LBMA/LPPM Precious Metals Conference 2012

13 November 2012

Central Banks: The outlook for demand

Presented by Ashish Bhatia Government Affairs | 13 November 2012

Central banks: The outlook for demand

Key insights 1. Central banks have become net buyersagain

2. Foreign reserve growth has been staggering, yet gold has kept pace
3. Why the renewed interest in gold? Liquiditygold is one the most liquid global assets Diversificationa crucial role for central banks Foundational assetthe war chest argument for gold re-emerges

World Gold Council | Central banks: The outlook for demand | 13 November 2012

Session 6 Bhatia

LBMA/LPPM Precious Metals Conference 2012

13 November 2012

Central banks have become buyersagain

World Gold Council | Central banks: The outlook for demand | 13 November 2012

Central banks own 1/5th of all the gold in the world

68ft

Total above ground stocks = 171,300 tonnes (US$8.7 trillion)1

68ft

1 Based on end-2011 volume and 2011 average gold price. 2 Includes other fabrication (12.1%) and unaccounted for (2.1%) Source: Thomson Reuters GFMS, US Geological Survey, World Gold Council
World Gold Council | Central banks: The outlook for demand | 13 November 2012 4

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LBMA/LPPM Precious Metals Conference 2012

13 November 2012

Clear divide between advanced and emerging economies

World Gold Council | Central banks: The outlook for demand | 13 November 2012

Emerging markets FX reserves have grown at a staggering pace

World Gold Council | Central banks: The outlook for demand | 13 November 2012

Session 6 Bhatia

LBMA/LPPM Precious Metals Conference 2012

13 November 2012

Gold reserves keep pace with growing FX reserves

12% 12%

World Gold Council | Central banks: The outlook for demand | 13 November 2012

EM central banks rebalance reserve portfolios

World Gold Council | Central banks: The outlook for demand | 13 November 2012

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LBMA/LPPM Precious Metals Conference 2012

13 November 2012

1. Liquidity

World Gold Council | Central banks: The outlook for demand | 13 November 2012

US$240 billion of gold is traded on the London OTC market

World Gold Council | Central banks: The outlook for demand | 13 November 2012

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LBMA/LPPM Precious Metals Conference 2012

13 November 2012

2. Diversification

World Gold Council | Central banks: The outlook for demand | 13 November 2012

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Gold provides ultimate diversification

World Gold Council | Central banks: The outlook for demand | 13 November 2012

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LBMA/LPPM Precious Metals Conference 2012

13 November 2012

Gold is negatively correlated to the US dollar

World Gold Council | Central banks: The outlook for demand | 13 November 2012

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3. Foundational asset

World Gold Council | Central banks: The outlook for demand | 13 November 2012

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LBMA/LPPM Precious Metals Conference 2012

13 November 2012

The war chest argument gold is seen as the ultimate asset to hold in an emergency and in the past has often appreciated in value in times of financial instability or uncertainty
John Nuge, Centre for Central Banking Studies, Bank of England

World Gold Council | Central banks: The outlook for demand | 13 November 2012

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Rising EM countries are top holders of FX reserves

Emerging markets (ex Japan)

World Gold Council | Central banks: The outlook for demand | 13 November 2012

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LBMA/LPPM Precious Metals Conference 2012

13 November 2012

yet the largest economies rely on gold, not fiat currencies

World Gold Council | Central banks: The outlook for demand | 13 November 2012

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G20 EM countries had modest holdings of gold in 07

World Gold Council | Central banks: The outlook for demand | 13 November 2012

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LBMA/LPPM Precious Metals Conference 2012

13 November 2012

by 2012, they are rapidly increasing gold holdings

World Gold Council | Central banks: The outlook for demand | 13 November 2012

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The Executive Program in Gold Reserves Management April 29 May 1, 2013

World Gold Council | Central banks: The outlook for demand | 13 November 2012

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LBMA/LPPM Precious Metals Conference 2012

13 November 2012

Thank you
World Gold Trust Services, LLC 510 Madison Avenue, 9th Floor New York, NY 10022, United States of America T +1 212 317 3800 F +1 212 688 0410 W www.gold.org

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