Section I.

Macro
Fig.1. Gold and US Real Rates
$2,000
$1,800
US Real Rates
$1,600
Gold Price
$1,400
$1,200
$1,000
$800
$600
$400
$200
$0
2000 2002 2004 2006 2008 2010 2012

5%
4%
3%
2%
1%
0%
-1%
-2%
-3%
-4%
-5%

€ 1,600

4%

€ 3,500

3%

€ 3,000

2%

€ 2,500

1%

€ 2,000

0%

€ 1,500

-1%

€ 1,000

-2%

€ 500

Source: Bloomberg

Fig.3. Gold and ECB Real Rates

€ 1,400

Gold
ECB Real Rates

€ 1,200
€ 1,000

€ 400
€ 200
€0
2000 2002 2004 2006 2008 2010 2012

-3%

Source: Bloomberg

¥14,000

¥10,000

PBC Real Rates
Gold

¥8,000
¥6,000
¥4,000
¥2,000
¥0
2000 2002 2004 2006 2008 2010 2012
Source: Bloomberg

$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
1995

1999

2003

2007

2011

Fig.4. ECB Balance Sheet (€B)

€0
1999

2003

2007

2011

Source: Bloomberg

Fig.5. Gold and PBC Real Rates

¥12,000

$4,000

Source: Bloomberg

€ 800

€ 600

Fig.2. Fed Balance Sheet ($B)

$4,500

5%
4%
3%
2%
1%
0%
-1%
-2%
-3%
-4%
-5%

¥35,000

Fig.6. PBC Balance Sheet (CNY B)

¥30,000
¥25,000
¥20,000
¥15,000
¥10,000
¥5,000
¥0
2003

2005

2007

2009

2011

2013

Source: Bloomberg

1

Fig.7. The Biggest 6 Central Bank Balance Sheets
US, UK, Japan, China, EU & Switzerland (US$T)

$16
$14
$12

Thousands

Section I. Macro
$50

Fig.8. Gold and M2 (US$B; Fed, ECB, PBC)

$40

$1,500

Gold

$30

$2,000

M2

$1,000

$10
$20

$8

$500

$10

$6
$4
2006 2007 2008 2009 2010 2011 2012 2013

$0
1999

Source: Bloomberg

Source: Bloomberg

25%

Fig.9. US M1 YoY%

$0
2003

2007

2011

Fig.10. US M2 YoY%

15%

20%
15%

10%

10%
5%

5%

0%
-5%
1970
1980
Source: Bloomberg
20%

1990

2000

2010

Fig.11. ECB M1 YoY %

0%
1970

1980

Source: Bloomberg

12%

1990

2000

2010

Fig.12. ECB M2 YoY %

10%

15%

8%
10%

6%
4%

5%

2%

0%
1999 2001 2003 2005 2007 2009 2011 2013

0%
1999 2001 2003 2005 2007 2009 2011 2013
Source: Bloomberg

Hundreds

Source: Bloomberg

40%
35%
30%
25%
20%
15%
10%
5%
0%
1996

35%

Fig.13. PBC M1 YoY %

Fig.14. PBC M2 YoY %

30%

25%
20%
15%
10%
5%
2000

Source: Bloomberg

2004

2008

2012

0%
1996

2000

2004

2008

2012

Source: Bloomberg

2

Section I. Macro
Fig.16. US National Debt ($T)

$25
$20

Fig.15. Inflation
US
Euro Area
1.2
0.9
1.7
0.9
8.8
n/a

Headline CPI
Core CPI
Shadowstats

China
3.0
n/a
n/a

$15
$10

Source: Bloomberg, Shadow Government Statistics.
As of 11/30/2013

$5
$0
1940 1950 1960 1970 1980 1990 2000 2010
Source: TreasuryDirect.gov, USDebtClock.org

$18

Fig.17. US Debt as % of GDP

370%

Fig.18. The Debt Ceiling ($T)

$17

320%

$16

270%
220%

$15

170%

$14

Total Federal Debt
Debt Ceiling Limit

120%
1947

1957

1967

1977

1987

1997

2007

$13
2011

Source: Bloomberg

7.0%
6.5%
6.0%
5.5%
5.0%
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
2000

Fig.19. Average Annual Interest Rate on US
Debt

2012

2013

Source: Bloomberg

2014

Fig.20. Interest Expense as % of Total
Government Outlays

25%
20%
15%
10%
5%
0%

2002

2004

2006

2008

Source: US Treasury, Meridian Macro.

2010

2012

1989

1993

1997

2001

2005

2009

2013

Source: Bloomberg; US Treasury

3

Section I. Macro
Fig.21. Global Forex Accumulation
(US$B, 12 month sum)

$1,900

$1,400

$900

$400

-$100 2005

2006

2007

2008

2009

2010

2011

2012

2013

Source: Bloomberg; MacroMavens, LLC

$700

Fig.22. Net Purchases of US Treasury Notes and Bonds by All Foreign
Countries (US$B, 12 month sum)

$500

$300

$100
1978
-$100

1983

1988

1993

1998

2003

2008

2013

Source: US Treasury; MacroMavens, LLC

$220

Fig.23. China Net Purchases Long-Term US Securities
(annual US$B)

$180
$140
$100
$60
$20
-$201990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Source: US Treasury; MacroMavens, LLC

4

Section II. Gold
Fig.24. Gold Supply and Demand (tonnes)
2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

3Q13

Supply
Mine production

2,591

2,592

2,478

2,550

2,481

2,476

2,409

2,584

2,739

2,827

2,848

2,188

835

944

829

886

1,107

956

1,217

1,672

1,723

1,669

1,626

1,047

Traditional supply

3,426

3,536

3,307

3,436

3,588

3,432

3,626

4,257

4,463

4,495

4,473

3,235

Net producer hedging

(412)

(279)

(445)

(86)

(373)

(444)

(349)

(252)

(108)

10

(20)

(39)

545

617

497

662

367

484

236

30

-

-

-

-

3,559

3,874

3,359

4,012

3,582

3,472

3,513

4,034

4,355

4,505

4,453

3,196

2,680

2,522

2,673

2,707

2,283

2,405

2,187

1,760

2,017

1,972

1,908

1,645

360

385

416

431

458

462

436

373

466

453

428

309

3,040

2,907

3,089

3,138

2,741

2,867

2,623

2,134

2,483

2,425

2,336

1,954

373

314

396

412

421

446

649

743

1,205

1,519

1,256

1,252

Old gold scrap

Official sector sales
Total supply
Demand
Jewellery
Other
Total fabrication
Bar & coin retail investment
Official sector purchases

-

-

-

-

-

-

-

-

77

457

535

297

ETFs & similar

3

39

133

208

260

253

321

617

382

185

279

(697)

Implied net investment
Total demand

143

614

(259)

254

160

(94)

(80)

541

207

(81)

47

390

3,559

3,874

3,359

4,012

3,582

3,472

3,513

4,034

4,355

4,505

4,453

3,196

Source: World Gold Council

Fig.25. Market Cap of Above Ground Gold as % of Total US Financial
Assets
21.8%
19.6%

25.0%
20.0%
15.0%
10.0%

3.9%

5.0%
0.0%
1934

1982

3Q2013

Source: Federal Reserve, World Gold Council

Fig.26. Gold Held by ETFs
80
Millions of Ounces

All ETFS
SPDR Trust

40

0
Oct-03

Oct-05

Oct-07

Source: Bloomberg, Company Filings.

Oct-09

Oct-11

Oct-13

5

Section II. Gold
Fig.27. SPDR Gold Trust Ownership by Type
Investment
Adviser,
19.80%
Broker, 9.90%

NonInstitutional,
60.70%

Private
Banking, 3.10%

Insurance
Company,
0.20%

Hedge Fund,
Mutual Fund, 5.80%
3.20%

Pension Fund,
0.40%

Source: FactSet

Fig.28. Notable Transaction in October 2013

Country
Kazakhstan
Azerbaijan
Turkey

Tonnes
2.4
2.0
13.0

Transaction
Purchase
Purchase
Addition

Source: World Gold Council

34,000
33,500

Fig.30. Central Banks Holdings of Gold
(tonnes)

600
Fig.29. Central Banks Net Purchases (tonnes)
500
400
300
200
100
0
08 09 10 11 12 3Q
-100 00 01 02 03 04 05 06 07
13
-200
-300
-400
-500
-600
Source: World Gold Council

Fig.31. Gold as % of Total Reserves

14%
13%

33,000

12%

32,500
32,000

11%

31,500

10%

31,000
30,500

9%

30,000

8%

29,500
3/00 3/02 3/04 3/06 3/08 3/10 3/12

Source: World Gold Council

3/00

3/02

3/04

3/06

Source: World Gold Council

3/08

3/10

3/12

6

Section II. Gold
Fig.32. Web searches for "Gold Bubble"

100
80
60
40
20
0
2006

2007

Source: GoogleTrends

2008

2009

2010

2011

2012

2013

Fig.33. Web searches for "Gold Investment"

100
80
60
40
20
0
2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Source: GoogleTrends

Fig.34. Bernstein's Daily Sentiment Index

100

$2,000
$1,800
$1,600
$1,400
$1,200
$1,000
$800
$600
$400
$200
$0

80
60

40
20
0
2006

DSI
Gold

2007

2008

2009

2010

2011

2012

2013

Source Bloomberg, Bernstein's DSI

Fig.35. Market Vane Bullish Consensus

100
80
60
40

Market Vane
Gold

20
0
2006

2007

2008

2009

2010

2011

2012

$2,000
$1,800
$1,600
$1,400
$1,200
$1,000
$800
$600
$400

2013

Source Bloomberg, Market Vane

7

Section II. Gold
Fig.36. Comex Gold Futures Open Interest
(tonnes)

2000

$2,000
$1,800
$1,600
$1,400
$1,200
$1,000
$800
$600
$400
$200
$0

1800
1600

1400
1200

Open Interest
Gold

1000
800
2006

2008

2010

Source: Bloomberg

2012

Fig.37. Gold vs Continuous
Commodity Index

480%

CCI Index

380%

Gold

280%

180%
80%
-20%
2000 2002 2004 2006 2008 2010 2012
Source: Bloomberg

Fig.38. Comex Gold Futures Activity (tonnes)

1,000

$2,000

Net Large Speculators
Net Hedgers/Commercials
Gold

800
600

$1,500

400
200
0
2006
-200

$1,000
2007

2008

2009

2010

2011

2012

2013

-400

$500

-600
-800
-1,000

Source: CFTC

$0

Fig.39. Commercial Net Shorts as % of Total
Open Interest
100%
$1,900

6

$1,700

5

80%

$1,300
$1,100

40%
20%
0%
7/10

$900

Net Short/Open Interest
Gold

$700

Less Net Short

7/11

7/12

7/13

Source: Bloomberg; The McClellan Market Report

$500

Millions of Ounces

More Net Short

90
80
70
60
50
40
30
20
10
0

Registered Stocks
Owners per Ounce

$1,500
60%

Fig. 40. Registered COMEX Gold Stocks vs.
Owners per Ounce

4
3
2
1
0
2003

2005

2007

2009

2011

2013

Source: Bloomberg

8

Section III. Gold Mining Equities
70%

Fig.41. XAU and HUI as a Ratio of Gold

60%

HUI/Gold
XAU/Gold

50%
40%
30%
20%
10%
0%
1995

1997

1999

Source: FactSet

$4,000

2001

2003

Fig.42. Net Fund Flows For Lipper's Equity
Precious Metals Fund Universe ($M)

$3,000

2005

$16
$14

2007

2009

2011

2013

Fig.43. Market Cap of Van Eck Gold Equity
ETFs ($B)

$12
$2,000

$10
$8

$0

$6

-$1,000

1H07
2H07
1H08
2H08
1H09
2H09
1H10
2H10
1H11
2H11
1H12
2H12
1H13
2H13

$1,000

$4
$2

-$2,000
-$3,000

$0
5/06 5/07 5/08 5/09 5/10 5/11 5/12 5/13

Source: Morningstar
2H13 - as of 11/30/13

Source: FactSet

$18

Fig.44. Equity Capital Issued by Gold Miners

$16
$14
$12

$B of Equty Issued
# of Transactions

$10

300
250
200
150

$8
$6

100

$4

50

$2
$0

0
00 01 02 03 04 05 06 07 08 09 10 11 12 13

Source: RBC Capital Markets

9

Section III. Gold Mining Equities
10%

Fig.45. Senior Producers Return On Capital

$600 Fig.46. Average Cost of Acquisitions in the Gold 70%
Sector ($/Oz)
60%
$500

8%

50%

$400
Millions

6%
4%

40%

$300

30%

$200

2%

$100

0%

$0

20%
10%
0%
05 06 07 08 09 10 11 12 13

02 03 04 05 06 07 08 09 10 11 12 13

-2%

Est.

Acquisition Cost

Source: FactSet.
Universe: NEM, ABX, GG, KGC, AUY, NCM, AU, GFI, HMY

As Ratio of Gold Price

Source: RBC Capital Markets, Bloomberg.

Fig.47. Senior Producers Cash Costs and Margin ($/Oz)

$1,800
$1,600
$1,400

Cash Margin

$1,200

Cash Costs

$1,000
$800
$600
$400
$200
$0
2002

2003

Source: Bloomberg

2004

2005

2006

2007

2008

2009

2010

2011

2012 3Q2013

Fig.48. Gold Mining Industry Production Costs

$2,500

40%
35%

$2,000

30%
25%

$1,500

20%

$1,000
$500
$0

10%
5%

2013 2014
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
E
E

After Tax Cash Cost ($/oz) 209
Margin (%)

15%

After Tax Cash Cost ($/oz)
Margin (%)

210

253

311

363

413

552

738

661

814

0%

987 1,100 1,270 1,137

23% 32% 31% 24% 18% 32% 21% 15% 32% 34% 37% 34% 19% 27%
Source: Tocqueville Asset Management, FactSet.

10

Section III. Gold Mining Equities
Fig.49. Gold Price Discounted by Market ($/Oz)

Source: BMO Capital Markets

Fig.50. NAV Premiums – Senior & Intermediate Producers (N.A.)

Source: BMO Capital Markets

Fig.51. P/CF – Universe of Coverage Average

Source: Scotiabank

Fig.52. Adjusted Market Cap per Oz of Resource
Divided by Gold Price

Source: Scotiabank

11

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