Neil Meader Above-ground Gold Stocks: A Growing Menace or a Phantom Menace? LBMA/LPPM Precious Metals Conference, Vienna 20 th October 2015
Neil Meader
Above-ground Gold Stocks:A Growing Menace or a
Phantom Menace?
LBMA/LPPM Precious Metals Conference, Vienna20th October 2015
Introduction
Coverage:
• Jewellery
• Other fabricated products
• Retail investment
• Institutional investment
The scale of above-ground gold stocks
The quality of above-ground gold stocks
Location detail: jewellery & retail investor stocks
Vienna, October 2015
Other Fabricated Products
Coverage:• electronics applications• decorative & other industrial end-uses• dentistry
Vienna, October 2015
Other Fabricated Products
Coverage:• electronics applications• decorative & other industrial end-uses• dentistry
Dentistry:• potential scrap already included• remaining stocks largely inaccessible
Vienna, October 2015
Other Fabricated Products
Coverage:• electronics applications• decorative & other industrial end-uses• dentistry
Dentistry:• potential scrap already included• remaining stocks largely inaccessible
Decorative & other industrial end-uses:• dispersion means potential for scrap limited
Vienna, October 2015
Other Fabricated Products
Coverage:• electronics applications• decorative & other industrial end-uses• dentistry
Dentistry:• potential scrap already included• remaining stocks largely inaccessible
Decorative & other industrial end-uses:• dispersion means potential for scrap limited
Electronics applications:• scrap already included• historic fabrication increasingly inaccessible• price may not drive volumes
Vienna, October 2015
The Scale of Jewellery Stocks
Reasons why stocks may be understated
• conversion from bar & coin
Vienna, October 2015
The Scale of Jewellery Stocks
Reasons why stocks may be understated
• conversion from bar & coin
Reasons why stocks may be overstated
• production losses
Vienna, October 2015
The Scale of Jewellery Stocks
Reasons why stocks may be understated
• conversion from bar & coin
Reasons why stocks may be overstated
• production losses
Conclusion
• true figure closer to 83,000 tonnes
• grey areas significant
• range of 78-88,000 tonnes plausible
• always a large multiple of annual mine production
Vienna, October 2015
The Quality of Jewellery Stocks
Far-from-market stocks:
• artefacts & modern high end pieces
Vienna, October 2015
The Quality of Jewellery Stocks
Far-from-market stocks:
• artefacts & modern high end pieces
Mass market stickiness – return rates low
Vienna, October 2015
The Quality of Jewellery Stocks
Far-from-market stocks:
• artefacts & modern high end pieces
Mass market stickiness – return rates low
Jewellery demand almost always a “net” positive
Vienna, October 2015
“Net” Jewellery Consumption
Vienna, October 2015Source: Metallis Consulting, Consolidated Gold Fields Ltd & GFMS Thomson Reuters
The Quality of Jewellery Stocks
Far-from-market stocks:
• artefacts & modern high end pieces
Mass market stickiness – return rates low
Jewellery demand almost always a “net” positive
Consumption & scrap price dependence
• negative demand only with high investment & prices
Vienna, October 2015
The Location of Jewellery Stocks
Vienna, October 2015Source: Metallis Consulting
The Scale of Investor Stocks
Reasons why stocks may be understated
• institutional “allowance” too small
Vienna, October 2015
The Scale of Investor Stocks
Reasons why stocks may be understated
• institutional “allowance” too small
Reasons why stocks may be overstated
• conversion to jewellery
Vienna, October 2015
The Scale of Investor Stocks
Reasons why stocks may be understated
• institutional “allowance” too small
Reasons why stocks may be overstated
• conversion to jewellery
Conclusion
• true figure a little under 36,000 tonnes
• grey areas significant
• range of 34-39,000 tonnes plausible
• again, a high multiple of annual mine production
Vienna, October 2015
Retail Investment
Vienna, October 2015Source: Metallis Consulting, Metals Focus & GFMS Thomson Reuters
The Location of Retail Investor Stocks
Vienna, October 2015Source: Metallis Consulting
Institutional Stock Possibilities
Volumes before the bull run: a few hundred tonnes?
Vienna, October 2015
Institutional Stock Possibilities
Volumes before the bull run: a few hundred tonnes?
Increase 2001-12 (basis market balance): c. 4,000 tonnes
Implied end-2012 total stock: c. 4,500 tonnes
Vienna, October 2015
Institutional Stock Possibilities
Volumes before the bull run: a few hundred tonnes?
Increase 2001-12 (basis market balance): c. 4,000 tonnes
Implied end-2012 total stock: c. 4,500 tonnes
Feasibility of total:
• change 2012-2014: drop of at least 500 tonnes
• contribution from ETFs and Comex means change in other institutional stocks (basis market balance):
o 2001-2012: increase of < 1,000 tonnes
o 2012-2014: growth of a few hundred tonnes
• complication of lending being unwound
Vienna, October 2015
Institutional Stock Possibilities
Volumes before the bull run: a few hundred tonnes?
Increase 2001-12 (basis market balance): c. 4,000 tonnes
Implied end-2012 total stock: c. 4,500 tonnes
Feasibility of total:
• change 2012-2014: drop of at least 500 tonnes
• contribution from ETFs and Comex means change in other institutional stocks (basis market balance):
o 2001-2012: increase of < 1,000 tonnes
o 2012-2014: growth of a few hundred tonnes
• complication of lending being unwound
Any threat from these stocks?
Vienna, October 2015
© Metallis Consulting Limited, October 2015
Disclaimer:
Although every effort has been made to undertake this work with care and diligence, Metallis Consulting Ltd cannot guarantee the accuracy of any information, forecasts or assumptions. Nothing contained in this presentation constitutes an offer to buy or sell securities or commodities and nor does it constitute advice in relation to the buying or selling of investments. It is published only for informational purposes. Metallis Consulting Ltd does not accept responsibility for any losses or damages arising directly or indirectly from the use of this presentation.
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