metal transhipped to this demand
holidays. hungry market. Apart from the imports associated
with arbitrage related flows from China imports were
It is worth noting, however, that these gross import dominated by shipments from Zurich (which were down
volumes were highly inflated by large scale round slightly year-on-year), the United States, and Australia,
tripping of gold between Hong Kong and the mainland. with the latter surging to over 100 tonnes. Turning
This involves gold jewellery being exported from China to to exports, these were of course dominated by China
Hong Kong (as bullion exports are barred), reprocessed at almost 90% of the total, with gross exports to the
into investment bars in Hong Kong and re-exported to mainland exceeding 860 tonnes on a calculated basis.
China as a part of complex financial operations based Elsewhere, deliveries to India jumped more than three-
on foreign exchange and/or interest rates arbitrage. In fold (from a low base) and shipments to Zurich and
our cautious estimation this type of bi-directional flow Thailand retreated 15% and 12% respectively.
was in excess of 370 tonnes in 2012, lowering the true
net Chinese bullion import figure to approximately 520 Taiwanese gold imports contracted 16% last year
tonnes. reaching an estimated 14 tonnes (on a calculated basis)
as demand for retail physical investment products
HONG KONG OFFICIAL BULLION IMPORTS AND EXPORTS SHANGHAI GOLD EXCHANGE PREMIUM/DISCOUNT
300 50
Imports Exports Premium
40
250
US$/oz Premium/Discount*
30
200
20
Tonnes
150 10
0
100
-10
50
-20
Discount
0 -30
Q1-08 Q1-09 Q1-10 Q1-11 Q1-12 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
Source: Thomson Reuters GFMS Source: Shanghai Gold Exchange
*Weighted average of the 999.9 and 999.5 SGE prices versus London am fix
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AUSTRALIAN GOLD EXPORTS THAI BULLION IMPORTS
150 East Asia Other 250 120 30

UK India Gold Price
Gold Price (Baht per 15.244g, thousands)

Rupiah 100
Gold prices (Index, Q1 -08 = 100)

25
200
100 Baht 80
20
Tonnes
Tonnes
150 60
15
50 40
100
20 10
0 50 0 5
Q1-08 Q1-09 Q1-10 Q1-11 Q1-12 Q1-08 Q1-09 Q1-10 Q1-11 Q1-12
(either OTC or gold Pass Book products offered by banks) was authorised to produce bars. Based on our analysis
declined, particularly in the second half of the year. of these unofficial flows, we estimate that imports of
Demand for industrial applications and stable offtake close to 50 tonnes entered Vietnam in 2012 (mostly in
GOLD BULLION TRADE
from the wedding jewellery segment underpinned the the first half of the year), with the main sources being
need for new metal as the flow of scrap eased noticeably. Cambodia, Laos, and China. Exports were also tightly
Imports last year were dominated by shipments from controlled with no bullion deliveries last year, though
Switzerland (at almost half), Hong Kong and Japan. there remained a low level of scrap shipments (less than
five tonnes).
A marked slowdown in the level of investment driven
demand saw Thailand’s bullion imports decline by over Reviewing Australia’s bullion flows can provide a reliable
35% last year to a calculated quantity (a combination indication of demand trends across East Asia and India
of both official and unofficial flows) of 183 tonnes. as historically the majority of bullion exports (mainly kilo
Shipments from Switzerland remained the largest source bars) are destined for these markets. Moreover, when
of supply, with a notable rise in deliveries from both demand for fresh imports declines in these countries,
Japan and South Africa. Direct shipments from Australia due to a lack of demand or surplus scrap, this material
were notably weaker, declining by almost 70% last year. is often redirected to the United Kingdom in large bars.
Turning to exports, Thomson Reuters GFMS estimate that Bullion exports to India fell by 30% last year to 58 tonnes
bullion flows (which include scrap deliveries) slipped 12% though this drop was offset by a surge in shipments
in 2012. The fall in speculative trading last year reduced to Mainland China which jumped 300% to over 105
the volume of bullion being returned to the market and, tonnes, taking a third of all exports. Elsewhere, weaker
coupled with further losses in scrap supply, meant most investment demand in Thailand saw deliveries there
surplus gold was recycled and consumed internally. fall sharply to just 17 tonnes, while Singapore recorded
Switzerland again featured as the main destination for a modest 7% rise in shipments. Given the strength
Thai exports at close to 50% of the total, with Hong Kong of Chinese demand it is little surprise that large bar
and Australia the other main official trade routes. shipments to the United Kingdom subsided, falling by
almost a fifth last year to 72 tonnes on a calculated basis.
Analysing Vietnam’s bullion imports remains a difficult
assignment given the State Bank’s strict control on the Japan’s bullion exports suffered a drop of almost a third
gold market where it has essentially created a monopoly, last year, declining to an estimated 84 tonnes. This sharp
controlling all official trade into and out of the country contraction supported our field research findings of a
and the volume of investment bars produced. Officially, significant drop in dishoarding and jewellery scrap flows
there were no bullion imports into the country last year, in 2012 as consumers waited for a return to higher prices
though anecdotal evidence gathered from field research before liquidating gold assets. Moreover, while exports
in Vietnam and the across the region last year again to traditional destinations such as the United Kingdom,
discovered that unofficial flows from neighbouring Thailand, and Singapore all declined last year, shipments
countries were still rampant. That said, there was no to Hong Kong grew substantially, making it the main
doubt this hand carried trade slowed in the second half destination for Japanese outflows.
of the year as policy was tightened as only one mint
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GOLD SURVEY 2013
7. FABRICATION DEMAND
• World gold fabrication in 2012 fell for the second year in CARAT JEWELLERY
a row, slipping by 5.3% last year to reach 2,613 tonnes.
EUROPE
• The bulk of the fall came from a 4.2% drop in global
jewellery fabrication which took its offtake to 1,893 tonnes. — European jewellery fabrication fell by 7%, chiefly as a
This was led primarily by sizable falls in India and Europe, result of Italian losses.
although declines were registered in most markets.
Jewellery fabrication in Italy fell by 8% to 86.2 in 2012,
• Jewellery production, excluding the use of scrap, reveals continuing a downtrend that has been in place since 1999
a greater fall, declining 7.7% to 1,278 tonnes. and cutting last year’s volumes to just 16% of the earlier
high. Despite that, the country is still managing to hang
• Despite a significant slowdown last year, China on to its third position in global rankings, even if the gap
maintained its tenth consecutive increase, recording a 0.6% with India and China is now wide.
rise in jewellery fabrication and setting a new record of 498
tonnes. A key factor in both the historic slide and last year’s
losses in isolation was high and still volatile gold prices.
• In contrast, Indian jewellery fabrication fell to a three- To an extent, this was apparent during the course of
year low, as a weaker domestic currency accentuated the 2012 as the fall in prices from last February’s levels in the
rise in the dollar gold price, driving fabrication in the first high $1,700s to a summer around the $1,600 mark was
half down by over 30% year-on-year. accompanied by a swing in exports from heavy year-
on-year losses in early 2012 to notable gains from May
• Jewellery fabrication in the Middle East declined onwards. This responsiveness was certainly noticeable
by 2.5% last year, with a recovery in Egyptian offtake in shipments to Italy’s largest single market, the United
(following the crisis of 2011) offsetting significant falls in Arab Emirates, as these roughly doubled in the second
most other regional markets. quarter in comparison to the first.
FABRICATION DEMAND
• The impact of the fragile economic environment and That said, we would argue that such elasticity is often
substitution losses saw electronics fabrication slip over 11% more of a short term event and that, at current levels and
to a three-year low of 285 tonnes. given current trends, the gold price is more detrimental
for exports to the industrialised world; we certainly
• Dental demand suffered from further substitution gains need an explanation for why outflows to the UAE rose
to non-precious metals, ceramics and palladium, slipping by around a fifth last year, while exports to the EU-25
10% last year to a multi-decade low. and North America fell by 16% and 11% respectively.
This we believe to be the case as buyers of low margin
• Other industrial and decorative uses eased by 5.1% last quasi-investment pieces in emerging markets may well
year, led by a heavy fall in India. continue acquiring jewellery in the face of robust prices.
WORLD GOLD FABRICATION JEWELLERY’S SHARE OF TOTAL FABRICATION DEMAND

Ch7 Jewelllery’s share of total demand
4000 2000 100 2000

Jewellery’s Share of Total Fabrication Demand (%)
Electronics Other
Real Gold Price Real Gold Price
Jewellery Official Coins
90
3000 1500 1500
Jewellery’s Share
80
Tonnes
2000 1000 1000

70
1000 500 500

60
0 0 50 0
2003 2005 2007 2009 2011 2003 2005 2007 2009 2011
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GOLD SURVEY 2013
TABLE 7 - WORLD GOLD FABRICATION (INCLUDING THE USE OF SCRAP)
(tonnes) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Europe
Italy 333.9 312.5 290.2 235.9 228.4 186.7 134.6 126.3 103.3 95.9
Switzerland 42.6 53.6 55.5 60.7 62.2 58.2 37.5 40.8 47.9 45.5
Germany 54.5 56.9 51.8 51.3 51.4 49.0 38.6 41.3 39.6 36.9
Austria 8.0 9.4 8.5 5.7 6.5 26.3 34.6 19.7 22.9 14.1
UK 33.6 32.9 28.6 24.4 16.9 15.6 15.2 13.9 15.5 15.3
France 28.3 18.6 16.4 14.4 14.0 13.0 11.0 11.1 10.1 8.5
Spain 35.0 31.7 27.4 24.2 23.6 19.8 13.6 8.4 7.1 6.3
Poland 5.8 6.0 5.9 5.8 5.4 4.6 4.5 5.0 4.9 4.7
Greece 10.6 9.8 8.6 7.8 8.5 7.4 6.2 6.2 4.5 4.0
Portugal 9.3 8.9 7.2 5.3 6.7 6.1 4.9 4.6 3.2 3.0
Sweden 2.0 2.0 1.9 1.7 1.4 2.2 2.7 2.6 2.8 2.8
Czech & Slovak Republics 3.2 3.2 3.1 2.9 2.8 2.6 2.5 2.9 2.9 2.8
Netherlands 5.8 5.5 5.5 5.3 4.2 3.3 2.9 3.0 2.8 2.6
Other Countries 9.8 9.9 10.1 8.8 8.9 8.6 7.5 8.3 8.1 7.7
Total Europe 586.4 565.0 525.0 458.4 445.1 407.3 319.7 297.4 278.3 252.6
North America
United States 224.9 224.0 218.8 210.9 179.0 175.2 173.4 179.9 167.8 147.4
Canada 25.2 26.0 26.8 22.0 22.2 40.1 48.4 44.7 45.3 32.7
Latin America
Brazil 17.9 22.0 23.7 20.0 22.1 22.9 21.1 26.3 23.1 22.9
Mexico 38.8 34.3 35.4 28.5 25.3 23.0 22.0 19.7 14.9 14.3
Chile 4.2 4.2 4.3 3.9 3.6 3.2 2.8 2.9 2.2 2.2
Colombia 2.3 2.5 2.5 2.1 2.0 1.6 1.4 1.3 1.4 1.3
Venezuela 2.4 3.0 3.2 3.3 3.1 2.6 1.7 1.4 1.1 1.0
FABRICATION DEMAND
Bolivia 3.6 3.8 3.7 2.9 2.5 1.7 1.5 1.3 1.0 0.9
Other Countries 9.8 10.5 10.9 9.7 8.1 6.8 4.8 4.8 4.1 3.9
Middle East
Turkey 260.5 285.4 303.4 242.0 276.8 236.7 111.3 109.0 136.3 113.7
Egypt 64.6 67.5 70.8 50.3 56.5 64.5 44.9 43.3 30.2 38.7
Iran 35.6 37.3 40.7 36.2 40.7 41.0 37.6 39.3 37.4 36.9
Iraq & Syria 21.1 20.6 21.8 20.6 23.0 20.1 15.8 15.4 12.2 9.3
Israel 12.7 12.1 11.9 9.9 9.0 8.7 7.2 6.3 5.5 5.1
Oman & Qatar 10.2 11.0 11.3 9.9 10.3 8.7 6.6 5.9 5.2 4.8
Jordan 5.6 6.0 6.9 4.5 4.7 4.7 5.6 5.9 5.2 4.6
Bahrain 10.9 10.8 11.4 9.6 9.9 8.7 6.5 5.7 5.1 4.5
Kuwait 13.8 12.7 12.3 9.7 8.9 8.4 5.6 4.8 4.1 3.7
Lebanon 7.4 8.0 7.6 5.4 5.5 4.8 3.4 2.6 2.1 1.9
India 538.4 621.1 695.2 633.8 684.4 708.1 571.0 783.4 761.0 736.0
Sri Lanka 6.8 6.3 6.2 5.1 5.2 4.5 3.8 3.7 3.2 3.1
Other Countries 0.9 1.0 1.0 0.9 0.9 0.8 0.7 0.6 0.5 0.5
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GOLD SURVEY 2013
TABLE 7 - WORLD GOLD FABRICATION (INCLUDING THE USE OF SCRAP)
(tonnes) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
East Asia
China 215.0 239.9 262.6 278.3 339.8 378.8 427.7 508.6 585.8 590.5
Japan 151.3 159.3 164.4 175.0 177.8 163.7 140.5 157.5 147.2 126.1
South Korea 84.8 82.0 83.3 82.3 86.1 77.5 65.0 68.1 62.2 53.4
Indonesia 86.3 90.8 86.5 64.8 63.2 61.4 46.0 38.9 35.3 36.1
Malaysia 56.9 69.7 74.3 58.0 61.0 56.3 45.0 43.8 36.4 33.6
Taiwan 24.7 28.5 31.9 30.7 29.7 27.5 23.1 26.1 24.0 22.5
Singapore 21.7 24.2 30.0 28.7 29.5 27.6 23.3 25.5 23.8 22.0
Thailand 61.0 64.1 68.5 52.7 47.5 40.3 25.2 22.0 18.7 17.0
Hong Kong 11.3 14.0 14.6 14.9 15.4 15.6 14.7 15.8 16.5 14.8
Vietnam 24.2 26.8 28.3 22.6 21.6 19.6 14.7 13.5 12.4 10.7
Philippines 2.6 2.9 3.2 2.8 2.5 2.2 1.7 1.6 1.5 1.3
Other Countries 8.1 8.7 7.8 7.0 6.9 6.1 4.8 4.2 3.7 3.6
Total East Asia 747.9 810.9 855.2 817.7 880.9 876.5 831.7 925.6 967.4 931.6
Africa
South Africa 12.5 12.8 10.0 10.3 14.0 16.4 28.3 24.9 27.8 27.2
Morocco 13.6 13.9 13.8 10.6 10.3 9.5 7.6 7.0 6.8 6.6
Libya 4.5 4.8 5.0 4.9 5.2 4.8 3.9 3.5 2.4 2.3
Algeria 3.8 3.9 3.9 3.0 3.4 3.1 2.5 2.4 2.1 2.1
Other Countries 6.2 6.5 6.7 6.0 6.3 5.9 5.3 4.9 4.9 4.7
Total Africa 40.6 41.8 39.3 34.7 39.2 39.6 47.6 42.7 43.9 42.7
Oceania
Australia 9.3 11.1 9.9 10.3 10.5 14.0 14.6 13.1 14.3 13.6
Total Oceania 9.3 11.1 9.9 10.3 10.5 14.0 14.6 13.1 14.3 13.6
CIS
Russia 50.2 55.3 61.1 65.2 79.4 76.0 57.5 61.2 66.1 70.3
Other Countries 18.2 20.1 21.1 23.5 29.0 27.4 20.6 23.2 24.8 23.6
Total CIS 68.4 75.4 82.2 88.7 108.4 103.4 78.1 84.4 90.9 93.9
FABRICATION DEMAND
World Total 3,003.0 3,180.0 3,305.4 2,957.5 3,103.1 3,027.3 2,518.5 2,786.8 2,759.8 2,613.5
In contrast, high gold prices have pushed the Italian export data; some destinations, often the more
industrialised world’s high margin jewellery pieces troubled ones, are witnessing a shift from unofficial to
far above key retail price thresholds, triggering heavy official consumption as tax authorities crack down on the
thrifting and substitution to silver, non-precious metals former and this could lift the visible, official component
and alternative materials. A clear example of this was of trade. Not only does this apply to the totality of
exports to France, which fell by around a quarter as Italian exports, but this also appears to have been the
high gold prices have led to a massive swing from 18 to case as regards sales within Italy. Much centres on the
9-carat pieces in order to restrain retail prices but with introduction of a cash purchase limit of €1,000 and this
major consequences for the fine weight of sales. High fits with reports of city centre retail chains seeing fair
prices have also caused problems in Italy’s domestic results whilst independents in smaller towns had a very
market as this has led to a marked swing to silver and difficult year.
other alternatives such as brass and bronze.
Another consequence of high gold prices is that retailers
The view that prices could be the dominant factor may well not have sufficient credit to finance gold
receives support from the fact that Italian exports to inventory and have simply failed to replace pieces when
almost all destinations in the industrialised world saw sold. Such de-stocking at the trade level can therefore
losses, irrespective of economic performance. That said, occur even if customers might have been willing to
economic issues were clearly at work in the declines of buy the gold pieces in question and this explains why
over a third for shipments to Greece and Portugal in sometimes restrained losses for consumption at the retail
comparison to the drop of 6% for Germany. Caution on level mask a more brutal picture for manufacturers.
occasion needs to be applied to the changes in official
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GOLD SURVEY 2013
TABLE 7A - GOLD FABRICATION IN INDUSTRIAL AND DEVELOPING COUNTRIES (INCLUDING THE USE OF SCRAP)
(tonnes) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Industrial Countries
Jewellery Fabrication 753.5 714.1 677.5 572.9 539.3 457.3 344.2 332.7 301.8 278.3
Electronics 209.2 235.3 253.4 277.8 279.5 261.3 218.4 261.7 250.9 218.6
Dentistry 63.5 64.1 58.8 57.1 54.2 52.2 49.5 45.2 39.8 35.6
Other Industrial 50.0 49.3 49.2 51.2 54.5 53.5 45.5 49.2 47.3 44.8
Official Coin 44.2 51.6 46.2 55.9 49.1 106.8 149.1 121.6 121.4 93.3
Medals 1.7 1.8 1.5 1.6 1.6 1.6 1.6 1.7 3.1 2.1
Sub total 1,122.2 1,116.1 1,086.6 1,016.4 978.2 932.8 808.2 812.2 764.4 672.7
Developing Countries
Jewellery Fabrication 1,730.9 1,902.3 2,041.4 1,726.9 1,884.2 1,846.8 1,471.6 1,687.4 1,673.3 1,614.6
Electronics 27.3 30.7 32.2 38.3 42.2 49.8 56.6 64.3 69.0 66.0
Dentistry 3.5 3.5 3.6 3.6 3.4 3.5 3.1 3.1 3.0 2.9
Other Industrial 32.1 35.6 40.5 40.4 41.8 41.0 36.7 41.7 41.6 39.6
Official Coin 63.1 64.1 65.6 74.1 86.6 85.3 85.0 91.4 123.8 106.4
Medals 23.9 27.7 35.5 57.9 66.9 68.2 57.3 86.7 84.7 111.3
Sub total 1,880.8 2,063.9 2,218.8 1,941.1 2,125.0 2,094.5 1,710.2 1,974.7 1,995.5 1,940.8
World Total 3,003.0 3,180.0 3,305.4 2,957.5 3,103.1 3,027.3 2,518.5 2,786.8 2,759.8 2,613.5
JEWELLERY CONSUMPTION * (INCLUDING SCRAP)
(tonnes) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
India 441.7 517.2 573.5 516.4 557.8 599.8 471.4 657.6 618.3 552.0
FABRICATION DEMAND
China 201.0 224.1 241.4 244.7 302.2 340.6 376.3 451.8 515.1 518.8
United States 354.5 350.5 349.0 306.1 257.9 188.1 150.3 128.6 115.5 108.4
Russia 49.6 55.6 64.3 70.1 85.7 92.4 56.7 60.1 64.7 69.6
Turkey 163.6 185.7 194.9 165.3 188.1 153.2 75.2 67.4 70.1 61.5
UAE 81.7 89.3 96.4 92.4 99.8 100.0 74.6 69.6 58.1 49.8
Saudi Arabia 128.2 136.2 147.4 106.3 122.0 110.9 81.8 71.6 55.7 47.1
Egypt 66.1 73.0 75.3 60.0 67.8 74.3 56.7 53.4 33.8 45.7
Iran 40.5 43.3 47.8 41.5 47.4 45.8 37.5 37.4 35.1 35.8
Indonesia 82.0 83.9 78.0 57.7 55.2 55.9 41.0 32.8 30.2 30.8
Brazil 24.2 30.6 33.3 29.2 30.7 29.8 26.8 29.4 26.6 26.8
Hong Kong 12.0 15.8 16.0 15.1 18.2 17.0 16.4 20.6 27.8 26.5
Italy 82.0 77.2 71.0 64.8 57.4 49.1 41.4 34.9 27.6 22.3
Pakistan 56.2 59.8 65.1 54.7 51.8 45.5 30.9 27.3 23.1 21.5
UK 73.1 70.2 59.4 52.5 50.3 37.2 31.8 27.3 22.6 21.1
Mexico 47.1 44.0 42.4 37.1 34.9 28.5 26.4 23.8 19.9 18.3
Japan 31.6 34.6 33.5 32.8 31.7 31.2 22.3 21.3 16.6 17.5
Canada 29.7 29.6 30.1 27.4 24.7 22.3 18.6 17.5 16.3 15.5
France 39.8 38.2 35.1 30.7 28.9 26.1 23.6 20.2 18.2 14.2
Vietnam 22.8 26.1 26.9 22.1 21.4 19.6 15.1 14.4 13.0 11.4
© Copyright Thomson Reuters GFMS
*Fine gold content of all new jewellery sold at the retail level (excluding the exchange of old for new jewellery), calculated by taking jewellery
fabrication, plus imports less exports and adjusting for retail stock movements. This list only includes those countries for which GFMS has
supplied consumption data to the World Gold Council for use in its publications. GFMS’ database, however, covers a much longer list of
countries, for which consumption is measured, than that shown in the table above.
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GOLD SURVEY 2013
A final feature of industrialised world markets worth year at the same time as the mainland’s consumption
singling out is the top end continuing to outperform of 18-carat pieces increased a fraction. One bright spot
the mass market. However, while this may do much to in that region, however, was Japan, with Italian exports
support the value of jewellery sales, its contribution to to that country rising in line with its 6% rise in jewellery
the fine weight of gold sold is less significant. consumption as a partial recovery from 2011’s natural
disasters took place.
This differentiation by price sector might appear
supported by the reported rise of 5% in the gross weight Another area enjoying a recovery was North Africa, with
of shipments to Switzerland, that country frequently exports to all five constituent countries seeing substantial
operating as a global distribution centre for the top end percentage gains, as activity resumed either late 2011 or
brands. Such flows will have no doubt contributed to a during the course of 2012. It is these gains that explain
relatively robust outcome but industry contacts told us much of the rise for the ‘Other’ category in the graph
on many an occasion that a fair portion of that would below. The volumes achieved, however, remain far
represent scrap still in jewellery form, rather than a crude below the levels recorded before the onset of political
bar, travelling cross-border and destined for a Swiss problems. Developments in Sub-Saharan Africa are also
refinery. If we make an allowance for this, true exports worth mentioning; some wholesalers in Italy reported
look to have fallen, although we would cite lower trans- poor direct business due to African customers facing visa
shipments of mainstream pieces as the prime driver of problems in travelling to Italy and that instead these
that. One piece of evidence for that view is the visible buyers would have travelled to Dubai. It is possible
drop in shipments to Turkey, much of which are en route therefore that some of the rise in Italian exports to that
to Russia or central Asia. (This is shown in the fair size emirate was down to this re-routing.
drop for ‘Other Europe’ in the graph below.)
There are several in the Italian industry who feel
A factor of similar importance in explaining Italy’s long fabrication would have fallen by far more than our figure
term decline and the drop in exports last year is market of 8%. It is certainly true that some producers faced
share loss to rival producers. As illustrated in the graph a very difficult year, if exposed to those markets that
on page 93, Italy’s share of US imports, for example, has were weak. However, some contacts noted stability and
been steadily falling, down from over 40% in 1998 to 12% others even year-on-year gains, typically those serving
last year. (This was mirrored in Italy’s own exports, with more buoyant official export markets or the top end,
FABRICATION DEMAND
the US share of those dropping from just over a third at and their results help mitigate overall losses. We have
the turn of the millennium to a mere 8% last year.) In to acknowledge, however, that there is less clarity today
the case of the United States, duty disadvantages have for overall volumes as the traditional yardstick of bullion
played a significant role but losses more generally have imports has ceased to provide a meaningful guide, given
been the result of the low labour costs and the improving that the rise in domestic scrap and imported scrap has
quality of other producers, such as China. Unsurprisingly made Italy a net bullion exporter.
therefore, another region where market share loss
is readily apparent is East Asia. For instance, Italian As for 2013, we may well see further losses for Italian
exports to China/Hong Kong fell by a few percent last fabrication, given expectations of medium term price
ITALIAN OFFICIAL JEWELLERY EXPORTS BY REGION ITALIAN JEWELLERY FABRICATION AND EXPORTS
400
EU-25 Unofficial Exports
Official Exports
Other Europe* 2011
300 Fabrication for Domestic Market
2012
N America
100% OPACITY
Tonnes
L America 200
Middle East
100
East Asia
Others
0
0 5 10 15 20 25 2003 2005 2007 2009 2011
Tonnes
Source: Thomson Reuters GFMS; Calculations based on Italian export data. Source: Thomson Reuters GFMS
Shows only the direct flow of finished pieces. *incl Russia & Turkey
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GOLD SURVEY 2013
TABLE 8 - CARAT JEWELLERY (INCLUDING THE USE OF SCRAP)
(tonnes) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Europe
Italy 323.8 302.4 279.0 224.4 215.3 172.6 123.3 116.0 93.8 86.2
Switzerland 24.7 27.4 32.2 35.8 36.0 35.0 20.1 21.1 29.4 28.6
Germany 20.4 21.7 21.3 19.9 19.9 19.0 14.8 15.1 15.4 14.7
France 19.5 17.5 15.3 13.4 13.0 12.0 10.1 10.2 9.2 7.6
UK 29.3 28.1 23.8 19.6 12.2 10.0 9.2 8.2 6.9 6.7
Spain 33.8 29.9 25.6 22.4 21.8 17.6 12.3 7.4 6.2 5.4
Greece 10.2 9.4 8.2 7.4 8.1 7.0 5.8 5.8 4.1 3.7
Poland 5.2 5.3 5.3 5.2 4.4 3.9 3.5 3.8 3.5 3.3
Portugal 9.0 8.3 7.1 5.3 6.6 5.9 4.8 4.5 3.1 2.9
Other Countries 14.5 14.4 14.3 12.8 11.8 10.5 9.0 9.2 9.0 8.7
Total Europe 494.0 468.1 436.1 369.8 352.9 297.0 215.7 204.0 182.8 169.8
North America
United States 143.3 131.9 130.0 108.0 94.5 77.0 63.0 66.0 60.3 53.7
Canada 18.0 16.7 16.2 13.3 12.8 12.1 9.8 9.3 8.7 8.2
Latin America
Brazil 15.9 20.2 21.7 17.5 18.6 19.2 17.7 22.6 19.4 19.3
Mexico 36.2 31.5 32.2 25.9 22.7 18.9 17.3 14.4 11.5 10.6
Chile 4.2 4.2 4.3 3.9 3.6 3.2 2.8 2.9 2.2 2.2
Colombia 2.1 2.3 2.3 1.9 1.6 1.4 1.2 1.1 1.2 1.1
Bolivia 3.6 3.8 3.7 2.9 2.5 1.7 1.5 1.3 1.0 0.9
Venezuela 2.3 2.9 3.1 3.2 3.0 2.5 1.6 1.3 1.0 0.9
Other Countries 9.5 10.2 10.6 9.4 7.8 6.5 4.5 4.5 3.8 3.6
Middle East
FABRICATION DEMAND
Turkey 213.0 238.0 251.1 184.9 219.7 183.2 80.0 73.0 77.0 73.8
Egypt 64.6 67.5 70.8 50.3 56.5 62.4 44.0 42.1 28.7 37.5
Iran 30.8 32.7 36.5 32.2 36.2 35.7 30.0 29.9 27.8 27.7
Iraq & Syria 20.6 20.0 21.2 20.0 22.4 19.6 15.1 14.7 11.5 8.7
Oman & Qatar 10.2 11.0 11.3 9.9 10.3 8.7 6.6 5.9 5.2 4.8
Jordan 5.6 6.0 6.9 4.5 4.7 4.7 5.6 5.9 5.2 4.6
Israel 12.1 11.5 11.3 9.3 8.4 8.1 6.6 5.7 4.9 4.5
Bahrain 10.9 10.8 11.4 9.6 9.9 8.7 6.5 5.7 5.1 4.5
Kuwait 13.6 12.5 12.3 9.7 8.9 8.4 5.6 4.8 4.1 3.7
Lebanon 7.4 8.0 7.6 5.4 5.5 4.8 3.4 2.6 2.1 1.9
India 496.7 572.2 634.0 550.9 594.7 623.2 503.4 685.0 667.0 618.2
Sri Lanka 6.8 6.3 6.2 5.1 5.2 4.5 3.8 3.7 3.2 3.1
Other Countries 0.9 1.0 1.0 0.9 0.9 0.8 0.7 0.6 0.5 0.5
East Asia
China 194.0 216.8 239.0 244.8 297.1 329.6 363.6 432.3 495.6 498.4
Indonesia 85.9 90.4 86.0 64.3 62.7 60.8 45.6 38.4 34.8 35.5
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GOLD SURVEY 2013
TABLE 8 - CARAT JEWELLERY (INCLUDING THE USE OF SCRAP)
(tonnes) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Malaysia 56.7 69.5 74.1 58.0 61.0 56.2 45.0 43.7 36.2 33.4
Thailand 59.0 61.9 66.0 50.2 44.8 37.5 22.7 19.3 16.0 14.3
Japan 21.9 22.3 22.3 21.1 19.0 17.5 14.4 14.3 12.9 13.3
South Korea 52.6 46.8 44.5 36.4 36.1 30.3 23.4 20.3 16.7 13.2
Hong Kong 8.5 11.1 11.5 11.6 11.8 12.2 11.6 12.2 12.8 11.4
Vietnam 24.2 26.8 28.3 22.6 21.6 19.6 14.7 13.5 12.4 10.7
Singapore 11.5 12.5 11.2 9.9 10.9 10.2 7.9 8.9 9.7 10.4
Taiwan 13.3 14.6 16.1 12.3 10.3 9.1 5.8 5.3 4.6 4.6
Philippines 2.6 2.9 3.2 2.8 2.5 2.2 1.7 1.6 1.5 1.3
Other Countries 8.1 8.7 7.8 7.0 6.9 6.1 4.8 4.2 3.7 3.6
Total East Asia 538.3 584.2 610.0 540.8 584.6 591.3 560.9 613.9 656.7 650.2
Africa
Morocco 13.6 13.9 13.8 10.6 10.3 9.5 7.6 7.0 6.8 6.6
South Africa 9.2 8.9 8.1 7.5 7.0 7.4 5.1 4.5 3.7 3.5
Libya 4.5 4.8 5.0 4.9 5.2 4.8 3.9 3.5 2.4 2.3
Algeria 3.8 3.9 3.9 3.0 3.4 3.1 2.5 2.4 2.1 2.1
Other Countries 6.2 6.5 6.7 6.0 6.3 5.9 5.3 4.9 4.9 4.7
Total Africa 37.3 37.9 37.4 31.9 32.2 30.6 24.4 22.2 19.8 19.0
Oceania
Australia 5.3 5.3 5.0 4.5 4.4 4.0 3.2 3.2 2.9 2.8
Total Oceania 5.3 5.3 5.0 4.5 4.4 4.0 3.2 3.2 2.9 2.8
CIS
Russia 34.6 38.3 44.4 47.6 58.5 53.2 34.9 39.4 45.1 49.2
Other Countries 15.8 17.6 18.6 20.9 26.3 24.8 18.2 20.8 22.3 21.2
Total CIS 50.4 55.9 63.0 68.5 84.8 78.0 53.1 60.2 67.4 70.4
World Total 2,484.4 2,616.4 2,718.9 2,299.8 2,423.5 2,304.1 1,815.8 2,020.2 1,975.1 1,892.9
FABRICATION DEMAND
strength and still shaky economic confidence. However, a 4%* (*value terms, source: Société 5). The country’s top
positive message has emerged in the form of consumers end brands also had a good year (as evidenced by export
in many markets expressing good interest in the growth), but much of their contained metal is derived
gold look; gold-plated silver and base metals remain from imported semi-manufactured items.
reportedly strong and gold accents are felt to have grown
in popularity in the branded, mass market segment. Jewellery fabrication in Germany contracted in 2012,
chiefly in response to domestic consumption falling
French jewellery fabrication in 2012 fell by 17%, the by 10%. The latter result was largely due to still high
steepest rate in Europe as the fine weight was hit by the gold prices whose impact was made worse by economic
rapid shift from 18 to 9-carat for domestic consumption uncertainty. Exports of finished jewellery also fell a few
and as importers took market share in the lower percent. The drop in fabrication, however, was kept to
purity segment. All this was compounded by overall a modest 4% as much is 18-carat semi-manufactured
consumption being weak, falling by 7%*. It would be material destined for luxury brands based in other
incorrect to heavily blame economic factors here as sales countries, and German exports of this were notably more
of silver jewellery rose by 1%* and those of watches by robust than implied by the 11% drop in the trade data.
SWISS WATCH CASE HALLMARKING UK jewellery fabrication eased by 4% in 2012, chiefly in

(Index based on units with 2006 = 100)
reflection of an ongoing decline in domestic consumption
2007 2008 2009 2010 2011 2012 and destocking at the retail level. Much of this was
101 104 60 63 88 106 caused by the high gold price, as this continued to
Source: BCCMP encourage a shift to lighter weights, and to silver and
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GOLD SURVEY 2013
NEGATIVE NET CONSUMPTION IN WESTERN Indeed, in most developed countries, scrap is already falling but
JEWELLERY MARKETS this is chiefly as a result of a third factor, namely the depletion
of near-market supplies. The scale of the ultimate retreat in
The long run slide in western jewellery consumption in weight scrap, however, may well prove more restrained than might be
terms is a key development within the global gold market as it supposed, firstly as prices are like to remain well above the lows
has robbed the latter of around 450 tonnes of demand in the seen in the early 2000s, due to greater consumer awareness of
space of a decade (basis numbers for North America and the top recycling opportunities and lastly far better developed collection
five EU markets). At the same time, we have seen scrap surge, facilities.
with these same countries supplying roughly an extra 300
tonnes to the market if we compare 2012 volumes with those a Scrap’s stock-led slip has already led to the ‘surplus’ contracting
decade earlier. With almost all old scrap coming from jewellery, last year and this curtailment of supply should continue when
this has therefore pushed the West’s jewellery sector into a looking ahead, but it may be several years yet before we return
position of net supply to the global market for the last few years. even to neutrality as the above non-price factors restrain net
Similar developments have also been witnessed in East Asia, demand. If that sounds gloomy to some, it is worth pointing out
with Japan a ‘net supplier’ since 2008. that, as referenced in the feature box on page 94, it looks likely
to be many more years yet before the jewellery sectors of most
This has important consequences, particularly if this net emerging markets start to materially resemble those of the
supply is being generated by non-price factors and if such a industrialised world.
phenomenon were to spread to other countries, in particular
China and India. The news in that sense is mixed. Looking
firstly at the demand-side, the enduring nature of the fall in WESTERN JEWELLERY CONSUMPTION AND SCRAP*
consumption is strongly indicative of structural forces being 700

at work, and here we would cite the shift from plain, simple, Consumption
600
unbranded pieces to gemset, high design branded items.
Another factor are the losses suffered by all jewellery to new, 500 Scrap
often better promoted discretionary areas, such as technology
400
Tonnes
goods. That said, the pace of decline accelerated in recent years

as gold prices rose and economic hardship emerged and so a 300
reversal for these two should provide support to gold jewellery

200
FABRICATION DEMAND
sales.
100
Scrap supply has also been boosted of late by high gold prices 0
2003 2005 2007 2009 2011
and distress selling, and so any sustained fall in the gold price Source: Thomson Reuters GFMS
and an uplift in economic prospects should curtail volumes. *North America and the top 5 European markets
other forms of jewellery. However, it is of note that the timepieces in value terms rose by 20.5% over the year,
decline in fabrication was restrained, which itself largely whilst bi-metallic watches recorded a more moderate
reflects much of the structural change behind longer growth of 5.3%. The uptrend in Swiss watch exports
term losses having already occurred. continued into 2013, adding to optimism about the
industry’s growth potential this year. In January, exports
Swiss jewellery fabrication fell a fraction despite support of gold watches in unit terms rose by nearly 13% year-
from strong gains in the watch industry in 2012 as much on-year. To put it into value terms, the increase was even
of that sector is supplied by imported semi-manufactured more pronounced at 20%, with strong gains recorded in
items. The country’s watch case hallmarking data reveals Hong Kong and Europe.
that the use of gold by luxury watch manufacturers rose
by 20% last year, with the full year total surpassing the Following a major collapse in 2009, gold jewellery
peak levels achieved in 2007-08. Last year’s growth was fabrication in Russia experienced a period of
led by a strong rise in watch exports, particularly during uninterrupted gains through to last year. To put this into
the first half of the year, with evident growth on most of perspective, jewellery offtake increased by over 40%
the main markets. Figures produced by the Federation between 2009 and 2012, to a little over 49 tonnes last
of the Swiss Watch Industry reveal that exports of gold year. That said, the full year total still remained well
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GOLD SURVEY 2013
HALLMARKED UK JEWELLERY FABRICATION AND IMPORTS HALLMARKED RUSSIAN JEWELLERY FABRICATION AND IMPORTS
(tonnes, fine) (tonnes, gross)

2007 2008 2009 2010 2011 2012 2007 2008 2009 2010 2011 2012
32.3 22.5 17.4 15.6 12.4 11.7 121.8 134.0 73.5 80.5 88.2 93.4
Source: Birmingham Assay Office, British Hallmarking Council Source: Assay Office
below the pre-crisis level of 2008. Similar to the trend NORTH AMERICA
in previous years, last year’s strong performance was
primarily driven by a rise in income and a growing desire — US jewellery consumption in 2012 suffered its 11th
for luxury goods as a symbol of social status from the consecutive fall but at a far slower pace of 6%.
burgeoning middle class in the country.
US gold jewellery consumption in 2012 fell for the 11th
Nevertheless, although the jewellery market in Russia year in succession, reaching a level representing just 28%
has enjoyed a secular increase in recent years, the pace of the peak volume in 2001. That figure of 108.4 tonnes
of the growth abated somewhat in 2012. Volume of still leaves it as the third largest globally, although
jewellery fabrication rose by 9% last year, compared with the gap with the two biggest, India and China, is now
a 15% increase in 2012. This was largely due to a softer considerable and the difference with fourth placed Russia
economic environment (real GDP growth slowed down is rapidly narrowing as the latter continues to enjoy gains.
from 4.3% in 2011 to 3.4% in 2012), which to some extent It is also sobering to note that (total) US scrap was some
has restrained growth in discretionary spending. 20 tonnes larger than its jewellery consumption in 2012.
Meanwhile, a modest depreciation in the rouble against That we saw another decline in 2012 was due to some
the US dollar also resulted in even higher gold prices in long standing trends, such as a shift from plain to
local currency terms. It is of note that rapidly rising gold gemset, and also some drivers that have more recently
prices in recent years have resulted in a notable shift in joined the fray, such as high gold prices. The impact of
consumer preference in favour of lighter weight jewellery the latter was felt in a variety of ways, including a shift
pieces. Local fabricators indicated that the average to silver as implied by double-digit percentage gains
weight of gold pieces has been reduced from 3.7 to 1.4 last year for silver jewellery imports, while gold jewellery
FABRICATION DEMAND
grammes over the past few years. imports fell by 5%. The white metal continues to find
favour, especially among the independents, as its lower
Looking ahead, we expect a further modest increase price facilitates attractive margins, particularly through
jewellery fabrication in 2013. Despite a forecast the rising share of gemset silver and growth of private
recovery in gold prices, this is not expected to dampen labels, and keeps retail prices below key thresholds,
significantly Russian fabrication growth, as the current although the switch does have the side effect of lowering
strong appetite for gold jewellery is likely to persist for a turnover. It appears less the case that the shift is fashion
while, thanks to solid GDP growth along with an ongoing led, given the growth for gold-plated silver items.
rise in disposable income.
GLOBAL JEWELLERY FABRICATION, 2003 GLOBAL JEWELLERY FABRICATION, 2012

Global Jwl Fab 03 Global Jwl Fab 11
Other Italy
Other Italy Other Europe
133 t 86t
173 t 324t 84t North America
62t
Turkey
Other Europe
East Asia 74t
170t
538t
Other Middle East
East Asia 155t
North America 650t
161t
Turkey
213t
Indian Sub-Continent Other Middle East

329t Indian Sub-Continent
576t 650t
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GOLD SURVEY 2013
TABLE 8A - CARAT JEWELLERY (EXCLUDING THE USE OF SCRAP)
(tonnes) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Europe
Italy 281.0 264.3 232.3 170.9 158.2 111.6 90.3 70.0 49.8 46.2
Switzerland 24.7 27.4 32.2 35.8 36.0 35.0 20.1 21.1 29.4 28.6
Germany 16.4 17.6 16.3 13.9 14.2 13.3 9.8 10.0 10.4 9.7
France 13.8 13.0 12.8 11.4 11.0 10.0 8.1 7.7 6.2 4.6
UK 26.5 25.3 21.2 14.1 7.1 4.4 4.8 3.4 2.4 1.7
Portugal 8.4 7.8 6.6 4.4 5.8 5.0 3.5 2.9 1.5 1.3
Netherlands 1.2 1.1 1.1 1.1 1.0 0.9 0.7 0.8 0.8 0.8
Poland 2.4 2.4 2.7 2.5 1.8 1.2 0.6 0.9 0.9 0.7
Greece 9.1 8.3 6.9 5.8 6.7 5.1 2.8 2.5 0.8 0.6
Spain 28.3 25.8 21.9 16.3 16.3 11.1 3.7 0.5 0.5 0.1
Other Countries 7.3 7.3 7.2 4.4 4.3 3.8 2.9 2.6 2.2 2.0
Total Europe 421.4 402.7 364.0 282.7 264.9 203.6 148.7 123.2 105.2 96.5
North America
United States 116.5 107.3 106.6 84.0 72.0 57.0 41.0 39.5 32.7 22.1
Canada 13.3 12.3 12.2 7.8 8.3 7.6 5.3 4.6 4.2 4.6
Latin America
Brazil 6.9 13.6 17.4 12.2 13.0 12.6 8.1 9.3 6.7 6.5
Chile 3.7 3.7 3.8 3.3 2.8 2.3 2.1 2.1 1.3 1.3
Mexico 30.2 25.8 25.0 19.4 14.1 7.8 4.0 0.4 0.2 1.1
Other Countries 16.6 16.2 15.6 11.3 7.8 5.3 2.8 1.9 2.1 1.8
Middle East
Turkey 162.0 189.0 197.9 117.4 164.7 100.2 24.8 18.5 29.0 30.8
FABRICATION DEMAND
Iran 20.1 22.4 24.0 14.0 17.9 15.3 10.7 12.1 10.3 11.7
Egypt 4.8 4.6 12.1 7.8 18.0 28.4 6.5 15.1 3.9 5.1
Jordan 2.1 2.5 5.4 2.6 2.9 3.0 4.7 4.5 3.8 3.2
Bahrain 9.6 9.2 10.0 6.4 6.7 5.5 3.0 2.8 2.5 2.4
Oman & Qatar 7.2 9.3 8.9 5.4 6.1 4.1 2.8 2.6 2.4 2.4
Iraq & Syria 13.5 10.5 11.9 6.5 10.9 5.9 2.9 5.0 3.2 1.5
Other Countries 12.3 14.0 15.0 10.1 10.7 8.4 4.1 3.0 2.7 3.0
India 364.7 465.2 540.0 470.9 521.7 533.7 444.9 604.0 608.5 505.2
Other Countries 5.9 5.5 5.5 3.6 3.2 2.3 1.8 1.9 1.5 1.4
East Asia
China 166.0 182.8 198.0 201.6 257.0 264.9 262.7 322.6 399.5 406.6
Malaysia 53.5 64.2 68.3 49.4 53.5 48.6 36.0 35.2 29.0 26.7
Indonesia 43.1 46.3 34.5 26.0 25.8 29.5 16.8 15.6 12.5 18.0
Singapore 8.6 9.8 8.7 6.6 6.8 5.8 3.4 5.0 5.5 6.9
Hong Kong 0.7 4.1 5.6 5.3 5.2 5.2 4.4 5.5 7.0 6.1
Vietnam 17.6 20.9 20.5 14.3 12.6 11.1 3.3 3.3 5.5 4.8
Thailand 41.5 50.2 54.5 36.7 28.8 21.0 6.1 6.1 3.5 4.0
South Korea 40.6 35.6 33.8 24.2 24.3 18.3 7.6 7.3 5.0 4.0
Taiwan 3.0 2.6 6.7 1.8 2.7 2.9 1.1 1.2 1.5 2.7
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GOLD SURVEY 2013
TABLE 8A - CARAT JEWELLERY (EXCLUDING THE USE OF SCRAP)
(tonnes) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Japan 7.6 9.7 11.8 9.7 6.4 4.2 3.1 0.7 0.0 2.4
Other Countries 7.1 8.7 7.9 6.2 6.1 5.0 3.0 2.7 2.3 2.4
Total East Asia 389.3 434.8 450.3 381.6 429.0 416.5 347.3 405.1 471.2 484.4
Africa
South Africa 7.9 7.7 7.0 6.2 5.8 6.0 3.8 3.2 2.1 2.0
Morocco 9.6 9.9 9.2 5.6 6.0 4.9 1.1 1.7 0.9 0.7
Other Countries 8.6 8.8 8.5 6.4 5.9 3.9 2.5 2.3 1.8 2.0
Total Africa 26.1 26.3 24.7 18.2 17.6 14.8 7.4 7.1 4.8 4.6
Oceania
Australia 4.5 4.5 4.3 3.8 3.7 3.3 2.2 1.7 0.6 0.4
Total Oceania 4.5 4.5 4.3 3.8 3.7 3.3 2.2 1.7 0.6 0.4
CIS
Russia 28.1 30.8 36.0 38.8 49.0 43.2 21.2 27.4 34.6 38.2
Other Countries 13.2 14.9 15.8 18.0 23.5 21.7 14.5 17.2 18.7 17.5
Total CIS 41.3 45.7 51.8 56.8 72.5 64.9 35.7 44.6 53.3 55.7
World Total 1,756.2 1,937.9 2,040.3 1,621.2 1,791.7 1,593.7 1,159.4 1,348.8 1,384.6 1,278.0
Silver was not the sole beneficiary of substitution as base held stable at the previous highs set in 2006 and 2011.
metals continued to gain traction at the bottom end of In addition, 2012’s drop in consumption of 6% was far
the market. Examples here include cobalt, tungsten and smaller than the average annual drop for the prior five
brass, and again it appears more a price than a fashion- years of 18%. There was an element of ‘bottoming out’
led shift as a fair portion of these pieces are plated with for the longer term trend, but also of significance were
gold or silver. Nor can we ignore the reported growing gold prices rising at a slower pace (basis the annual
adoption of other materials, such as resin. Within average) and being more stable. This meant retailers
gold, efforts to reduce prices continued through a shift were often able to keep price tickets unchanged. More
to yet lighter weights and a move to lower caratages, positively, consumers and retailers’ attachment to gold
although the latter trend remained restrained due to looks to remain strong, as suggested by one retailer at
FABRICATION DEMAND
some retailers’ desire to avoid any perceived lowering of the lower end re-introducing a gold offering, having
the quality of their product offering. We should neither previously exited from the metal. Consumption also
ignore the economic backdrop; GDP may have grown by looks to have been boosted by the reported success for
2.2% but uncertainty and still high unemployment led to novel distribution channels, most obviously on-line sales.
stagnation in overall retail expenditure.
The above elements of resilience meant that the pace
If the above sounds relentless gloomy, it is worth noting of decline in gold jewellery imports slowed to the earlier
that, in crude value terms (the fine weight multiplied by noted figure of 5%, from an annual average rate of just
the annual average gold price), consumption essentially over 20% for the preceding five years. Furthermore,
UNITED STATES FABRICATION UNITED STATES JEWELLERY IMPORTS
Jewellery Other Industrial

160 Fabrication & Decorative 200
Dentistry
Others
140 East Asia
Official Coins
160 Latin America
120 Electronics
Turkey
100
120 Italy
Tonnes
Tonnes
80
60 80
40
40
20
0 0
2003 2005 2007 2009 2011 2003 2005 2007 2009 2011
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GOLD SURVEY 2013
Looking forward, we would expect fine gold consumption in

WESTERNISATION’S POTENTIAL IMPACT ON the region to be impacted by these changes, as item weights
EMERGING MARKET JEWELLERY CONSUMPTION are reduced, jewellery purity is lowered and designs of a more
intricate nature (attracting a greater labour charge component)
In most emerging markets, jewellery is often purchased with are introduced. As such, even though expenditure on jewellery
investment as the rationale. This largely explains why the vast may continue to rise, due in part to the change in the markup
majority of gold jewellery sold in these markets takes the form structure and a further increase in incomes, the acquisition of
of high carat plain pieces, with a low labour cost and mark-up. fine gold is not guaranteed to follow a similar path.
Such pieces are therefore quite different to the high margin,
more intricate and often branded pieces to be found in the West. Taking China as an example, what was almost exclusively a
However, in recent years, many developing nations have seen plain 24-carat market has seen uptake of 18-carat designs
the emergence of designs more similar to those in the West and gain market share in first tier cities since the mid-2000s. The
this focus box reviews some of the possible implications of this. 18-carat sector has certainly behaved very differently in a
rising price environment; total Chinese jewellery consumption
Starting with India, jewellery designs in the country are deeply has risen by almost 40% over the last three years whereas
influenced by its diverse culture and religious beliefs. However, 18-carat consumption has almost flatlined over the same period
many of these traditional styles are no longer considered as its budget constraints have undermined sales, whereas
fashionable for daily wear by many urban women, for whom investment-motivated 24-carat pieces have performed well.
elegance and perceived value may count more than intrinsic This should not necessarily be seen as a negative since, should
value. This has already led to a shift towards jewellery, we find ourselves in a bear market, the lower purity designs
often gemset, that is lighter in weight if still never less than could outperform, helping sustain the total.
18-carat. Our estimates are that in 2012 on a fine weight basis
this category could have accounted for just over 55 tonnes of We could always see the emergence of what are in effect
total consumption’s 552 tonnes. It therefore only commands hybrid styles. Up to now we have used the term ‘western’ since
a small market share but this is rising fast; it might have only industrialised Asia has jewellery on offer that remains priced
just exceeded 35 tonnes in 2010 when total consumption by weight according to the prevailing bullion price, the most
stood at 658 tonnes. Future growth is also firmly based as obvious being Japan’s kihei chain. Should similar product come
much rests upon strong trends such as a rising young, urban to be offered elsewhere, that could do much to sustain demand.
population and higher disposable incomes amongst women.
FABRICATION DEMAND
Some contacts have suggested that this could translate into A final point to consider is per capita consumption. At its peak,
an average of five grammes additional consumption in this jewellery consumption in Italy reached around 2g/capita, whilst
segment from each new customer during these initial years Indian and Chinese levels today are under 0.5g. Should these
of heady growth. There would no doubt, however, be some two giants therefore fully adopt western styles, there is clearly
cannibalisation of traditional jewellery consumption. still room for substantial growth in fine weight terms.
These fashion-oriented pieces have more of an aspirational Illustrations of

value than an emotional value (unlike traditional or heirloom Western-style
jewellery). However, this should not lift their likelihood of being Designs
scrapped as our research shows that such pieces are far more
likely to be exchanged for the latest design with the original
retailer; seldom are they sold to raise cash because of the higher
markups. As this churn of stock takes place therefore, we could
Clockwise from top: white gold chain by
see more of an incremental increase in expenditure each year, Kuwayama; yellow gold & diamond bangle
rather than rapid growth in fresh metal needs. by Gitanjali Gems & Jewellery, yellow
and rose gold necklace and earrings by
Shenzhen Yuehao, yellow gold earrings
Jewellery consumption in East Asia has already demonstrated with diamond by Diti Jewellery of Shrenuj .
growing signs of maturity, with clear signals that consumers
are looking to more western style designs. A rising gold price
has been the central pillar in encouraging this move in recent
years, although a change in taste among the general public
and a rapidly emerging middle-class have also accelerated the
migration away from traditional plain heavy, high-carat and low
labour markup pieces.
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GOLD SURVEY 2013
imports in both the third and fourth quarters rose to growing demand amongst the burgeoning middle
modestly year-on-year. The overall losses for the two class. That said, despite lower jewellery consumption
largest suppliers, India and China, were yet more modest elsewhere, resilient demand from Brazil helped to limit
at a respective 2% and 1%. Once more the country the region’s decline in 2012.
bearing much of the brunt of the decline was Italy, with
a drop of 9%, as it continued to suffer such factors as a MIDDLE EAST
duty disadvantage. That said, it is possible that indirect
flows of Italian fabricated product actually rose year- — Jewellery fabrication in the Middle East declined
on-year, albeit by an amount insufficient to offset the by 3% in 2012, with strong gains in Egypt offset by
drop in direct shipments. Imports from one of Italy’s key significant falls in most other regional markets.
rivals, Turkey, were essentially unchanged year-on-year,
which is a stronger result than may be implied, as several Turkish jewellery fabrication declined by just over 4% last
of Turkey’s key exporters had made the decision not to year, in the process giving up most of the gains realised
actively target the US market. Imports overall were also in 2011. Last year, gold bullion imports jumped by over
supported by the fact that domestic jewellery fabrication 25% to exceed 150 tonnes. This marked a four year high,
fell at a faster rate of just over 10%. One explanation for though this impressive outcome still fell short of the near
this was the notable destocking down the distribution 180 tonnes of inbound deliveries witnessed in 2008. In
chain, which meant that consumption at the wholesale past years the level of imported bullion has provided a
level fell more steeply than it did at the retail level. clear barometer of the health of the jewellery industry.
However, last year this was not the case as the much
LATIN AMERICA publicised “gas for gold” trade with Iran inflated bullion
flows (for more on this see chapter 6) and muddied the
— Total jewellery fabrication dropped by 3% in 2012, true picture of jewellery fabrication.
chiefly as a result of higher gold prices.
Higher gold prices and the delicate state of the economy
A 3% fall in Latin American jewellery fabrication in were twin drivers for the modest fall in jewellery
2012 left the full year total at just 40 tonnes, the lowest consumption last year. A drop in the domestic currency
level since 2000. Last year’s decline was the result against the dollar saw gold in local lira terms jump 14%
of weaker demand in both domestic and key export in 2012 impacting on domestic offtake. Furthermore,
FABRICATION DEMAND
markets, with higher gold prices accounting for much of after watching GDP growth top 8% in 2010 and 2011,
the drop. In Mexico, jewellery consumption continued Turkey saw its economic advancement ease (growing at
to weaken last year, dropping 8% to just 18 tonnes. The just 3%) amid a slowdown in expansion, both globally
decline was mainly driven by rising peso gold prices, and in the Eurozone, the impact of civil war in Syria (a
which encouraged further substitution away from gold main conduit to Middle East markets) and the raising
to silver jewellery. The slowdown in economic growth of interest rates throughout the year. Added to this,
also impacted negatively on consumer sentiment. In has been rising inflationary pressures which hit double
contrast, despite disappointing economic growth and figures in the first half of 2012 although it averaged
the weakness of the local currency, Brazilian jewellery 8.9% for the full year according to data published by the
consumption remained broadly flat last year, thanks Turkish Statistics Institute (TurkStat).
LATIN AMERICAN JEWELLERY CONSUMPTION

A sharp fall in fabrication demand at the start of the year
150 as a result of heavy snow which limited consumer access
Other
Mexico
to the market was buoyed by stronger demand in the
120 Brazil
second quarter as a weakening trend in Turkish lira (TL)
gold prices encouraged greater retail activity. Despite
90 the more active market during this period, fabrication
Tonnes
demand in the first half declined by almost 14% year-

60 on-year. Healthy consumption demand returned in the
early stages of the third quarter before giving way to
30 another bout of soft retail trade as local prices exceeded
TL100/g in September for the first time since February.
0 Despite the slow down at the end of the quarter, fine gold
2003 2005 2007 2009 2011
Source: Thomson Reuters GFMS demand jumped 18% year-on-year, and when combined
95
GS 2013 CH7.indd 95 21/03/2013 12:02:50

GOLD SURVEY 2013
with a modest drop in the final quarter delivered an 11% Turning to 2013, initial indications point to a solid start,
increase for the final six months of the year. with both domestic consumption and export demand
buoyed by weaker gold prices. However, a return to
From a product point of view, demand for 14-carat elevated gold prices later in the year will certainly limit
jewellery was the greatest casualty last year, giving up growth prospects, as would a further slowdown in the
ground to 8-carat gemset jewellery (often plated to Turkish economy.
provide the appearance of higher purity styles). Demand
for 22-carat jewellery was also impacted by the higher Saudi Arabian jewellery fabrication continued its
gold price. Diamond jewellery, which has enjoyed a declining trend, slipping for the fifth year in succession,
rapid rise in popularity in recent years, commanding with a further fall of 12% last year to a new record low of
almost 10% market share, recorded only modest gains 32.5 tonnes. To appreciate the extent that the jewellery
in 2012, suggesting it may be nearing saturation point. industry has deteriorated over the last decade, it is worth
Interestingly, another factor negatively impacting considering that, at the start of the millennium, Saudi
Turkish retailers last year was the decision by several of fine gold jewellery fabrication offtake exceeded 150
the country’s banks to start collecting scrap gold from tonnes per annum. Over the last decade, Saudi jewellery
consumers in an attempt to mobilise the metal. This fabrication has therefore plummeted by almost 80% or a
was problematic as it in turn infuriated gold traders who staggering 120 tonnes.
have typically relied on scrap purchases in high price
environments when sales demand is weak. The primary driver of the long term steep fall, and indeed
for the ongoing slide last year, has been the impact of
Turning to export markets, shipments to the United Arab high and volatile gold prices on local consumption. The
Emirates remained the largest destination for Turkish Saudi market, like most in the region, was previously
product in 2012 with shipments (mainly 22-carat chain) characterised by high purity, heavy plain jewellery.
increasing more than two-fold. This was followed by However, the impact of higher prices has limited the
Russia and Iraq, which both registered healthy gains and ability of average consumers to afford these styles and
generated a rise in fabrication of 14-carat and 21-carat has instigated a significant change in the product offered
pieces respectively. In fact, of the top five destinations, in the domestic market. While the average consumer
only Kazakhstan and the United States declined last year, expenditure on jewellery may have remained at a
with the latter down by some 12% year-on-year. relatively constant level across the decade, the average
FABRICATION DEMAND
domestic gold price has surged almost 500% in the last

Feedback from research contacts also suggested demand 10 years, significantly reducing fine gold demand.
in Europe remained moribund thanks to the economic
malaise. However, demand picked up for low purity The Saudi jewellery market has been forced into a
jewellery (mainly for 8-carat in Germany and 9-carat in process of transformation by this rapidly declining
France). Exports via the informal hand carry or luggage consumption. Faced with a shrinking market and rising
trade, centred around Laleli district in Istanbul, weakened gold prices, fabricators have looked to lower carat items
last year. This was mainly the result of tighter border (18-carat now commands a fifth of the market), lighter
security control in key export locations, with this crack items (using stamping and hollow designs) and an
down mainly impacting flows to Russia and Iran. increase in the use of stones in jewellery (predominately
cubic zirconia) to lower the fine gold content and reduce
MIDDLE EAST NEW GOLD ABSORPTION the retail price point. In addition, an increase in more
western styles, including diamond and higher margin
250 Gold Price 1800 lightweight stoneset jewellery, has been boosted by the
1600 increase in shopping mall outlets which are increasingly
US$/oz (Oil price reindexed to H1-05)
200
1400 catering for the middle classes.
1200
150
Oil Price 1000 Turning briefly to this year, demand in early 2013 has
Tonnes
800 been robust with retailers indicating during recent field

100
600
research that consumer interest had returned and sales
were moderately improved on the corresponding period
50 400
in 2012. Lower gold prices appear to be the main driver
200
for the uptick in consumption with expectation of a
0 0
H1-05 H1-07 H1-09 H1-11 return to higher price levels spurring retail activity at
96
GS 2013 CH7.indd 96 21/03/2013 12:02:50

GOLD SURVEY 2013
the perceived bottom of the market. If the gold price as Fabrication demand in Iran remained largely unchanged
expected should revisit higher price levels later in the in 2012, slipping less than 1% year-on-year. While
year then further erosion of the domestic market is likely. recording a modest drop (the fourth in succession),
In the interim at least, the supply chain is enjoying a brief demand in Iran remained one of the more resilient
period of growth after succumbing to heavy losses for markets in the region, providing healthy retail activity
several years though for how long this will last depends on any pullback in the price. This apparent stability was
on the price trajectory over the remainder of the year. mainly built on a platform of safe haven purchases as the
country’s high inflation, economic turmoil, and political
Jewellery consumption in the United Arab Emirates uncertainty saw consumers look to protect assets
(UAE) is estimated to have dropped by more than 14% by shifting to gold, both in jewellery and investment
last year to just under 50 tonnes. The significant drop in products. A crack down on jewellery imports by Iranian
demand was due to a combination of weaker domestic authorities in the second half of the year saw domestic
fabrication and a material slowdown in imports, with fabrication benefit, with demand for locally produced
the 6% rise in the gold price and subsequent weakness products offsetting some of the price related attrition.
across the region, the main drivers for the hefty fall.
Following the virtual collapse of the Egyptian jewellery
Jewellery demand last year was driven lower by the fabrication sector in 2011 due to the country’s political
absence of sales destined for the Iranian market which unrest, demand picked up some lost ground last year
are largely hand carried from Dubai. In the last few (increasing by over 30% on a year-on-year basis).
years, it has been demand from this key market (mainly However, last year’s volumes remained well short of pre-
for 18-carat jewellery) that has helped offset sizeable crisis levels. At the height of the protests in 2011, most
losses elsewhere. However, at the start of the year, the of the larger fabricators closed their operations or simply
re-introduction of tough economic sanctions on Iran saw maintained a skeleton staff and, where possible, moved
pressure applied on banks across the UAE to reduce stock outside of Cairo for protection.
available credit for trade to Iran, crippling trade between
the two countries. Turning to 2012, an improved though not entirely
resolved political landscape in Egypt saw life return to
In addition, demand for 22-carat jewellery (a mainstay of normal for most citizens by the start of the year, providing
sales in Dubai) was also impacted by external factors as some comfort to fabricators and across the jewellery
FABRICATION DEMAND
sales to Indian expatriates fell sharply. Price was the key supply chain. Retailers reopened outlets which led to
motivator in the first half, though a crackdown by Indian restocking, boosting fabrication demand in all sectors. In
custom authorities on the quantity of jewellery imports the first half of 2012, Thomson Reuters GFMS estimate
by consumers had a material impact on tourist purchases offtake jumped by over a quarter (from a reduced base)
in Dubai in the second half of the year. Looking to this as consumers bought into a rising Egyptian pound gold
year, consumption in the first few months has been very price. This healthy rate of recovery was exceeded in the
strong, with reports of healthy double-digit growth on the second half, augmented by a sharp jump in demand
back of lower gold prices and a solid sales performance in the final quarter. Price remained a limiting factor,
during the Dubai Shopping Festival. however, with the domestic gold price rising 8% last year,
as did migration to light weight and gemset items which
curtailed fine gold consumption gains.
MIDDLE EAST JEWELLERY FABRICATION
700 Fabrication demand in Israel recorded a near 8% drop in

Turkey Others
demand in 2012 as a weak export sector (US exports are
600 GCC* Egypt
estimated to have fallen 13% last year) and soft domestic
500 offtake saw the market drift lower. Competition from
silver and plated fashion jewellery continued to erode
400
Tonnes
gold’s market share and looks set to deliver further losses

300
this year. A stronger gold price, coupled with migration
200 to light weight and stone-set items accounted for the
near 12% fall in Jordan. Lebanese fabrication fell for the
100
fifth consecutive year, declining a further 11% last year,
0 in a market hit by the impact of the elevated gold price,
2003 2005 2007 2009 2011
*GCC: Saudi Arabia, UAE, Oman, Bahrain, Kuwait, Qatar coupled with political and economic uncertainty.
97
GS 2013 CH7.indd 97 21/03/2013 12:02:50

GOLD SURVEY 2013
anecdotal information suggests that not only did

INDIAN SUB-CONTINENT unofficial bullion imports rise, so too did inflows of
jewellery. In particular, jewellery imports from Thailand
— Indian jewellery fabrication fell by 7% in 2012, chiefly were reported to have jumped by more than 50% last
as a result of the 24% rise in the rupee gold price. year. This is due to the fact that jewellery imported
— Other negative factors were, however, numerous and from Thailand only attracted a 1% concessional duty
included a retail strike, drought, lower GDP growth, under a bilateral trade agreement (compared to 10% on
a shift to coin and bars, higher jewellery imports and imported pieces from other countries). The assessment
the broad end to a build-up in trade stocks. of volumes is made complex as the trade was not always
— Jewellery fabrication in Pakistan in 2012 fell by a fully official as several traders decided not to adhere to
similar amount, again chiefly due to the price rise. the requirement of these imports having a minimum of
20% added value. That said, the Indian government has
Last year, jewellery fabrication in India slipped by 7% already started to investigate this trade and is said to be
to 618 tonnes. This is higher than our estimate for 2012 negotiating an increase in the import duty.
in Gold Survey - Update 2, reflecting a more rapid than
expected re-stocking by the jewellery trade towards Lastly, the rapid expansion in number of new jewellery
year-end in anticipation of a further duty hike. Another outlets in previous years that entailed a marked rise
contributing factor to this upward revision was slightly in jewellery stocks held by the value chain came to a
higher than expected purchases ahead of the busy halt last year. Prior to 2012, many jewellery shops took
wedding season in early 2013. Nevertheless, despite advantage of rising gold prices to boost the book value of
some improvements in the latter part of the year, 2012 their firms, which in turn gave them access to easy capital
still marked the second consecutive year of decline in the financing. However, given a volatile price environment,
country’s jewellery fabrication, with volumes almost 70 they found that this strategy became increasingly risky.
tonnes below the peak reached in 2010. As such, a number of major chain stores that we spoke
to indicated that they were only rotating their jewellery
Looking at 2012 as a whole, the Indian jewellery industry stocks from one store to another. Even for new retail
undoubtedly faced a series of challenges. First was a shops in 2012, only 40 to 60% of starting inventory was
dramatic rise in the local gold price, due in part to the sourced from jewellery fabricators, with the rest being
marked fall in the rupee against the dollar, which clearly supplied from their existing stores.
FABRICATION DEMAND
had a significant negative impact on jewellery demand.

This was exacerbated by a rise in the customs duty to Jewellery’s call on the bullion market was also affected
4% in early 2012, a three-week nationwide strike by the by a considerable rise in exchange activity, which itself
jewellery industry against the excise duty (on unbranded was the result of a series of record highs for the rupee
jewellery) in March and a slowdown in GDP growth. price and consequential budget constraints. Our
feedback from retailers shows that nearly one third of
Other important factors also need to be taken into their sales last year were motivated by the exchange of
account. Firstly, purchases of gold jewellery from a old jewellery. This was particularly apparent in wedding
quasi-investment perspective (particularly among low jewellery purchases. In some cases, consumers also
income groups) suffered in rural areas as a result of a showed their willingness to stretch budgets to exchange
drop in income due to severe drought. Secondly, there
was a continued shift in preference by the general public INDIAN GOLD JEWELLERY CONSUMPTION
in favour of small bars or imitation coins. Thirdly, the

250 35
yellow metal faced stiff competition from alternative
quasi-investment options, diamonds in particular. Gold Price
200 30
Thanks to more intensive marketing campaigns by
Rupees/10g (thousands)
major retailers, diamond-set jewellery continued to gain 25

150
popularity among high-income women in urban areas,
Tonnes
20
with the development assisted by weaker diamond prices.
100
15
In addition, fabrication was undermined by growing
50
jewellery imports, especially from Thailand. Following 10
the announcement of the duty increase on bullion,

0 5
Q1-08 Q1-09 Q1-10 Q1-11 Q1-12
98
GS 2013 CH7.indd 98 21/03/2013 12:02:51

GOLD SURVEY 2013
old jewellery for diamond-set 18-carat pieces, which in INDIAN JEWELLERY FABRICATION AND CONSUMPTION
turned reduced the fine gold weight per item.
(tonnes) 12.Q1 12.Q2 12.Q3 12.Q4
Fabrication 147 132 167 172
The broader market was also affected by the heavy Consumption 138 125 136 153
margin pressure on retailers, which forced many smaller Average Price (Rs.10/g) 27,969 29,241 30,471 31,274
participants to exit the business, leading to heavy
de-stocking in 2012. With a volatile price, the rise in
customs duty and a change in ad valorem rate, even By contrast, consumption should perform better, thanks
well-established retailers decided to adopt a more to healthy yields from winter crops coupled with ongoing
cautious inventory management strategy. For instance, broader economic growth and growing remittances
many independently-owned jewellery stores reduced the from non-resident Indians (basis a report released by
inventory to sales ratio to 1:2. Also, regional chain stores the World Bank, India is estimated to have received a
simply kept only necessary stocks on display, with any new record of $70 billion of such funds in 2012). More
excess items (less popular designs) being re-melted and importantly, some contacts believe that many consumers
then upgraded to the latest designs. have only indulged in exceptional buying and therefore
that pent-up demand could prove considerable.
Looking ahead, jewellery fabrication is currently projected
to drop by another 10% in the first half of this year, which One consideration to bear in mind again relates to non-
would take volumes to a four-year low. This is expected resident Indians, stemming from the government’s recent
to occur primarily as a result of heavy de-stocking by the changes to the archaic rule on the maximum value of
jewellery trade, following another import duty hike on gold jewellery that can be brought home by a migrant
gold to 6% earlier this year. Indeed, our field trips have worker or family. Basis the current price, the maximum
suggested that there may have been a dramatic rise in weight that could be brought in was lifted to 30 grammes
stocks through the value chain in late 2012 and early for men and 50 grammes for women, a significant rise
2013. This is evident from our estimate for gross bullion from the three gramme limit that prevailed in the past.
imports which jumped to an almost two-year high of 115
tonnes in January this year. Our contacts in the Persian Gulf countries report that,
since the change, sales of jewellery to Indian workers
Also there are rumours of another round of nationwide have improved notably. It will therefore be interesting to
FABRICATION DEMAND
strikes against the new government’s regulation that see the extent to which these additional sales are covered
makes it mandatory for jewellers to collect a KYC by jewellery fabricated in India or in the Gulf. (For the
(“know your customer”) document from every customer record, these sales under our methodology would be
purchasing jewellery worth Rs. 50,000 or more allocated to consumption in the Gulf.)
(equivalent to around 15 grammes of gold at current
prices). The law came into force in February under the Pakistan’s jewellery fabrication mirrored that of its larger
auspices of the Anti-Money Laundering Act. For an neighbour, slipping almost 7% to just below 21 tonnes.
industry where transactions are largely in the form of The annual drop, the seventh in succession, was not
cash, this could have notable consequences. solely a price driven affair. However, a weaker currency
(the rupee fell over 7% against the dollar) delivered a
14% rise in the average rupee gold price and certainly
TOTAL INDIAN FABRICATION DEMAND played a central role in driving jewellery demand
lower. In addition, Pakistan continued to face difficult
1000 220
Scrap used in Fabrication macroeconomic challenges, a crippling energy crisis,
Fabrication excluding Scrap and a progressively worsening security environment
800 Agricultural Production
180 across much of the country. Not surprisingly, this fragile
Index 2003=100
environment did little to encourage consumer spending,

600
especially on perceived luxury goods like jewellery. That
Tonnes
140
GDP
said, diamond and stone-set jewellery was less affected
400
by the sharp rise in the gold price as the middle classes
200
100 were still prepared to buy. In contrast, low wage earners
looked to cheaper alternatives or held on to their savings.
0 60
2003 2005 2007 2009 2011
GFMS Indian Ministry of Agriculture
99
GS 2013 CH7.indd 99 21/03/2013 12:02:51

GOLD SURVEY 2013
2012, being the Year of the Dragon in Chinese culture,

EAST ASIA was an auspicious year to have babies or get married.
Gift related purchases therefore soared during the new
— Jewellery fabrication in East Asia dropped by 1%, year period, helped by increasing promotional events by
thanks to solid demand in China. Excluding China, shops in order to boost sales.
the decline was a more notable 6%.
— Jewellery offtake remained resilient in China, Demand then started to ease from March onwards,
although the pace of the increase slowed to 0.6% in mostly on a seasonal basis, but the drop appeared to be
2012, the smallest gain in more than a decade. particularly acute last year. This subsequently resulted
in the first, yet modest, year-on-year contraction since
Having witnessed an average annual increase of 9% 2006 in jewellery demand in the second quarter of
over the last decade and a jump of 15% in 2011, growth 2012, with a further decline recorded in the following
in Chinese jewellery fabrication stalled in 2012, with three month period. In part, this was due to a major
total offtake only up by a mere 0.6% year-on-year. That economic slowdown and growing worries of a possible
said, at a fresh all-time of 498.4 tonnes, demand in “hard landing”, which hit consumer sentiment, with
China performed well compared with the majority of discretionary spending on jewellery or other luxury
other key markets. As such, not only did China continue products facing increasing pressure. In addition, a lack
to consolidate its place as the second largest jewellery of a clear gold price trend in the middle part of the year
market, but the country’s role became increasingly made many small retailers cautious about replenishing
important, with its jewellery demand accounting for more their jewellery stocks, especially in light of weak sales.
than 26% of the global total last year, compared with
around 8% a decade ago. That said, the fall at the manufacturing level turned out
to be more muted compared to the drop in retail sales.
Moreover, the significant rise in consumption witnessed In essence, this reflected the ongoing expansion of new
over the last few years is all the more impressive given jewellery outlets across China. As outlined in previous
this rate of growth was achieved amid a high and volatile Surveys, rapid urbanisation, along with fast-paced real
gold price environment. Indeed, in expenditure terms, estate development, has created thousands of massive
the rise in the crude value of jewellery demand was a new shopping centres in China. This has occurred in
more promising 4% last year, with the total hitting a new tandem with growing appetite from jewellery retailers to
FABRICATION DEMAND
record of close to RMB 170 billion, more than eight times expand aggressively into third and fourth tier cities where
that seen in 2003. competition is often less fierce and where scope exists for
huge growth in consumer spending in the future.
Nevertheless, demand over the course of 2012 was by no
means persistently strong compared with 2011. Looking As such, even though retail sales tapered off in mid-2012,
at intra-year developments, following an impressive competition for retail jewellery space in prime shopping
increase in 2011, the start of 2012 saw a continuation of locations remained strong. In addition, it is interesting
robust sales of gold jewellery, thanks to a softer local to point out that while the expansion was initially driven
gold price (compared with the peak seen in September by well-established Hong Kong jewellery brands, the last
2011) and a still buoyant local economy. Meanwhile, couple of years also saw a growing number of mainland
Chinese jewellery fabricators and wholesalers expand
EAST ASIAN TOTAL DEMAND * into the retail business. Indeed, almost every major
500 250 jewellery manufacturer we spoke to during our recent
East Asian GDP**
GDP (US$bn) & Exchange Rate (Normalised)
Exchange Rate** visit to China expressed interest in moving further up

400 the jewellery value chain in order to improve their profit
200
margins. These developments undoubtedly had an
300 additional boost to jewellery production, as a significant
Tonnes
150 amount of “start-up” jewellery stocks is needed for each

200 new retail unit.
100
100
Returning to intra-year developments, offtake started to
recover in the fourth quarter, although this was largely
0 50
Q1-08 Q1-09 Q1-10 Q1-11 Q1-12 related to jewellery re-stocking ahead of the Chinese
Source: Thomson Reuters GFMS New Year. Interestingly, in spite of growing signs that
*The sum of total fabrication (including scrap) and physical bar investment
**Weighted average: Indonesia, South Korea, Thailand
100
GS 2013 CH7.indd 100 21/03/2013 15:37:32

GOLD SURVEY 2013
the local economy had avoided a hard landing, there was middle class and the newly rich in ‘first tier’ cities were
a degree of cautiousness among retailers in response increasingly purchasing gold bars for wealth preservation
to a disappointing sales performance in mid-2012. In and as an alternative asset diversification option, the
addition, the sharp gold rally in the late summer and the vast majority of consumers with limited budgets in rural
subsequent retracement kept many jewellers waiting on regions turned to small pieces of 24-carat gold jewellery.
the sidelines for a clear price direction. Finally, anecdotal
information also pointed to a softening in the gifting Moreover, new technologies and sophisticated
segment, largely following the change in leadership and workmanship have also allowed 24-carat gold jewellery
a crackdown on extravagant spending by officials and to adopt more intricate and fashionable contemporary
state-owned companies in the latter part of the year. As designs that previously were only available in 18-carat or
such, jewellery demand only started to pick up in the final PGM jewellery. These more attractive styles have gained
weeks of the year, with the total for the final quarter only increasing popularity among the younger generation who
improving marginally on a year-on-year basis. often consider traditional high purity gold jewellery styles
as outdated and unfashionable.
Turning to the trend within the gold jewellery sector, the
24-carat (pure gold) segment continued to dominate the Demand for 18-carat gold jewellery also held up well,
market and growth in this area had been most prominent particularly for imported high-end pieces. However,
in recent years. Indeed, once perceived as an old it is of note that, after a rapid increase following the
fashion item, 24-carat jewellery seems to have regained introduction of this new segment to China in the mid-
popularity. For instance, in the wake of staggering sales 2000s, growth slowed notably in recent years. In a large
among the general public, many jewellery manufacturers part, this is due to the pricing methodology at the retail
decided to reallocate some of their capacity from level. Unlike 24-carat jewellery which is sold on a weight
palladium or platinum to the 24-carat segment in recent basis, 18-carat items are often sold on a “per piece”
years, despite the fact that margins remained extremely basis with fairly high markups. It has proved difficult to
thin on pure gold jewellery (typically a mere 1% at the persuade them to buy a more expensive item with less
manufacturing level). precious metals content. Sales of 18-carat jewellery are
therefore largely confined to first tier cities.
As regards drivers behind robust demand for 24-carat
pieces, gold’s impressive price performance in the last Looking at this year, our feedback from research contacts
FABRICATION DEMAND
decade and the flexibility to cash in without significant points to a strong rebound in jewellery demand during
losses at retail levels made pure gold jewellery an ideal the Chinese New Year, thanks to an improving economic
quasi-investment vehicle among the general public. outlook coupled with a relatively stable price. In addition,
Another factor that came into play was inflationary as sales turned out to be stronger than previously
pressure. Even though the official CPI fell sharply over anticipated, a rapid fall in inventory held by the jewellery
the course of 2012, still heightened price pressure, trade meant that stock replenishment after the new year
reduced real purchasing power and negative returns lasted longer than in previous years. Indeed, during our
from bank deposits in real terms continued to encourage trip to China in early March (almost one month after
allocations to hard assets such as bullion. While the the start of the new year), many showrooms we visited
CHINESE AND INDIAN JEWELLERY CONSUMPTION CHINESE FABRICATION & HONG KONG BULLION IMPORTS
800 1000 400

Bullion Imports Fabrication
China India
350
800
600
Gold Price 300
600
250
Tonnes
Tonnes
RMB/g
400
400 200
150
200
200
100
0 0 50
2003 2005 2007 2009 2011 2003 2005 2007 2009 2011
101
GS 2013 CH7.indd 101 21/03/2013 12:02:52

GOLD SURVEY 2013
still did not have sufficient stocks to meet demand from gold price ahead of the key trading month of Ramadan
retailers, as manufacturers reached their production saw demand in the first half stronger by 7% year-on-year.
capacity. Going forward, we expect a healthy increase
this year, stemming from the continued increase in While domestic consumption was recovering some lost
incomes, the ongoing expansion of new jewellery stores ground the export sector continued to struggle as key
and bullish price expectations. markets remained moribund due to the fragile economic
environment and elevated gold prices. Deliveries to
Jewellery consumption in Hong Kong is estimated to Europe and the United States remained fragile and
have slipped 5% last year to less than 27 tonnes after Dubai, which is often regarded as a last resort market due
recording impressive consecutive gains the two years to the low markup structure, provided little relief as that
previously. The principal driver for the decline appears market too was weak. The only home to offer support
to have been the softer mainland economy, though was Hong Kong, with shipments to this conduit for the
tourist numbers do not reflect a slowdown last year, with Chinese market relatively steady for most of the year.
the Hong Kong tourism board estimating that visitor
numbers rose 16% last year to over 48 million. Feedback The second half of 2012 saw domestic demand slip
from the retail trade suggests Chinese visitors (which marginally, declining 3% year-on-year, chiefly due to
jumped 24% last year) were more reluctant to spend a near 10% drop in the third quarter as gold prices
given the tighter economic environment and expenditure again picked up momentum. Competition from non-
per customer was down on previous years. Demand for precious alternatives, primarily silver and gold plated
24-carat items dominated sales, though fell marginally, brass, continued to erode gold’s market share and this
while the biggest casualty was 18-carat and gemset has led several fabricators to move some or all their
items, which both were notably weaker. production away from carat jewellery. The migration to
low carat jewellery continues unabated with this market
Indonesian jewellery fabrication reversed a seven-year segment now dominating fabrication volumes. Once
trend of declines to register a modest 2% increase in widely accepted only in West Java, it is rapidly gaining
2012, rising to 35.5 tonnes. The drop in demand over the momentum across the entire archipelago.
last few years can arguably be blamed on the rising and
often volatile gold price so it was something of a surprise Looking to 2013, there has been some brighter news,
that demand was so resilient in the face of further gold with a stronger export sector combining with a healthy
FABRICATION DEMAND
price pressure. In domestic terms, a weaker currency saw domestic market to boost fabrication volumes in the first
the gold price based in rupiah jump 13% last year, adding few months of the year. Lower prices have encouraged
strains to an already struggling retail (and export) sector. retail stock building and consumers appear willing to buy
at current levels. However, should gold prices return to
It would be wrong to assume the market as a whole saw the elevated levels witnessed previously then demand in
a sustained recovery last year. Demand in the first half Indonesia is again likely to fall.
of the year was indeed buoyant. A healthy economy
(Indonesia’s GDP grew by 6.2% in 2012) and the absence In recent years, Malaysian jewellery manufacturing has
of major flooding in Jakarta (an almost annual event in fallen to new multi-year lows and 2012 was no exception,
recent years) combined with a well timed pull back in the with the total falling by almost 8% to its lowest level
INDONESIAN JEWELLERY CONSUMPTION MALAYSIAN JEWELLERY FABRICATION
100 12 80
Domestic
Exchange Rate Exports
Rupiah/US$ exchange rate (thousands)
80 10
60
8
60
Tonnes
Tonnes
6 40
40
4
20
20
2
0 0 0
2003 2005 2007 2009 2011 2003 2005 2007 2009 2011
102
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GOLD SURVEY 2013
since 1989. The decline was due to both easing domestic back to country, also negatively impacted on 22-carat
consumption and a significantly weaker export sector. jewellery wholesale demand in Dubai. The one market
that did offer some support was Hong Kong, with Chinese
Turning firstly to the domestic scene, Malaysia’s economy demand for fine chain and lightweight gemset items
grew at a healthy 5.6% in 2012 supported primarily performing well. However, due to the cost of retooling
by booming manufacturing and construction sectors. many chose not to pursue this market.
Moreover, Inflation was tightly controlled at under 2%
and the unemployment rate remained at an impressive South Korean jewellery fabrication remained on its
low of 3.2%. Given such a robust economy, it may seem decade-long downward trajectory, falling by nearly
counterintuitive that domestic jewellery demand failed 21% to 13.2 tonnes, a level last seen in 1986. Elevated
to recover. There were several factors at play last year gold prices in local currency terms coupled with weaker
which helps explain the decline. Firstly, higher gold domestic sentiment negatively impacted consumer
prices remained the chief culprit, with low carat jewellery, confidence and their discretionary spending.
mainly 9-carat, benefiting from the need to lower retail
price points, and gaining market share at the expense of The higher carat segment, which was dominated by
18-carat designs. wedding sets and gifting jewellery in rural areas, was
largely responsible for last year’s hefty decline. Apart
In addition, expenditure on diamond and gemset items from high prices, demand was also hampered by a
fell markedly on the domestic front, as consumers looked declining number of marriages as well as a shift in
to cheaper fashion alternatives or diverted funds to preference among younger generations in favour of
personal electronics goods (primarily mobile phones), low-carat jewellery or non-jewellery luxury products. By
branded clothing, or simply reduced their discretionary contrast, the 14-carat sector, performed relatively well,
spending. Demand for plain gold (mainly 22-carat) as light weight and more affordable designs continued to
was well supported by the Indian expatriate community attract interest in urban areas.
during price dips, though overall even this market faced
stiff head winds for much of the year. In the wake of lacklustre sales and high gold prices,
local jewellery fabricators continued to move to cheap
The export sector, which consumes the bulk of Malaysia’s alternatives such as stainless steel, titanium or gold
jewellery fabrication saw more closures in 2012 as plated silver. It is of interest to note that, given the long-
FABRICATION DEMAND
fabricators struggled with dwindling sales, cost of term preference towards yellow gold among the general
inventory carry and tougher credit terms. Demand public, some fabricators introduced a gold resembling
in Dubai, which was historically the main outlet for tombac (a metal alloy of copper and zinc), which began
Malaysian product, was down heavily last year, driven to make inroads into the jewellery market. In addition,
lower by the cessation of trade with Iran which had skillful workmanship coupled with new fabrication
previously consumed large quantities of 18-carat techniques allowed for the traditional appearance while
jewellery (mainly machine made chain). achieving significant reductions in gold usage per item.
The crackdown by Indian customs authorities, which Last year, Thailand’s jewellery fabrication is estimated
limited the volume of jewellery tourists could bring to have fallen by around 11% to 14.3 tonnes. Much of the
fall last year stemmed from further losses in domestic
THAI JEWELLERY FABRICATION consumption with higher baht gold prices the chief
80 Fabrication for the architect for the lack of retail activity. Thompson Reuters
domestic market
GFMS estimate domestic consumption (in fine gold
Exports to the United States
Other exports terms) fell by over a fifth last year as the 8% rise in the
60
baht gold price and a notable decline in sentiment as
gold failed to reach new highs saw jewellery demand
Tonnes
40 lose further ground. Demand in the first half slipped just

7.4%, while the declining price trend towards the end of
the year dragged demand down by more than 15% year-
20
on-year in the final six months of the year.
0 On the economic front, Thailand rebounded strongly

2003 2005 2007 2009 2011
Source: Thomson Reuters GFMS last year after being hit hard in 2011 as a result of
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GS 2013 CH7.indd 103 21/03/2013 12:02:53

GOLD SURVEY 2013
the severe flooding experienced in the south of the The jewellery manufacturing sector in Vietnam used an
country, recording annual GDP growth of 6.4%, with estimated 10.7 tonnes of fine gold in 2012, down by over
a headline inflation rate of 3% and unemployment 13%. The fall, the seventh annual drop in succession, saw
dropping to an impressive 0.5% by the end of the first half offtake slip 12%, while demand in the second
year. Despite this healthy set of numbers, consumers half declined by 15 % year-on-year. Higher gold prices
were reluctant to divert funds to gold jewellery (often remained the chief catalyst for the fall last year though
purchased as a quasi-investment option) given the lack there were other underlying factors that also featured.
of a clear directional price trend last year. As a result,
investment driven purchases were well down on previous Vietnam’s respectable sounding GDP growth of 5.1% in
years. Demand remained for gift giving occasions but 2012 was in fact down from 5.9% in 2011 and marked its
consumers were turning to smaller items. slowest pace in 13 years, limiting discretionary spending.
The lack of available supply (due in part to the tight
Thai fabricators, struggling to survive in a weakening import regulations on gold bullion implemented by the
market, have also had to content with rising costs. In State Bank) saw domestic gold prices soar above the
April last year minimum wages were raised 40% (still world bench mark, regularly exceeding $150 an ounce
below $10 a day), with this increase severely impacting or 3 million dong/tael. This elevated level of pricing, not
overheads and reducing profitability. During field surprisingly, had a negative impact on retail activity.
research visits last year this issue was raised consistently
as one of the toughest challenges facing the industry In addition, demand for low carat jewellery continued
and, with further rises already in 2013, will again be a to gain momentum as fabricators looked to reduce the
major issue this year. retail price points of their products. Low purity jewellery,
predominately 10-carat therefore recorded growth at the
Thailand’s jewellery exporters had another difficult year. expense of 18-carat designs. Moreover, selling of under-
Those heavily reliant on the economically troubled US carat items was also widespread last year, as was the
and EU markets for the bulk of their trade saw orders increased use of stones in jewellery designs to reduce the
continue to diminish and limit in size. Based on our fine gold content of the items; both of these measures
analysis, shipment to the United States declined by negatively impacted the level of fine gold consumption.
more than 25% last year forcing many to look elsewhere. The export sector also faced stiff head winds due to the
Exports to China (via Hong Kong) were notably stronger widening gap between gold prices at home and abroad, a
FABRICATION DEMAND
though it was a sharp jump in flows to India that lack of unskilled workers, and increased competition from
helped offset some of the weaker markets. Indeed, across the Asean zone.
with Thailand enjoying a 1% import duty in India (since
increased to 6%) this led to a surge in demand for Thai A final impact last year, and one that is also eroding
product and even saw jewellery from other regional gold’s prevalence in other regional markets, has been
markets being transshipped via Thailand to benefit from the uptake of silver jewellery in the main urban markets.
the concessional duty. Traditionally Vietnamese consumers have shied away
from silver due to a lack of a buy back scheme from
Taiwan’s jewellery fabrication reported a 1% gain to retailers. However, it seems the younger generations are
reach 4.6 tonnes last year, a far cry from nearly 160 willing to forgo the investment driven motive to obtain
tonnes two decades ago. As with previous years, a large
portion of Taiwanese gold consumption was related to JAPANESE JEWELLERY FABRICATION
wedding and gift buying in 2012. For example, those

25 Platinum White Gold
consumers committed to old traditions continued to
Yellow Gold
buy heavy, five-piece wedding sets as well as small
20
size (1-2 grammes) gift items destined for auspicious
occasions and anniversaries. That said, the shrinking
15
fashion jewellery market forced fabricators to introduce
Tonnes
alternative materials, stainless steel in particular, in 10

order to retain younger consumers. The combination of
stainless steel with bold designs and small gold elements 5
proved to be an attractive solution under the high gold
price environment. 0
2003 2005 2007 2009 2011
Source: Japan Chain Makers Association
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GOLD SURVEY 2013
low cost fashion jewellery. To this end there has been a fabrication markets for gold bonding wire - GBW). China,
rapid expansion of stand-alone silver jewellery outlets, which has enjoyed uninterrupted growth since 2001, also
often at the expense of gold showrooms. faced stiff headwinds as a weaker domestic economy and
migration to copper wires saw electronic demand there
Japanese jewellery fabrication posted a 3% increase in fall by 6% year-on-year.
2012. Nevertheless, it is of note that this was against a
relatively low base in 2011 when the country was struck According to the Semiconductor Industry Association
by a devastating earthquake and tsunami. Despite the (SIA), total sales of semi-conductors fell by only 3% last
modest recovery, underlying demand remained weak in year, thanks to healthier sales in the final quarter which
Japan, primarily due to a still struggling local economy. were supported by strong growth in smart phones,
Meanwhile, 18-carat gold jewellery demand also suffered tablets, optoelectronics and memory applications.
from increasing competition from platinum jewellery, Looking at regional performance reveals the true impact
as the latter received a boost from a lower fine metal of the European financial crisis with sales in Europe
price. That said, there were some decent growth in sales slumping almost 12% in 2012.
of kihei gold chains, which were typically bought as a
quasi-investment vehicle by the general public due to Looking to 2013, Thomson Reuters GFMS anticipate
their lower markups. Information from research contacts further attrition in gold bonding wire fabrication as the
suggests that demand for these items was notably rate of migration to cheaper alternatives increases,
stronger when the local gold price dropped towards the placing further pressure on fine gold demand in the
psychologically important level of ¥4,000/gramme. field of electronics. Recently released data suggests
Elsewhere, there was a healthy increase in the low-carat semi-conductor sales have returned to growth in early
segment, in particular for pink and yellow gold. 2013, led by a healthy rise in US demand, however, it
is the continued weakness in Japanese and European
demand that is likely to shape the demand trends for the
remainder of the year.
ELECTRONICS
Last year, demand for gold in the Japanese electronics
— Gold used in electronics slumped 11% year-on-year sector fell by 19% to reach 88 tonnes, a level last seen
in 2012, dragged down by the weaker economic in the early 2000s. The main drivers behind the drop,
FABRICATION DEMAND
environment and substitution losses. were related to a fragile global economic backdrop
which hampered growth in the electronics sector. Other
Global electronics demand fell for the second year in contributing factors remained the elevated gold price
succession, registering a hefty 11% drop last year to environment which saw the rate of miniaturisation and
284.5 tonnes. Weak consumer sentiment remained a substitution gather pace, forcing the industry to look for
driving force in dampening growth in this segment, with cheaper alternatives. Indeed, demand for palladium
the European debt crisis, slowing growth in emerging coated copper last year increased by nearly 50% in some
markets and regional conflicts all impacting on demand components, while other variants such as silver bonding
as they limited spending on electrical and electronic wire were introduced in several products.
appliances. In addition to this economical impact, the
elevated gold price has also accelerated the substitution A small loss was also recorded for electronics fabrication
losses of the yellow metal within the electronic industry in the United States last year. Again, part of this is
as gold’s market share of bonding wire is eroded understood to be due to lower exports of GPC and other
primarily by plain copper and palladium coated copper gold-bearing compounds. Sustained efforts to thrift
wires. It is estimated that non-precious wires are now on the use of the metal or replace it entirely are also
approaching 25% of the bonding wire market, with of consequence, arguably more so. A key feature here
further attrition expected in coming years as copper and, are moves to switch to cheaper palladium-containing
more recently, aluminium alloy wires are introduced to alternatives. The country’s decline at only 4%, however,
higher end packages. was, like Europe’s, smaller than global losses, again
reflecting less exposure to GBW fabrication. It may
Significant falls in fine gold offtake were recorded in this be too early, however, for the reported instances of
segment across several fabricating countries, particularly ‘onshoring’ to lift offtake, as this has yet to be noted by
Japan, Singapore and South Korea (the primary our industry contacts as having raised their production.
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GOLD SURVEY 2013
GLOBAL BILLINGS
grade copper wire or palladium plated copper wire rose
(semi-conductor shipments per year, millions) significantly. New alternatives such as silver bonding
wire or even gold plated copper wire have been tested
World Americas Europe Japan Asia
and should be available on a commercial scale from
2011 300.8 55.4 37.9 43.3 164.2
next year. Some signs of an improvement in demand
2012 291.1 54.0 33.4 41.4 162.3
were detected already this year on the back of recovering
Change -9.7 -1.4 -4.5 -1.8 -1.9
economy in the United States as well as a growing
Change % -3% -3% -12% -4% -1%
Source: SIA
domestic consumption in China.
Last year, Taiwanese electronics fabrication declined

Chinese electronic demand was not immune to the by 8% to reach 16.7 tonnes. Given Taiwan‘s heavy
weak economic environment in the industrialised world, dependency on exports (primarily trade with the Chinese
with export demand hit heavily by the global slowdown. mainland), the slowdown in the economy there and
Negative sentiment at home, deriving from (relatively) broadly across the industrialised world saw end-user
weaker domestic economic conditions, particularly in the demand for finished goods decline. Higher gold prices
first three quarters of last year, also dampened domestic added further pressure as chip manufacturers looked to
consumer spending. According to Thomson Reuters reduce package costs, with substitution away from gold
GFMS’ estimates, demand for gold used in electronics bonding wires to plain copper (and palladium coated
declined by 6% last year (the first drop in over a decade) wires) a key motivator for the annual decline.
to 48 tonnes. Demand in this sector is largely driven by
GBW fabrication and this faced similar head winds to the European electronic demand fell by a little over 5% in
other GBW producing countries in the region. Reduced 2012. As with the other industrial & decorative category,
export orders, coupled with the pressure to cut costs, part of the reason is the decline in shipments of GPC
accelerated the use of palladium coated copper bonding to East Asia due to European producers’ market share
wires, which continued to gain market share at the losses or relocation. Another factor is growing use of
expense of gold, particularly in lower end applications. imported assembled components. This development has
done much to curtail end-use by the local automotive
Gold use in the South Korean electronics sector suffered industry, which previously had been strong thanks to still
a 15% decline last year. A combination of factors robust output of high end vehicles, which typically have
FABRICATION DEMAND
including weaker export demand from traditional trading a far higher electronics component, and the migration
partners, sluggish GDP growth and weaker consumer of top end features to cheaper cars. Thrifting and
spending at home all impacted on demand. In addition, substitution has also been all too apparent, particularly
miniaturisation, and the continuous drive to reduce in the field of telecommunications. It is of note, however,
retail prices of products pushed manufacturers to look that the region’s drop was smaller than the global
for reductions in gold weightings per package, with this average as Europe has little exposure to perhaps the
trend driven largely by the elevated price environment. most undermined field of GBW.
In response to the market’s demand, production of high
GLOBAL SEMI-CONDUCTOR BILLINGS WORLD FABRICATION OF GOLD BONDING WIRE
400 200 120

Other Asia/Pacific
OECD Industrial Production
Japan
Industrial Production (2003 = 100)
160
Number of shipments (millions)
Europe
300
Americas
100
120
Tonnes
200
80
80
100
40
0 0 60
2003 2005 2007 2009 2011 2003 2005 2007 2009 2011
Source: SIA Source: Thomson Reuters GFMS,
GFMS OECD
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GOLD SURVEY 2013
TABLE 9 - ELECTRONICS (INCLUDING THE USE OF SCRAP)
(tonnes) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Japan 100.4 108.0 112.4 123.6 128.4 116.0 94.5 115.0 108.0 88.0
United States 44.1 51.9 55.2 57.4 50.2 52.1 46.2 55.8 58.3 55.7
China 11.7 13.2 14.6 20.3 23.6 31.2 39.5 46.4 51.0 48.0
South Korea 23.4 26.2 28.0 32.9 35.6 33.3 28.8 33.4 31.6 27.0
Taiwan 10.4 12.8 14.6 17.1 18.1 17.1 16.1 19.4 18.1 16.7
Russia 11.1 11.9 12.0 12.1 12.6 13.1 12.3 12.4 12.5 12.6
Singapore 9.8 11.4 18.5 18.5 18.3 17.2 15.1 16.3 13.8 11.3
Germany 10.3 11.3 12.2 14.3 15.3 14.5 9.8 12.6 12.0 11.2
Switzerland 4.2 8.5 7.3 8.9 9.1 7.5 4.7 5.9 5.6 5.4
India 1.1 2.0 2.2 2.6 2.5 2.1 1.9 2.6 2.5 2.4
CIS (ex Russia) 2.0 2.1 2.1 2.2 2.2 2.2 2.0 2.0 2.1 2.0
Hong Kong 1.4 1.6 1.7 1.9 2.0 1.9 1.7 1.9 2.0 1.8
Other Countries 6.7 5.0 4.7 4.4 4.0 3.2 2.3 2.5 2.5 2.4
World Total 236.5 266.0 285.6 316.1 321.7 311.2 274.9 326.0 319.9 284.5
DENTISTRY Last year demand from the Japanese dental industry

eased by 5% and reached 19 tonnes. The precious
— Demand for gold from the dental sector declined by metals dental alloy market in Japan is largely shaped
10%, to the lowest level in our data series going back by demand for Kimpala 12, a gold:palladium dental
to 1968. The losses were driven by the high gold alloy subsidised by the Ministry of Health Labour and
price and the associated substitution to non-metallic Wealth due to the alloy’s durability and a long term cost
substrates base metals and in places palladium. effectiveness. The correlation between subsidies, the
level of which is fixed each quarter based on historical
prices, and the current materials price can often be
Dental fabrication in Europe saw further losses in 2012, one of the factors impacting Kimpala’s demand from
continuing a trend that has now been in place since dentists. As the level of subsidies last year exceeded the
FABRICATION DEMAND
2005. It had once been supposed that this slide might material price, subsidies were responsible for the decline
slow as the bulk of structural changes became historical. in gold demand. One of main reasons contributing to a
However, the pace has if anything accelerated, with gradual and long-term decline for gold (and palladium)
losses last year at over 20% and early indications for 2013 in dentistry is the expansion of usage of non-metallic
suggest similar weakness. Much of the long run drop has products such as porcelain, composite resins, modified
been price-related as people have switched to base metal glass ionomer cements and others, all of which not
alternatives, such as cobalt:chrome, particularly when only offer affordable alternatives but more importantly
state-funded dental care was curtailed. The cosmetically provide more cosmetically pleasing results. Additionally,
superior option of ceramics has also seen its costs fall as initiating prevention and better dental hygiene reduces
techniques have improved, with this material now often the need for dental intervention.
cheaper than gold. It is also now reportedly capable of
replacing the metal in almost all areas, which has led DENTAL GOLD FABRICATION
to speculation by some contacts that the use of gold in

80
dentistry might at some point virtually disappear.
Substantial, if not as marked, losses were also recorded 60

Other
in the United States, as any earlier conservatism about
moving away from gold-bearing alloys continued to
Tonnes
40 Germany
be pushed aside by high prices. One difference of note
United States
between the two regions is that palladium has fared
20
relatively better in the US market, with some contacts
Japan
reporting that the use of that metal in the country’s
dental field is now greater than gold’s. 0
2003 2005 2007 2009 2011
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GOLD SURVEY 2013
TABLE 10 - DENTISTRY (INCLUDING THE USE OF SCRAP)
(tonnes) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Japan 22.3 22.3 23.0 23.2 23.1 23.1 22.8 21.4 20.0 19.0
United States 13.8 14.1 13.9 13.4 12.1 11.4 10.8 9.8 8.5 7.4
South Korea 3.5 3.3 3.2 3.2 3.1 3.0 2.9 2.7 2.5 2.4
Germany 12.8 13.4 8.8 7.7 7.0 6.4 5.7 4.9 3.5 2.3
Russia 1.9 1.9 2.0 2.0 2.0 2.0 2.0 2.0 2.0 1.9
Switzerland 3.2 3.2 2.5 2.8 2.8 2.6 2.4 2.0 1.7 1.5
Netherlands 2.6 2.6 2.5 2.4 2.1 2.0 1.8 1.7 1.5 1.3
Italy 3.3 3.3 3.2 2.8 2.5 2.3 1.9 1.5 0.9 0.7
Other Countries 3.5 3.5 3.4 3.3 3.0 3.0 2.5 2.4 2.2 2.0
World Total 67.0 67.6 62.4 60.7 57.6 55.7 52.7 48.4 42.9 38.6
OTHER INDUSTRIAL AND DECORATIVE USES Other industrial & decorative use of gold in India fell
over 20% last year, with losses mainly in the ‘other
— China continued to outperform by enjoying growth, industrial’ segment. In addition to slower GDP growth
defying the global trend of a 5% drop, while demand and despite sharp currency depreciation, there was a loss
in India slipped by 21%, triggered by losses from of cost competitiveness compared to some neighbouring
plating and jari manufacturing. countries, which undermined offtake for plating
purposes. Many of the firms operating in this sector are
Given a troubled economic backdrop, it might come as said to be diversifying away from the more industrial
little surprise that Europe’s other industrial & decorative sphere to decorative end-uses.
fabrication fell marginally last year. However, one
important cause of this was the unrelated factor, shown This shift was reinforced by the growing popularity of
in the graph opposite, of the ongoing fall in shipments plated jewellery in the northern and western regions of
of gold-containing compounds to East Asia. This chiefly India, due chiefly to high gold prices. This most obviously
occurred as these compounds, primarily gold potassium affected the market through adaptations to new fashion
cyanide (GPC), are ever more sourced locally as the trends while staying within personal budgets, particularly
FABRICATION DEMAND
quality of East Asian suppliers improves and as western amongst younger women. Another evolving segment is
producers relocate capacity. Another factor contributing older women, who are switching to plated jewellery due
to the decline for this overall category was the drop in the to a growing fear of being robbed of high value carat
plating of carat jewellery (its fabrication within Europe jewellery. Also, bridal collections in so called ‘one-gram’
having fallen by 7% in 2012). gold jewellery are performing well in sections of lower
income groups. The term ‘one-gram’ should not be taken
Losses for the total were, however, pared back by further in a literal sense as the weight can go as low as 100
strong gains for sales of plating salts to the luxury milligrams of 22-carat gold, depending on the type of
accessories industry. It had been feared that many of the jewellery purchased.
brands producing these goods had built excessive stocks
but these concerns have lifted, given such factors as
China’s economy having avoided a hard landing. It is also OTHER INDUSTRIAL & DECORATIVE USES
reported that sales of plating salts to producers of silver

120 2000
jewellery were also strong as high gold prices boosted Other Europe Other Real Gold Price
jewellery pieces that retained a link to gold and were still 100
East Asia Switzerland
‘precious’ but were cheaper. Lastly, there was an increase 1500

in the sale of GPC to those producing electro-formed 80
jewellery (we record this here rather than as jewellery

Tonnes
60 1000
fabrication since the first point of transformation from
bullion is the production of GPC). This in turn was largely 40
the product of sales into the principal homes for this form 500
20
of jewellery, North Africa and the Middle East, recovering,
India
although volumes remain far below those achieved 0
0
before the outbreak of political problems. 2003 2005 2007 2009 2011
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GOLD SURVEY 2013
TABLE 11 - OTHER INDUSTRIAL & DECORATIVE USES (INCLUDING THE USE OF SCRAP)
(tonnes) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
China 4.3 5.0 5.5 6.3 8.1 10.1 13.9 17.2 18.7 19.2
South Korea 5.2 5.6 7.6 9.8 11.3 11.1 10.0 11.8 11.4 10.8
Switzerland 10.0 14.0 13.4 13.1 14.2 12.9 10.1 11.5 10.8 9.8
India 19.9 22.6 26.2 24.5 22.5 19.3 12.2 13.2 11.5 9.1
Italy 5.6 5.6 7.0 7.8 9.7 10.9 8.6 8.0 7.7 8.2
Japan 6.5 6.5 6.3 6.7 6.9 6.7 6.5 6.4 5.9 5.4
Brazil 2.0 1.8 2.0 2.5 3.5 3.7 3.4 3.7 3.7 3.6
Germany 4.6 4.1 3.8 3.7 3.7 3.6 2.6 3.2 3.2 3.0
Thailand 1.8 2.0 2.4 2.5 2.6 2.7 2.4 2.6 2.5 2.6
United States 7.5 8.1 5.7 4.5 3.1 2.8 2.5 3.0 3.0 2.5
Hong Kong 1.3 1.3 1.4 1.5 1.6 1.6 1.5 1.7 1.7 1.6
Other Countries 13.5 8.4 8.5 8.8 9.2 9.3 8.6 8.8 8.9 8.8
World Total 82.1 85.0 89.7 91.6 96.3 94.5 82.2 90.9 88.9 84.4
The plated jewellery market is mostly in the hands of Looking briefly at the regional demand trends last year
informal players, although a few branded producers (and excluding China for the moment), demand for
are present, offering guarantees on the coating and plated carat jewellery declined in several markets as both
purity for their products (normally done to a 22-carat domestic and export demand faltered in response to the
and on occasions a 24-carat standard). It is, however, higher gold prices and a weaker economic environment.
mainly offered under different brand names to avoid On the other hand, demand for plated costume jewellery
undermining the existing brand image. Also of note was considerably stronger, with Indonesia and Thailand
is that few of the regional retailers and those selling benefitting from this substitution.
through the shop-in-shop format have been testing this
space, even though this segment has been growing at a China’s demand for gold use in the other industrial
rate of nearly 30% over the last two years. and decorative segment again defied the global trend
to register a 2% rise, reaching a record 19.2 tonnes.
In contrast, the volume of jari (the thread used in the Demand in this sector was largely driven by gains in
FABRICATION DEMAND
weaving of saris) has fallen significantly due to budget plating salts (gold potassium cyanide) offtake which is
constraints. The volume of end-use has dropped to such widely used for electroplating of a wide range of luxury
an extent that the government of Tamil Nadu relaxed goods and accessories such as belt buckles, watch
the usage of gold and silver in ‘Kancipuram silk saris’ (a cases, and sunglasses. It is worth noting that this
brand that has a dominant market share in silk saris in was the lowest growth in a decade reflecting weaker
south India) since December 2011; it was reduced to 40% retail domestic sales which, having peaked during the
silver and 0.5% gold from 57% and 0.6% respectively. traditionally strong first quarter, subsequently eased
In addition, the recycling of silk saris has boomed, thereafter, only to recover some losses in the final months
especially for saris from before 2000, as the designs in of the year.
jari being used then were often notably more elaborate.
Other industrial & decorative fabrication in East Asia CHINESE IMPORTS OF GOLD COMPOUNDS
slipped 2% in 2012, the first decline in over a decade, as

25
modest growth in China failed to offset falls elsewhere; Other
Taiwan
if we exclude China from the regional total, the fall was
20 Japan
more in line with the global average of a 5% decline.
Hong Kong
This sector of industry had enjoyed almost uninterrupted Europe
15
growth in recent years, largely as a result of the
Tonnes
relocation of GPC production from western markets

10
(mainly Europe) due to lower labour costs. In addition,
demand from domestic markets has also grown sharply
5
due to the rapid economic advancement of the region.
This has in turn seen demand for plating salts rise on the 0
back of growth within the accessories sector. 2003 2005 2007 2009 2011
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GOLD SURVEY 2013
8.APPENDICES
Appendix 1 - Gold Futures and Options Turnover (Comex and Tocom) 111
Appendix 2 - Official Sector Holdings and Other Reserves 112
Appendix 3 - Nominal Gold Prices in Various Currencies 1979-2012 113
Appendix 4 - Real Gold Prices in Various Currencies 1979-2012 114
Appendix 5 - Gold Prices and Annotated Graph 2003 115
APPENDICES
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GOLD SURVEY 2013
APPENDIX 1 - GOLD FUTURES AND OPTIONS TURNOVER
Gold Contracts on COMEX Gold Contracts on TOCOM

Gold Equivalent
Futures Options Futures Options Futures
Turnover1 Open Interest2 Turnover1 Turnover Turnover Turnover1 Open Interest2
(100 oz) (100 oz) (100 oz) (tonnes) (tonnes) (1kg) (1kg)
2003 12,228,189 279,381 4,310,318 38,033 13,406 26,637,897 377,870
2004 14,960,597 318,735 4,668,793 46,532 14,521 17,385,766 344,086
2005 15,890,617 323,247 2,886,183 49,425 8,977 17,958,240 299,973
2006 15,917,524 344,915 3,708,573 49,508 11,535 22,228,198 242,743
2007 25,060,440 541,854 3,555,038 77,945 11,057 18,202,949 177,089
2008 38,373,367 306,651 4,392,637 119,353 13,662 14,960,381 72,439
2009 35,136,388 489,779 4,850,111 109,285 15,085 11,913,502 134,163
2010 44,730,345 585,114 7,673,165 139,125 23,866 12,198,340 117,657
2011 49,171,091 419,154 9,477,081 152,937 29,477 15,193,602 123,688
2012 43,893,380 427,991 9,106,807 136,522 28,325 11,895,357 145,738
2011
Jan 4,724,586 463,700 836,501 14,695 2,602 1,011,846 130,185
Feb 2,740,447 509,724 737,821 8,524 2,295 868,189 123,033
Mar 4,512,310 497,625 695,706 14,035 2,164 1,268,032 97,494
Apr 3,145,214 531,882 647,036 9,783 2,012 1,171,559 111,095
May 4,955,279 501,400 753,929 15,412 2,345 1,199,330 123,424
Jun 3,078,861 491,065 596,182 9,576 1,854 1,158,002 126,257
Jul 4,278,165 518,850 749,985 13,306 2,333 1,266,848 131,615
Aug 6,406,493 502,784 1,548,134 19,926 4,815 2,581,114 126,040
Sep 5,297,035 439,874 942,007 16,475 2,930 1,931,203 123,081
Oct 3,025,717 440,335 661,727 9,411 2,058 1,248,463 127,700
Nov 4,105,135 430,118 622,466 12,768 1,936 267,845 45,071
Dec 2,901,849 419,154 685,587 9,026 2,132 1,221,171 123,688
2012
Jan 4,146,564 425,133 701,880 12,897 2,183 1,027,800 120,294
Feb 3,506,653 461,741 793,468 10,907 2,468 1,025,835 115,143
Mar 4,860,601 404,680 920,467 15,118 2,863 1,156,449 127,745
Apr 2,834,798 408,005 680,180 8,817 2,116 818,339 136,426
May 4,913,675 416,909 866,518 15,283 2,695 1,017,132 137,992
Jun 3,479,372 418,129 738,099 10,822 2,296 894,355 133,425
Jul 3,732,707 403,403 704,099 11,610 2,190 751,839 133,663
Aug 2,793,530 438,033 631,297 8,689 1,964 798,314 146,153
Sep 3,460,788 486,521 811,616 10,764 2,524 1,106,584 139,747
Oct 3,147,021 457,811 650,680 9,788 2,024 1,010,981 142,474
Nov 4,380,328 442,584 848,426 13,624 2,639 1,169,694 149,201
Dec 2,637,343 427,991 760,077 8,203 2,364 1,118,035 145,738
APPENDICES
1. Turnover refers to period total 2. Open Interest refers to end-period
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GOLD SURVEY 2013
APPENDIX 2 - OFFICIAL SECTOR GOLD HOLDINGS AND OTHER RESERVES
end-2003 end-2012
Gold Gold
Other Other
Reserves Reserves
million oz tonnes $ billion1 $ billion2 $ billion million oz tonnes $ billion1 $ billion2 $ billion
United States 261.55 8,135 11.04 108.87 74.89 261.50 8,134 11.04 433.43 139.13
Germany 110.58 3,440 179.97 46.03 50.69 109.04 3,391 181.43 180.73 67.42
Italy 78.83 2,452 129.95 32.81 30.37 78.83 2,452 131.17 130.66 50.50
France 97.25 3,025 129.08 40.48 30.19 78.30 2,435 130.29 129.78 54.23
China, P.R.: Mainland 19.29 600 9.82 8.03 408.15 33.89 1,054 9.82 56.17 3,331.12
Switzerland 52.51 1,633 55.41 21.86 47.65 33.44 1,040 57.82 55.43 475.66
Russia 12.55 390 49.74 5.22 73.17 30.79 958 51.04 51.04 486.58
Japan 24.60 765 40.56 10.24 663.29 24.60 765 40.94 40.78 1,227.15
Netherlands 25.00 777 32.46 10.40 11.17 19.69 612 32.77 32.64 22.05
India 11.50 358 26.24 4.79 98.94 17.93 558 27.22 29.72 270.59
Taiwan 13.62 424 4.51 5.67 206.63 13.62 424 5.28 22.58 403.17
Portugal 16.63 517 20.27 6.92 5.88 12.30 382 20.46 20.38 2.20
Venezuela 11.47 357 18.91 4.77 16.03 11.76 366 19.82 19.49 6.67
Turkey 3.73 116 15.71 1.55 33.99 11.56 360 19.23 19.17 99.94
Saudi Arabia 4.60 143 0.41 1.91 22.62 10.38 323 0.41 17.21 656.46
United Kingdom 10.07 313 16.44 4.19 35.35 9.98 310 16.53 16.53 88.60
Lebanon 9.22 287 15.31 3.84 12.52 9.22 287 15.94 15.29 37.12
Spain 16.83 523 14.93 7.00 19.79 9.05 282 15.07 15.01 35.52
Austria 10.21 318 14.84 4.25 8.47 9.00 280 14.98 14.92 12.23
Belgium 8.29 258 12.06 3.45 10.99 7.31 227 12.17 12.12 18.60
Philippines 8.22 256 10.55 3.42 13.65 6.20 193 10.35 10.27 73.48
Algeria 5.58 174 0.30 2.32 33.13 5.58 174 0.30 9.25 189.25
Thailand 2.60 81 8.36 1.08 41.08 4.90 152 8.28 8.12 173.33
Singapore 4.10 127 0.21 1.70 96.03 4.10 127 0.21 6.79 259.09
Sweden 5.96 185 6.77 2.48 19.68 4.04 126 6.72 6.70 45.52
South Africa 3.98 124 6.68 1.65 6.50 4.02 125 6.70 6.67 44.00
Mexico 0.17 5 6.63 0.07 58.96 4.00 125 6.64 6.64 160.41
Libya 4.62 144 0.16 1.92 19.58 3.75 117 0.16 6.22 116.58
Kazakhstan 1.74 54 5.56 0.72 4.24 3.71 115 6.15 6.14 22.13
Greece 3.45 107 5.92 1.44 4.36 3.60 112 5.99 5.96 1.27
ECB 24.66 767 16.14 502

IMF 103.44 3,217 90.47 2,814
BIS 6.17 192 3.73 116
World 1,040.95 32,377 1,018.89 31,691
1
National valuation
2
Market valuation based on end-2003 and end-2012 gold prices respectively
APPENDICES
Source: IMF and central bank websites
112
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GOLD SURVEY 2013
APPENDIX 3 - NOMINAL GOLD PRICES IN VARIOUS CURRENCIES
Average, high and low US$ prices are based on the London PM fix.
Except for the Mumbai price, other prices are calculated using the PM fix and London exchange rates.
PM Fix Low High Mumbai

US$/oz US$/oz US$/oz Euro/kg* SF/kg Yen/g A$/oz Rand/kg Yuan/g Rs/10 g
1979 304.69 216.85 512.00 9,187 16,324 2,189 274.76 8,279 15.23 1,043
1980 614.50 481.50 850.00 18,284 32,946 4,457 537.56 15,331 29.60 1,452
1981 459.24 391.25 599.25 17,000 28,997 3,247 399.71 12,863 25.17 1,705
1982 375.17 296.75 481.00 15,016 24,599 3,016 371.96 13,142 22.83 1,708
1983 423.61 374.25 509.25 17,752 28,564 3,238 470.00 15,162 26.91 1,821
1984 360.78 307.50 405.85 16,811 27,144 2,749 409.90 16,948 26.91 1,958
1985 317.26 284.25 340.90 15,314 24,982 2,429 453.70 22,855 29.95 2,106
1986 367.85 326.30 438.10 13,067 21,147 1,983 553.11 27,126 40.84 2,210
1987 446.22 390.00 499.75 13,181 21,383 2,073 636.24 29,217 53.40 2,891
1988 436.87 395.30 483.90 12,604 20,532 1,801 560.13 31,889 52.28 3,202
1989 380.79 355.75 415.80 11,770 20,021 1,688 481.25 32,063 46.10 3,185
1990 383.59 345.85 423.75 10,192 17,148 1,784 491.27 31,893 58.99 3,406
1991 362.26 344.25 403.00 9,885 16,707 1,567 465.03 32,154 62.00 4,033
1992 343.95 330.35 359.60 8,819 15,522 1,400 468.13 31,502 60.98 4,255
1993 359.82 326.10 405.60 9,793 17,103 1,282 530.13 37,880 66.66 4,384
1994 384.15 369.65 396.25 10,235 16,865 1,261 525.36 43,867 106.45 4,652
1995 384.05 372.40 395.55 9,042 14,589 1,160 518.50 44,787 103.12 4,799
1996 387.87 367.40 414.80 9,587 15,388 1,355 495.99 53,466 103.68 5,191
1997 331.29 283.00 366.55 9,429 15,457 1,286 445.02 48,993 88.30 4,556
1998 294.09 273.40 313.15 8,506 13,707 1,238 467.79 52,307 78.28 4,182
1999 278.57 252.80 325.50 8,405 13,450 1,018 431.84 54,764 74.14 4,327
2000 279.11 263.80 312.70 9,734 15,158 967 480.88 62,173 74.29 4,518
2001 271.04 255.95 293.25 9,737 14,714 1,058 524.53 74,842 72.13 4,462
2002 309.68 277.75 349.30 10,545 15,470 1,245 569.76 104,477 82.41 5,131
2003 363.32 319.90 416.25 10,328 15,704 1,352 558.35 88,008 96.68 5,620
2004 409.17 375.00 454.20 10,582 16,335 1,422 556.01 84,738 108.88 6,119
2005 444.45 411.10 536.50 11,521 17,839 1,577 583.36 91,114 117.09 6,454
2006 603.77 524.75 725.00 15,452 24,298 2,256 801.47 131,751 154.78 8,912
2007 695.39 608.40 841.10 16,294 26,775 2,628 828.48 157,352 169.85 9,345
2008 871.96 712.50 1,011.25 19,071 30,267 2,907 1,033.13 229,694 194.79 12,256
2009 972.35 810.00 1,212.50 22,402 33,834 2,919 1,235.22 261,600 213.98 15,310
2010 1,224.52 1,058.00 1,421.00 29,739 38,267 3,444 1,331.28 287,568 266.15 18,386
2011 1,571.52 1,319.00 1,895.00 36,328 57,426 4,017 1,524.33 368,623 326.59 24,003
2012 1,668.98 1,540.00 1,791.75 41,755 57,238 4,278 1,610.49 440,575 338.51 29,730
* Prior to 1999 Deutsche Mark prices have been converted into Euros at the official conversion rate
APPENDICES
113
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GOLD SURVEY 2013
APPENDIX 4 - REAL GOLD PRICES IN VARIOUS CURRENCIES (CPI DEFLATED - CONSTANT 2012 MONEY TERMS)
Average, high and low US$ prices are based on the London PM fix.
Except for the Mumbai price, other prices are calculated using the PM fix and London exchange rates.
PM Fix Low High Mumbai
US$/oz US$/oz US$/oz Euro/kg* SF/kg Yen/g A$/oz Rand/kg Yuan/g Rs/10 g
1979 963.96 686.05 1,619.82 17,571 31,179 3,048 1,160.93 172,495 89.18 14,112
1980 1,712.72 1,342.02 2,369.10 33,170 60,493 5,757 2,062.49 281,036 161.19 17,639
1981 1,160.29 988.51 1,514.03 29,007 49,996 3,998 1,398.10 204,592 133.60 18,310
1982 892.87 706.24 1,144.74 24,340 40,144 3,615 1,170.57 182,341 118.76 17,011
1983 976.79 862.97 1,174.26 27,862 45,272 3,809 1,343.23 187,311 137.25 16,204
1984 797.49 679.70 897.10 25,765 41,803 3,163 1,126.97 187,741 133.59 16,081
1985 677.16 606.71 727.62 22,969 37,198 2,738 1,168.62 217,701 132.93 16,384
1986 770.83 683.75 918.02 19,623 31,256 2,222 1,306.03 217,761 169.36 15,823
1987 901.32 787.76 1,009.45 19,746 31,154 2,320 1,384.78 201,918 206.55 19,021
1988 848.43 767.69 939.76 18,645 29,361 2,002 1,136.91 195,409 170.32 19,165
1989 705.47 659.07 770.32 16,941 27,753 1,835 908.16 171,248 126.90 17,961
1990 674.25 607.91 744.84 14,285 22,557 1,881 864.22 149,000 157.58 17,625
1991 610.88 580.52 679.59 14,698 20,756 1,600 792.51 130,248 159.96 18,329
1992 562.96 540.70 588.57 12,479 18,534 1,406 790.01 112,058 147.95 17,299
1993 572.04 518.44 644.83 13,269 19,775 1,271 878.70 122,814 141.13 16,757
1994 595.21 572.74 613.96 13,497 19,334 1,242 854.61 130,554 181.41 16,135
1995 578.82 561.26 596.15 11,723 16,430 1,144 806.06 122,645 150.34 15,100
1996 567.92 537.95 607.36 12,251 17,189 1,334 751.43 136,382 139.54 14,989
1997 474.01 404.91 524.45 11,827 17,176 1,244 672.53 115,078 115.59 12,276
1998 414.34 385.19 441.20 10,570 15,229 1,190 700.96 114,955 103.35 9,949
1999 384.07 348.54 448.78 10,385 14,821 981 637.74 114,424 99.29 9,838
2000 372.25 351.83 417.05 11,854 16,449 939 679.75 108,625 99.23 9,874
2001 351.55 331.98 380.36 11,628 15,811 1,035 710.32 140,442 95.65 9,405
2002 395.39 354.63 445.98 12,417 16,517 1,229 749.08 179,595 110.13 10,362
2003 453.59 399.38 519.67 12,036 16,661 1,338 714.29 142,912 127.73 10,933
2004 497.50 455.96 552.26 12,131 17,193 1,408 695.01 135,721 138.47 11,469
2005 522.67 483.45 630.92 13,005 18,557 1,566 710.24 141,136 146.24 11,606
2006 688.02 597.97 826.16 17,171 25,012 2,234 942.79 195,107 190.53 15,105
2007 770.03 673.71 931.39 17,701 27,362 2,601 951.58 217,429 199.60 14,884
2008 930.52 760.34 1,079.16 20,188 30,198 2,838 1,137.28 284,636 216.23 18,020
2009 1,040.47 866.75 1,297.45 23,639 33,919 2,889 1,335.54 302,627 239.20 20,303
2010 1,289.20 1,113.88 1,496.06 31,029 38,098 3,433 1,399.68 319,085 287.98 21,766
2011 1,604.26 1,346.48 1,934.48 37,050 57,043 4,016 1,550.44 389,493 335.24 26,096
2012 1,668.98 1,540.00 1,791.75 41,755 57,238 4,278 1,610.49 440,575 338.51 29,730
* Prior to 1999 Deutsche Mark prices have been converted into Euros at the official conversion rate
APPENDICES
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GOLD SURVEY 2013
APPENDIX 5 - GOLD PRICES IN 2003
London London High Low

AM fix PM fix PM fix PM fix Rupees/
US$/oz US$/oz US$/oz US$/oz Euro/kg SF/kg Yen/g A$/oz Rand/kg £/oz 10g
Annual Average 363.83 363.32 10,328 15,704 1,352 558.35 88,008 222.21 5,620
Maximum 417.25 416.25 11,342 17,082 1,472 646.63 103,874 240.58 6,210
Minimum 319.75 319.90 9,603 14,373 1,238 511.31 76,368 205.65 5,060
Range:Average 26.8% 26.5% 16.8% 17.2% 17.3% 24.2% 31.3% 15.7% 20.5%
Monthly Average
Jan 356.86 356.86 369.90 343.80 10,802 15,791 1,363 611.92 99,729 220.68 5,752
Feb 359.58 358.97 382.10 344.10 10,707 15,703 1,379 603.30 95,498 223.16 5,772
Mar 341.56 340.55 354.70 329.45 10,128 14,878 1,298 565.73 88,043 215.04 5,423
Apr 328.21 328.18 336.75 319.90 9,719 14,540 1,265 538.55 80,812 208.40 5,189
May 355.41 355.68 371.40 340.50 9,882 14,968 1,341 549.41 87,939 219.12 5,558
Jun 356.91 356.35 366.75 343.85 9,819 15,125 1,356 535.87 90,198 214.65 5,509
Jul 350.77 351.02 365.60 342.50 9,920 15,347 1,339 530.32 85,048 216.19 5,363
Aug 358.99 359.77 375.60 347.50 10,363 15,961 1,373 552.02 85,330 225.60 5,462
Sep 378.88 378.95 390.70 370.00 10,828 16,755 1,399 572.10 88,913 234.92 5,718
Oct 379.09 378.92 388.25 370.25 10,400 16,109 1,333 545.39 84,795 225.71 5,698
Nov 390.20 389.91 398.35 377.90 10,699 16,684 1,368 544.09 84,180 230.70 5,850
Dec 407.62 406.95 416.25 400.25 10,669 16,583 1,411 551.34 85,015 232.90 6,097
Quarterly Average
Mar 352.62 352.09 10,547 15,459 1,346 593.79 94,490 219.59 5,655
Jun 347.01 346.90 9,807 14,882 1,321 541.19 86,380 214.06 5,421
Sep 362.81 363.16 10,364 16,013 1,370 551.14 86,443 225.42 5,514
Dec 391.92 391.06 10,579 16,440 1,368 546.79 84,664 229.52 5,887
GOLD PRICES IN 2003, PM FIX DAILY
US$/oz; other currencies reindexed to 2nd January
Swiss National Bank Iraqi gunboat

450 Newmont reports 109t
confirms sales up to fires on
APPENDICES
Banco de Potugal Q2 hedge reduction

and beyond Kuwaiti vessel
announces 15t sale
end_September 04
US declares Terrorist bombing US$/oz
400 end to Iraqi of Jakarta Marriot
hostilities
Yen
US$/oz
350
Euro
300 Rand
A$ Terrorist Bank of Greece
US-led war Banco de Portugal bombing announces Saddam
begins in Iraq announces 45t sale in Mumbai 20t sale Hussein Captured
250
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
115
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GOLD SURVEY 2013

Annual Average 409.53 409.17 10,582 16,335 1,422 556.01 84,738 223.38 6,119
Maximum 455.75 454.20 11,201 17,531 1,507 585.15 97,046 241.06 6,755
Minimum 373.50 375.00 10,152 15,436 1,351 511.62 76,599 210.33 5,600
Range:Average 20.1% 19.4% 9.9% 12.8% 10.9% 13.2% 24.1% 13.8% 18.9%
Monthly Average
Jan 414.50 413.79 425.50 399.75 10,540 16,505 1,414 536.94 92,565 226.97 6,183
Feb 404.73 404.88 416.00 393.25 10,298 16,204 1,388 520.87 87,831 216.83 6,019
Mar 405.98 406.67 423.70 390.50 10,658 16,685 1,418 542.46 86,408 222.66 5,987
Apr 404.85 403.26 427.25 386.00 10,816 16,823 1,397 543.17 85,374 223.93 5,914
May 383.95 383.78 393.60 375.00 10,280 15,830 1,385 545.50 83,638 214.70 5,741
Jun 391.78 392.37 404.25 384.85 10,388 15,775 1,380 565.14 80,983 214.72 5,862
Jul 398.44 398.09 406.50 387.30 10,433 15,930 1,400 556.09 78,420 216.10 6,055
Aug 400.13 400.51 410.60 390.85 10,556 16,241 1,420 562.55 83,137 219.91 6,124
Sep 405.40 405.28 415.65 396.30 10,670 16,466 1,435 577.17 85,149 226.13 6,166
Oct 420.21 420.46 429.15 411.25 10,817 16,685 1,471 573.09 86,383 232.76 6,361
Nov 439.06 439.38 453.40 423.50 10,865 16,529 1,479 569.93 85,275 236.16 6,549
Dec 442.97 442.08 454.20 434.00 10,629 16,316 1,477 577.14 81,760 229.22 6,444
Quarterly Average
Mar 408.38 408.44 10,507 16,476 1,407 533.90 88,873 222.25 6,064
Jun 393.63 393.27 10,495 16,136 1,387 551.82 83,250 217.73 5,839
Sep 401.34 401.30 10,553 16,212 1,418 565.31 82,221 220.72 6,112
Dec 434.16 433.80 10,777 16,517 1,476 573.21 84,573 232.88 6,453
500 Dutch Central Bank

Banque de France US$ hits record low
APPENDICES
New CBGA to sell 100t over

announces potential against euro
announced next 5 years
500-600t of sales China raises
interest rates US$/oz
450 Euro
A$
Yen
US$/oz
400
Rand
Banco de Portugal Swiss National Bank
announces 35t announces 130t of remaining
350 of recent sale sales under new CBGA
Bundesbank considers Argentine Central Bank
Net fund positions South Asian
600t of sales on Comex at announces July and
in new CBGA Tsunami
record high August purchases
300
116
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GOLD SURVEY 2013

Annual Average 444.99 444.45 11,521 17,839 1,577 583.36 91,114 244.95 6,455
Maximum 537.50 536.50 14,431 22,422 2,070 710.76 109,323 310.39 8,100
Minimum 411.50 411.10 10,301 15,943 1,385 531.09 80,518 220.58 5,950
Range:Average 28.3% 28.2% 35.8% 36.3% 43.4% 30.8% 31.6% 36.7% 33.3%
Monthly Average
Jan 424.08 424.03 427.75 420.00 10,413 16,111 1,409 554.16 81,686 225.98 6,152
Feb 423.43 423.35 435.45 411.10 10,457 16,218 1,429 541.99 81,797 224.34 6,101
Mar 434.35 434.32 443.70 425.15 10,569 16,374 1,468 552.35 84,048 227.66 6,270
Apr 429.14 429.23 437.00 423.45 10,665 16,499 1,480 555.22 84,902 226.39 6,147
May 422.90 421.87 429.15 414.45 10,690 16,518 1,446 551.00 86,053 227.61 6,030
Jun 430.30 430.66 440.55 415.35 11,390 17,533 1,505 561.52 93,382 236.91 6,131
Jul 424.75 424.48 432.60 418.35 11,340 17,669 1,528 564.06 91,523 242.44 6,060
Aug 437.77 437.93 447.25 430.65 11,450 17,784 1,557 574.87 91,008 244.07 6,258
Sep 455.94 456.05 473.25 439.60 11,976 18,561 1,630 595.78 93,289 252.36 6,533
Oct 470.11 469.90 475.50 462.85 12,568 19,458 1,735 623.53 99,476 266.40 6,874
Nov 476.67 476.67 496.00 456.50 13,010 20,103 1,816 648.36 101,938 274.98 7,131
Dec 509.42 510.10 536.50 489.00 13,829 21,396 1,947 684.77 104,298 293.06 7,588
Quarterly Average
Mar 427.40 427.35 10,481 16,237 1,436 549.55 82,536 226.02 6,174
Jun 427.57 427.39 10,926 16,866 1,478 556.08 88,229 230.45 6,101
Sep 439.71 439.72 11,593 18,010 1,572 578.45 91,947 246.35 6,285
Dec 484.88 484.20 13,099 20,262 1,827 650.56 101,787 277.36 7,209

Oil price
at record Gold at 24-year
650 Swedish National Bank Chinese yuan high high
APPENDICES
revalued by 2.1%
announces 15t and a further
45t of sales under new CBGA Paris riots Yen
600 Dutch vote “no”
begin
to EU constitution US first time jobless
Syria announces plans
claims at 2-year high
to withdraw from
550 the Lebanon
French vote
“no” to EU
First Palestenian Rand
US$/oz
500 constitution Euro

election since 1996
US$/oz
450 Swedish National Bank

announces plans to sell 10t
A$ under year two of CBGA 2
Katrina
400 Bank of Korea to Terrorist strikes Bank of Portugal
diversify reserves attacks the US reveals 10t of sales
Iraqi election on London Gulf coast over past month
350
117
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GOLD SURVEY 2013

Annual Average 604.34 603.77 15,452 24,298 2,256 801.40 131,719 327.68 8,913
Maximum 725.75 725.00 18,094 28,036 2,575 936.27 153,245 383.54 10,665
Minimum 520.75 524.75 13,952 21,568 1,955 702.64 103,939 298.90 7,620
Range:Average 33.9% 33.2% 26.8% 26.6% 27.5% 29.1% 37.4% 25.8% 34.2%
Monthly Average
Jan 549.43 549.86 568.75 524.75 14,588 22,599 2,041 733.38 107,510 311.21 7,918
Feb 555.52 555.00 572.15 538.75 14,949 23,298 2,102 748.55 109,141 317.66 8,029
Mar 557.22 557.09 584.00 535.00 14,895 23,384 2,101 767.30 111,928 319.53 8,059
Apr 611.85 610.65 644.00 586.50 15,985 25,174 2,296 828.35 119,414 345.23 8,957
May 676.77 675.39 725.00 642.25 16,996 26,450 2,424 883.77 137,326 361.14 9,969
Jun 597.90 596.15 641.80 567.00 15,140 23,617 2,196 805.91 133,553 323.44 8,943
Jul 633.09 633.71 663.25 605.70 16,060 25,203 2,357 842.14 144,470 343.54 9,568
Aug 631.56 632.59 654.40 613.40 15,873 25,040 2,356 828.74 141,141 333.90 9,546
Sep 600.15 598.19 637.75 573.60 15,113 23,889 2,252 791.84 143,017 317.15 8,975
Oct 586.65 585.78 608.50 560.75 14,931 23,741 2,235 777.19 143,957 312.32 8,704
Nov 626.83 627.83 646.70 614.10 15,662 24,938 2,367 812.79 146,267 328.37 9,141
Dec 629.51 629.79 648.75 614.00 15,319 24,423 2,368 801.36 142,593 320.77 9,132
Quarterly Average
Mar 554.13 554.07 14,811 23,099 2,082 750.31 109,607 316.22 8,002
Jun 629.17 627.71 16,028 25,052 2,304 839.34 130,680 342.85 9,294
Sep 621.76 621.67 15,685 24,716 2,322 821.03 142,849 331.57 9,361
Dec 613.61 613.21 15,302 24,363 2,320 796.77 144,410 320.46 9,015
US$/oz; other currencies reindexed to 3rd January
800 Euro rises to 1.32

Iran removes UN against US dollar
APPENDICES
Gold at Banco de Portugal

seals at the Natanz 26-year reveals 20 tonnes sale
750 uranium plant Rand
Silver ETF high
starts trading
700
ECB announce 57-
Hamas wins Oil price at
tonne gold sale
650 Palestinian 17-month low Yen
US$/oz
elections
US$/oz
600 A$
550 Israel-Hezbollah Euro

israel attacks conflict
500 Lebanon Chinese central bank
BT pension fund to invest N. Korea N. Korea conducts comments on
3% in commodities missile test first nuclear test reserve allocation
450
118
GS 2013 App 5-14.indd 118 21/03/2013 11:49:45

GOLD SURVEY 2013

Annual Average 696.43 695.39 16,294 26,775 2,628 828.48 157,352 346.98 9,345
Maximum 841.75 841.10 18,410 30,503 3,049 950.89 184,202 418.36 10,715
Minimum 608.30 608.40 15,063 24,242 2,324 756.38 141,802 314.34 8,520
Range:Average 33.5% 33.5% 20.5% 23.4% 27.6% 23.5% 26.9% 30.0% 23.5%
Monthly Average
Jan 630.35 631.17 651.75 608.40 15,622 25,235 2,444 806.34 145,906 322.24 9,078
Feb 665.10 664.75 685.75 645.70 16,337 26,486 2,575 849.24 153,416 339.42 9,585
Mar 655.89 654.90 670.40 636.75 15,899 25,647 2,470 825.87 154,830 336.27 9,368
Apr 680.01 679.37 691.40 658.25 16,141 26,442 2,597 820.08 155,142 341.37 9,329
May 668.31 666.86 688.80 652.65 15,863 26,185 2,590 807.95 150,515 336.31 8,884
Jun 655.71 655.49 671.50 642.10 15,707 25,990 2,585 778.16 150,842 329.87 8,713
Jul 665.27 665.30 684.30 648.75 15,587 25,828 2,598 767.08 149,158 327.08 8,755
Aug 664.53 665.41 675.50 657.50 15,704 25,728 2,497 803.62 154,562 330.97 8,824
Sep 710.65 712.65 743.00 672.00 16,471 27,158 2,636 841.85 162,798 352.92 9,322
Oct 754.48 754.60 789.50 725.50 17,049 28,490 2,811 839.32 164,058 368.93 9,696
Nov 808.31 806.25 841.10 778.85 17,663 29,119 2,875 900.72 174,059 389.36 10,341
Dec 803.62 803.20 833.75 784.25 17,729 29,422 2,900 920.81 176,124 397.28 10,291
Quarterly Average
Mar 649.99 649.82 15,941 25,767 2,494 826.46 151,320 332.43 9,314
Jun 667.62 666.84 15,896 26,198 2,590 801.47 152,069 335.67 8,975
Sep 679.19 680.13 15,903 26,209 2,575 803.00 155,278 336.49 8,950
Dec 787.57 786.25 17,453 28,969 2,858 883.45 170,915 383.95 10,107
900 Bear Stearns provides

Newcrest reveals Turkish troops
Cut in Fed $3.2bn in loans to
APPENDICES
2.3 Moz hedge cross into

Funds rate, bail out hedge fund US$/oz
Slump in book cut Iraq
basis points
SNB announces bond markets
800 Dollar weakens plan to sell 250t
News emerges of 50 Yen
on lower than over CBGA year
expected US prospective Iranian
trade report and US talks Rand
US$/oz
700 Euro
Benazir Bhutto
A$
assassinated
Euro
Turkish forces 25
600 Iran detains occupy Iraqi
UK personnel Novartis pension village 25
fund reveals 4%
Global stock Lihir buyback move into ECB injects €95bn Gold price at
markets fall revealed commodities to reassure markets 27-year high
500
119
GS 2013 App 5-14.indd 119 21/03/2013 11:49:46

GOLD SURVEY 2013

Annual Average 872.37 871.96 19,071 30,267 2,907 1,033 229,694 471.62 12,256
Maximum 1,023.50 1,011.25 21,390 33,263 3,313 1,374 276,780 607.45 14,105
Minimum 692.50 712.50 17,015 26,398 2,134 908 185,415 418.08 10,650
Range: Average 37.9% 34.3% 22.9% 22.7% 40.6% 45.1% 39.8% 40.2% 28.2%
Monthly Average
Jan 887.78 889.60 924.50 846.75 19,432 31,471 3,080 1,009.10 200,499 451.79 11,284
Feb 924.28 922.30 971.50 887.50 20,103 32,320 3,176 1,010.01 227,169 469.63 11,886
Mar 971.06 968.43 1,011.25 925.75 20,048 31,514 3,140 1,047.54 248,320 483.51 12,618
Apr 911.60 909.70 946.00 871.00 18,565 29,649 3,002 977.78 227,189 459.16 11,829
May 889.13 888.66 927.50 853.00 18,374 29,851 2,981 936.24 217,581 452.26 12,165
Jun 889.54 889.49 930.25 862.25 18,381 29,665 3,057 935.20 227,087 452.14 12,356
Jul 941.17 939.77 986.00 897.50 19,171 31,049 3,228 976.57 230,081 472.39 13,026
Aug 840.39 839.03 912.50 786.50 18,009 29,190 2,948 950.22 206,526 444.29 11,858
Sep 824.92 829.93 905.00 740.75 18,581 29,588 2,845 1,014.19 214,901 461.11 12,211
Oct 812.82 806.62 903.50 712.50 19,498 29,610 2,600 1,176.83 251,530 476.78 12,768
Nov 757.85 760.86 822.50 713.50 19,204 29,138 2,369 1,157.99 247,689 497.72 12,157
Dec 819.94 816.09 880.25 749.00 19,531 30,131 2,395 1,218.67 261,862 547.45 12,884
Quarterly Average
Mar 925.67 924.83 19,848 31,772 3,131 1,021.19 224,187 467.55 11,912
Jun 897.11 896.29 18,443 29,718 3,014 950.40 224,105 454.63 12,114
Sep 870.81 871.60 18,613 29,983 3,012 981.19 217,695 459.93 12,389
Dec 797.98 794.76 19,413 29,618 2,463 1,183.57 253,457 505.19 12,611

Israeli/Gaza
Collapse Collapse of conflict
1300 Washington 50 begins
of Bear
APPENDICES
Stearns Dollar at record Mutual

South
1200 low against euro
African Bailout
power Rand of AIG
1100 crisis A$
1000
US$/oz 75
Euro
US$/oz
900
800
75
50 Oil price at Yen
700 record high 50
75
25 Collapse
600 Cut in Fed BT Pension Fund of Lehman Brothers US interest
Funds rate, Gold at invests £350m rates at
basis points record high into commodities historic low
500
120
GS 2013 App 5-14.indd 120 21/03/2013 11:49:48

GOLD SURVEY 2013

Annual Average 973.66 972.35 22,409 33,834 2,919 1,235.22 261,600 621.07 15,233
Maximum 1,218.25 1,212.50 25,857 38,963 3,442 1,543.63 324,690 729.97 18,220
Minimum 813.00 810.00 19,910 29,318 2,337 1,126.74 232,031 552.67 12,905
Range: Average 41.6% 41.4% 26.5% 28.5% 37.9% 33.8% 35.4% 28.5% 34.9%
Monthly Average
Jan 857.73 858.69 919.50 810.00 20,873 31,146 2,491 1,274.87 274,207 593.75 13,490
Feb 939.76 943.16 989.00 895.00 23,711 35,327 2,817 1,452.13 302,852 654.60 14,777
Mar 925.99 924.27 956.50 893.25 22,786 34,341 2,907 1,388.33 295,769 651.12 15,241
Apr 892.66 890.20 924.50 870.25 21,701 32,871 2,826 1,246.27 256,786 604.96 14,481
May 926.86 928.64 975.50 884.50 21,858 33,029 2,882 1,212.81 250,402 600.96 14,606
Jun 947.81 945.67 981.75 920.60 21,699 32,879 2,940 1,178.77 244,502 577.62 14,639
Jul 934.27 934.23 955.00 908.50 21,329 32,417 2,837 1,160.93 238,850 570.28 14,722
Aug 949.50 949.38 964.00 932.75 21,402 32,626 2,900 1,136.98 242,761 573.97 14,968
Sep 996.44 996.59 1,018.50 955.00 21,997 33,322 2,929 1,156.35 240,750 611.05 15,730
Oct 1,043.51 1,043.16 1,061.75 1,003.50 22,625 34,257 3,029 1,150.68 250,902 644.18 15,859
Nov 1,126.12 1,127.04 1,182.75 1,061.00 24,287 36,683 3,229 1,225.26 271,867 678.62 17,057
Dec 1,135.01 1,134.72 1,212.50 1,084.00 24,938 37,506 3,267 1,253.58 273,289 696.85 17,150
Quarterly Average
Mar 907.61 908.41 22,442 33,589 2,739.87 1,370.76 290,830 633.10 14,467
Jun 923.20 922.18 21,749 32,923 2,884.56 1,211.50 250,367 593.86 14,577
Sep 960.00 960.00 21,577 32,788 2,887.37 1,152.01 240,696 585.21 15,125
Dec 1,100.64 1,099.63 23,897 36,075 3,169.69 1,208.06 264,864 672.38 16,712
US$/oz; other currencies reindexed to 2nd January Suspension of

IMF approves gold Dubai World
Germany, Japan sales of 403.3 tonnes debt repayment
1300 ECB cuts China reveals a
and France India buys
APPENDICES
interest 454-tonne increase

in its gold reserves US consumer exit recession 200 tonnes of
1200 rate by 50 Barrick announces
prices fall most gold from IMF
basis points the closure of all US$/oz
since 1955
1100 gold hedges
Yen Euro
1000
US$/oz
900 Rand
Record inflows A$
800 into ETFs
700
US unemployment
FOMC at 26-year high
600 New CBGA
begins ‘debt announced
monetisation’
500
121
GS 2013 App 5-14.indd 121 21/03/2013 11:49:50

GOLD SURVEY 2013

Annual Average 1,226.66 1,224.52 29,739 38,267 3,443.66 1,331.28 287,568 790.98 18,304
Maximum 1,426.00 1,421.00 34,573 48,247 3,792.49 1,523.73 315,461 911.35 20,780
Minimum 1,052.25 1,058.00 24,668 32,111 3,040.31 1,197.71 258,374 668.89 16,055
Range: Average 30.5% 29.6% 33.3% 42.2% 21.8% 24.5% 19.9% 30.7% 25.8%
Monthly Average
Jan 1,119.58 1,117.96 1,153.00 1,078.50 25,185 36,733 3,276 1,223.52 267,977 691.54 16,704
Feb 1,095.80 1,095.41 1,119.00 1,058.00 25,747 34,588 3,176 1,236.24 270,322 701.11 16,531
Mar 1,115.55 1,113.34 1,136.50 1,090.75 26,376 33,560 3,248 1,220.21 265,304 739.05 16,604
Apr 1,148.48 1,148.69 1,179.25 1,123.50 27,532 34,561 3,452 1,239.14 271,686 748.31 16,682
May 1,204.32 1,205.43 1,237.50 1,165.00 30,982 34,304 3,566 1,388.40 297,049 824.96 18,084
Jun 1,232.38 1,232.92 1,261.00 1,203.50 32,447 35,237 3,599 1,445.96 303,046 836.15 18,732
Jul 1,196.00 1,192.97 1,234.00 1,157.00 29,990 36,414 3,356 1,362.26 289,175 779.94 18,287
Aug 1,213.46 1,215.81 1,246.00 1,187.50 30,294 37,606 3,338 1,351.46 285,102 776.53 18,493
Sep 1,271.46 1,270.98 1,307.50 1,240.50 31,214 40,849 3,448 1,353.89 290,863 816.11 19,087
Oct 1,343.19 1,342.02 1,373.25 1,313.50 31,040 44,554 3,527 1,366.99 298,077 846.21 19,481
Nov 1,371.78 1,369.89 1,421.00 1,337.50 32,278 44,761 3,635 1,384.60 307,132 858.71 20,134
Dec 1,393.51 1,390.55 1,420.00 1,363.00 33,827 46,040 3,732 1,403.69 305,888 890.93 20,508
Quarterly Average
Mar 1,110.56 1,109.12 25,798 36,117 3,234.21 1,226.35 267,746 711.92 16,615
Jun 1,196.13 1,196.74 30,369 34,732 3,540.10 1,359.75 290,794 800.55 17,826
Sep 1,227.18 1,226.75 30,503 38,300 3,381.48 1,355.94 288,431 791.08 18,605
Dec 1,369.53 1,366.78 32,333 45,083 3,628.36 1,384.49 303,684 863.91 20,044

IMF announces sale of 10 tonnes
Eurozone sovereign to the Central Bank of Bangladesh North Korea shells
1600
debt crisis South Korea
APPENDICES
North Korea torpedoes Euro

1500 South Korean ship Anglogold Ashanti completes 95 tonne
buyback
US$/oz
1400
Greece asks for EU-IMF
financial rescue package
1300 A$ Rand
Earthquake
US$/oz
in Chile
1200
1100 Yen EU-IMF endorse Irish bailout
1000 FOMC announces

BIS announces it received 346 tonnes $600 billion QE2 package
of gold in ‘swap’ operations
900
122
GS 2013 App 5-14.indd 122 21/03/2013 11:49:52

GOLD SURVEY 2013

Annual Average 1,573.16 1,571.52 36,355 57,426 4,017.36 1,524.33 368,623 981.23 23,899
Maximum 1,896.50 1,895.00 43,403 78,313 4,697.99 1,801.96 468,817 1,188.73 29,140
Minimum 1,316.00 1,319.00 31,041 44,673 3,488.92 1,313.79 296,075 822.83 19,660
Range:Average 36.9% 36.7% 34.0% 58.6% 30.1% 32.0% 46.9% 37.3% 39.7%
Monthly Average
Jan 1,360.48 1,356.40 1,388.50 1,319.00 32,639 45,517 3,606.50 1,363.50 302,589 858.51 20,218
Feb 1,371.31 1,372.73 1,411.50 1,328.00 32,328 46,437 3,645.73 1,361.18 316,975 850.73 20,333
Mar 1,422.85 1,424.01 1,447.00 1,400.50 32,676 49,811 3,740.14 1,408.63 315,893 881.20 20,811
Apr 1,474.43 1,473.81 1,535.50 1,418.00 32,845 52,653 3,952.21 1,396.16 319,014 902.39 21,484
May 1,512.19 1,510.44 1,541.00 1,478.50 33,947 55,555 3,940.13 1,417.05 333,859 925.50 22,148
Jun 1,528.38 1,528.66 1,552.50 1,498.00 34,160 58,534 3,954.84 1,441.56 333,895 943.63 22,330
Jul 1,568.53 1,572.81 1,628.50 1,483.00 35,422 61,506 4,009.88 1,459.74 343,419 972.55 22,634
Aug 1,759.50 1,755.81 1,877.50 1,623.00 39,434 72,392 4,344.52 1,673.33 400,230 1,070.91 25,980
Sep 1,780.65 1,771.85 1,895.00 1,598.00 41,384 65,502 4,375.60 1,730.72 429,747 1,122.95 27,481
Oct 1,667.89 1,665.21 1,741.00 1,617.00 39,022 59,770 4,103.12 1,641.11 425,959 1,055.86 26,617
Nov 1,735.98 1,738.98 1,795.00 1,681.00 41,245 61,574 4,333.29 1,721.75 455,619 1,100.54 28,526
Dec 1,652.73 1,652.31 1,752.00 1,531.00 40,292 57,008 4,134.39 1,633.17 435,424 1,060.24 28,096
Quarterly Average
Mar 1,386.69 1,386.27 32,552 47,337 3,666.58 1,378.77 311,950 864.32 19,660
Jun 1,506.80 1,506.13 33,687 55,730 3,949.05 1,419.40 329,343 924.27 20,745
Sep 1,704.96 1,702.12 38,798 66,543 4,246.92 1,623.75 391,866 1,057.86 21,585
Dec 1,686.85 1,688.01 40,199 59,605 4,195.36 1,667.85 439,449 1,073.26 25,915
US$/oz; other currencies reindexed to 4th January
2500
APPENDICES
IEA releases 600 million

Bond sales by Fed announces Italian P.M Berlusconi
barrels of stockpiled oil
Italy and Spain ‘Operation Twist’ resigns
2200
Rand
Political tension in
1900 MENA Greek government
passes austerity cuts US$/oz
US$/oz
A$
Portugal seeks EU bailout
Euro
1600
Yen
1300 Standard & Poor’s Libyan leader Gadaffi killed

downgrades US debt to ‘AA+’
Osama bin Laden killed North Korean leader
Earthquake strikes
north-east Japan Kim Jong-il dies
SNB announces a ceiling for CHF against the Euro
1000
123
GS 2013 App 5-14.indd 123 21/03/2013 11:49:54

GOLD SURVEY 2013

Annual Average 1,668.86 1,668.98 41,755 57,238 4,278.04 1,610.49 440,575 1,052.96 29,730
Maximum 1,790.00 1,791.75 44,514 63,840 4,621.00 1,750.72 506,434 1,129.28 32,640
Minimum 1,537.50 1,540.00 39,028 50,765 3,909.00 1,517.90 402,433 968.45 27,320
Range:Average 15.1% 15.1% 13.1% 22.8% 16.6% 14.5% 23.6% 15.3% 17.9%
Monthly Average
Jan 1,656.10 1,656.12 1,744.00 1,598.00 41,309 56,724 4,098.00 1,590.99 426,739 1,066.84 27,694
Feb 1,743.10 1,742.62 1,781.00 1,711.50 42,333 61,433 4,400.00 1,623.28 428,052 1,102.60 28,247
Mar 1,675.06 1,673.77 1,714.00 1,635.50 40,746 58,934 4,435.00 1,590.30 409,467 1,057.93 27,979
Apr 1,648.54 1,650.07 1,677.50 1,621.00 40,288 58,033 4,309.00 1,592.55 415,533 1,031.25 28,719
May 1,585.11 1,585.50 1,664.00 1,540.00 39,869 54,275 4,061.00 1,590.63 416,470 997.47 28,923
Jun 1,595.63 1,596.70 1,635.00 1,558.50 40,934 53,609 4,076.00 1,595.06 430,127 1,024.47 29,951
Jul 1,592.78 1,593.91 1,622.00 1,556.25 41,708 52,435 4,047.00 1,547.97 422,715 1,021.84 29,588
Aug 1,625.68 1,626.03 1,668.00 1,597.00 42,155 53,983 4,113.00 1,552.14 431,987 1,034.69 30,336
Sep 1,741.93 1,744.45 1,784.50 1,690.00 43,579 59,707 4,383.00 1,678.06 463,411 1,082.18 31,778
Oct 1,746.35 1,747.01 1,791.75 1,706.50 43,291 60,242 4,436.00 1,696.78 485,875 1,086.93 31,156
Nov 1,724.35 1,721.14 1,750.50 1,683.50 43,139 58,903 4,482.00 1,654.17 487,328 1,078.15 31,728
Dec 1,687.34 1,688.53 1,720.00 1,650.50 41,431 58,845 4,529.00 1,610.57 468,349 1,046.07 30,967
Quarterly Average
Mar 1,691.16 1,690.57 41,452 59,029 4,313.00 1,601.35 421,232 1,075.79 27,969
Jun 1,608.53 1,609.49 40,339 55,207 4,145.00 1,592.64 420,582 1,016.33 29,241
Sep 1,650.70 1,652.00 42,446 55,240 4,175.00 1,590.06 438,620 1,044.52 30,471
Dec 1,721.27 1,721.79 42,727 59,384 4,478.00 1,658.02 481,585 1,072.61 31,274
US$/oz; other currencies reindexed to 3rd January
2200
APPENDICES
Fed minutes lower Fed launches QE3 and anticipates low Greece bailout
Fed says interest hopes of QE3 interest rates through mid-2015 funds approved
rates to stay low Greek default S&P cuts Spain’s
until at least 2014 avoided FOMC minutes credit rating
Mario Draghi pledges Rand
1900 released, no sign of QE3 to do “whatever it takes”
Yen
Spain seeks to save euro
banking rescue
Euro
German court ratifies
US$/oz
1600 Eurozone permanent

US$/oz A$ rescue fund Fed announces
Standard & Poor’s Fed Chairman Bernanke QE4 package
downgrades 9 Eurozone fails to mention QE3 Moody’s changes Fed minutes prompt
nations, 14 put on Germany’s outlook increased hopes of QE3
1300 Francois Hollande to negative Barack Obama re-elected
negative outlook
elected as Fed extends as US President
ECB launches French President “Operation Twist” ECB announces “unlimited”
second round of LTRO until year-end bond-buying scheme
1000
124
GS 2013 App 5-14.indd 124 21/03/2013 11:49:57

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GOLD SURVEY 2013
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GOLD SURVEY 2013

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Gfms Gold Survey Oct2013

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GOLD SURVEY 2013

THOMSON REUTERS GFMS

GOLD SURVEY 2013

©2013 Thomson Reuters. All rights reserved. Republication or redistribution of

TANAKA PRECIOUS METALS

THE NEXT GENERATION OF FUNDAMENTALS ANALYSIS

View infrastructure, analyze production and output, monitor performance

To find out more contact us on commoditiesenergy@thomsonreuters.com

002948_Ad1_v1.indd 1 21/12/2012 11:17

Neil Meader, Head of Precious Metals Research & Forecasts

CONSULTANTS & OTHER CONTRIBUTORS:

PUBLISHED APRIL 2013 BY THOMSON REUTERS GFMS

The Thomson Reuters Building, 30 South Colonnade

Intro-pages_13 JZ New.indd 1 21/03/2013 12:22:51

www.cmegroup.com Italpreziosi SPA

TANAKA PRECIOUS METALS

Barrick Gold Corporation www.standardbank.com/cib

5. Supply from Above-Ground Stocks 59

6. Gold Bullion Trade 74

• A Review of Price Volatility in 2012 15

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• WORLD SILVER SURVEY 2013: 24th April 2013

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troy ounce (oz) = 31.103 grammes

“-” Not available or not applicable.

Intro-pages_13 JZ New.indd 5 21/03/2013 12:22:52

1. SUMMARY AND PRICE OUTLOOK

TABLE 1 - WORLD GOLD SUPPLY AND DEMAND (TONNES)

GS 2013 CH1.indd 8 21/03/2013 12:06:40

TABLE 1A - END-USE GOLD CONSUMPTION (TONNES)

SUMMARY AND PRICE OUTLOOK

GS 2013 CH1.indd 9 21/03/2013 12:06:41

SUPPLY IN 2012 Producers’ costs continued to escalate apace in 2012,

— Global scrap supply fell by 3.1% to 1,616 tonnes last respectively.

WORLD GOLD SUPPLY MOBILISATION OF ABOVE-GROUND STOCKS

6000 Net Producer Hedging 2000 2000 2000

3000 Scrap 1000 1000

GS 2013 CH1.indd 10 21/03/2013 15:34:02

SUMMARY AND PRICE OUTLOOK

WORLD GOLD DEMAND JEWELLERY FABRICATION AND WORLD INVESTMENT

3000 1000 400

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BULLION ABSORPTION JEWELLERY FABRICATION EXCLUDING SCRAP

2500 2000 700 2000

GS 2013 CH1.indd 12 21/03/2013 12:06:43

2. GOLD PRICES GOLD PRICES

• Gold price volatility contracted over 2012 to the lowest

GOLD PRICE AND TRADE-WEIGHTED DOLLAR (INVERTED) - DAILY

Trade Weighted -100

GS 2013 CH2.indd 13 21/03/2013 12:08:04

REAL GOLD PRICES IN 2012 DOLLARS

Australian dollar prices, for example, only gained 6%,

ANNUAL GOLD PRICES GOLD PRICES IN MAJOR CURRENCIES

400 170 yen

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GS 2013 CH2.indd 15 21/03/2013 12:08:08

PRECIOUS METALS PRICES GOLD/OIL PRICE RATIO

Gold/Oil Price Ratio

PRICE COMMENTARY AND OUTLOOK