The Perfect Gold Storm

Presented by Pierre Lassonde| Tuesday October 23rd, 2012 Grants Interest Rate Observer Conference, New York

A gold bull market brings a production response...

Pierre Lassonde | The Perfect Gold Storm | 23 October, 2012

OOPS! Not this time

0.8

TSX Gold Index / Gold ($USD)

0.7

0.6

0.5

0.4

0.3

0.2 TSX GOLD/GOLD(US$) 0.1 13 week moving avg 52 week moving avg 0

Pierre Lassonde | The Perfect Gold Storm | 23 October, 2012

New finds are proving increasingly elusive...

Represents 189 gold deposits discovered since 1990, each with at least 2m oz of gold in total reserves, resources and past production (or at least 1m oz in reserves) Data sources: Metals Economics Group Strategies for Gold Reserves Replacement 2012
Pierre Lassonde | The Perfect Gold Storm | 23 October, 2012 4

Its all about grade...or lack of it

Pierre Lassonde | The Perfect Gold Storm | 23 October, 2012

Resource nationalism is polarising production...

Pierre Lassonde | The Perfect Gold Storm | 23 October, 2012

New finds are taking longer to bring to market...

Data sources: Metals Economics Group Strategies for Gold Reserves Replacement 2012
Pierre Lassonde | The Perfect Gold Storm | 23 October, 2012 7

Analysts: Perfectly wrong forecasts

Oil price: Costs proxy Gold price: Revenue proxy

Pierre Lassonde | The Perfect Gold Storm | 23 October, 2012

Dead cat bounce or ninth life

Cut-off grades reaching limits of current technologies Energy (25%) & labor (40%) could provide stability Capex still a wild card (location, labor productivity) Consensus price forecast reality

Pierre Lassonde | The Perfect Gold Storm | 23 October, 2012

Yearly gold supply 2001 & 2011

Pierre Lassonde | The Perfect Gold Storm | 23 October, 2012

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All the gold in the world! 171,300 tonnes

Private Investment 19% 68

Central Banks 17%

Tech 12%

Unaccounted 2%

Jewellery 50%

Value @ $1,700/oz =US$ 9.3 Trillion ~0.78 oz/person on the planet (assuming 7 B people) ~1 part/billion in earths crust
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Pierre Lassonde | The Perfect Gold Storm | 23 October, 2012

Demand continues to expand and broaden...

Pierre Lassonde | The Perfect Gold Storm | 23 October, 2012

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Central banks return as net buyers after 20 years...

Pierre Lassonde | The Perfect Gold Storm | 23 October, 2012

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and are not done yet...

Pierre Lassonde | The Perfect Gold Storm | 23 October, 2012

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Investment growing steadily, but gold is significantly under-owned...

Pierre Lassonde | The Perfect Gold Storm | 23 October, 2012

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Golds share of global allocations, 1980-2011

Includes: global equity, global marketable gov't debt, global private investment stocks of gold Excludes: corp/agency debt, money markets, commodities, real estate, hedge funds, private equity

If golds share doubled, it would amount to c.66,000 tonnes, equivalent to 23 years of production at current levels.
Pierre Lassonde | The Perfect Gold Storm | 23 October, 2012 16

China and India account for a lions share of growth...

Pierre Lassonde | The Perfect Gold Storm | 23 October, 2012

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With rising incomes driving demand in India...

Pierre Lassonde | The Perfect Gold Storm | 23 October, 2012

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and China...

Pierre Lassonde | The Perfect Gold Storm | 23 October, 2012

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Commodity super-cycle

Pierre Lassonde | The Perfect Gold Storm | 23 October, 2012

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Global Debt Crisis Bottom Line: most countries have excessive debts
Government Gross Debt
% of GDP

PIIGS

Over 90% spells trouble!

Source: IMF Fiscal Monitor, April 2012 and IMF World Economic Outlook, April 2012; DundeeWealth

Pierre Lassonde | The Perfect Gold Storm | 23 October, 2012

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Europes pension liabilities are massive

%GDP

Austria Bulgaria Czech Rep Germany Spain Finland France Greece Hungary Italy Lithuania Latvia Malta Netherlands Poland Portugal Sweden Slovakia UK Source: Research Center for Generational Contracts, January 2009 NB Future contributions are not taken into account

100% of GDP

Pierre Lassonde | The Perfect Gold Storm | 23 October, 2012

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Before euro: PIIGS regularly devalued

Log Scale

PIIGS EXCHANGE RATES

January 1957 to December 1998 Units per Deutschemark: Jan 1957=100
100

Index Value When Euro starts - 1999

24.8 21.1 15.0

10

10.9

6.7

4.3

Source: DundeeWealth

Pierre Lassonde | The Perfect Gold Storm | 23 October, 2012

Gold rises and falls with FX liquidity

60 48 36 24 12 0 -12
Correlation: .62

% %

42 35

Global Liquidity: FX Reserves

28 21 14 7 0 -7
Last month: August 2012 Liquidity estimated

-24 -36
82 84 86

Gold
88 90 92 94 96 98 00 02 04 06

-14

08

10

12

Global Liquidity: FX Reserves + US MBase Source: IMF, Federal Reserve

Pierre Lassonde | The Perfect Gold Storm | 23 October, 2012

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Printing of money drives gold

1850 1700 1550 1400 1250 1100 950 800 650 500 350 200
82 84 86 88 90 92 94 96 98 00 02 04 06
Last month: August 2012 Liquidity estimated

16.5 15.0 13.5 12.0

Global Liquidity FX Reserves (trillion$)

10.5 9.0 7.5 6.0

Gold (US$)

4.5 3.0 1.5 0.0

08 10 12

Pierre Lassonde | The Perfect Gold Storm | 23 October, 2012

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Dow / Gold ratio: The Ultimate Test

Pierre Lassonde | The Perfect Gold Storm | 23 October, 2012

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Thank you

The Perfect Gold Storm

Presented by Pierre Lassonde| Tuesday October 23rd, 2012 Grants Interest Rate Observer Conference, New York