上海期货交易所首页the fomc qe3 announcement in september 2012 triggered a gold rally, which...
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Global Research
Global Research - Commodities
Gold's fundamentals and its role as diversifier
May 2013
James Steel AnalystHSBC Securities (USA) Inc.+1 212 525 [email protected]
View HSBC Global Research at: http://www.research.hsbc.com
Issuer of report: HSBC Securities (USA) Inc.
Disclosures and Disclaimer This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it
0200400600800
1,0001,2001,4001,6001,8002,000
May-0
5
Nov-0
5
May-0
6
Nov-0
6
May-0
7
Nov-0
7
May-0
8
Nov-0
8
May-0
9
Nov-0
9
May-1
0
Nov-1
0
May-1
1
Nov-1
1
May-1
2
Nov-1
2
May-1
3
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
May-72 May-76 May-80 May-84 May-88 May-92 May-96 May-00 May-04 May-08 May-12
22
Historical gold pricesGold hit a record high of
USD1,921/oz in September 2011, in
nominal terms before falling sharply for the
rest of the year
Prices recovered on the Federal Reserve’s
announcement of its third round of
quantitative easing (QE3) but began to
weaken after the US election
In April 2013 prices fell to USD1,320/oz on
persistent financial market chatter that the
Fed would end QE ahead of schedule and
on a rotational shift out of commodities and into
equities
The gold price’s all-time inflation-adjusted high is
cUSD2,350/oz, reached in January 1980
Gold prices (USD/oz)
Source: Reuters
Source: Reuters
Gold prices (USD/oz)
33
Gold holds up in times of crisis
Since the global financial crisis in 2008, gold has
appreciated significantly as the Federal Reserve
initiated QE2 and “Operation Twist”
Gold notably outperformed other asset
classes during this period, underscoring its traditional
function as a safe haven
Gold has been supported by global accommodative
easing, economic uncertainty, commodity
price increases, and geopolitical risks
In the latter half of 2011, steep equity market
declines, amidst deteriorating economic prospects and eurozone
sovereign-debt concerns, boosted the USD and
triggered a correction in gold prices
Source: Reuters
Returns for various asset classes, 2008-2011
-80%-60%-40%-20%
0%20%40%60%80%
100%120%140%
Jan-
08
Apr
-08
Jul-0
8
Oct
-08
Jan-
09
Apr
-09
Jul-0
9
Oct
-09
Jan-
10
Apr
-10
Jul-1
0
Oct
-10
Jan-
11
Apr
-11
Jul-1
1
Oct
-11
S&P 500 Gain (Loss)Gold Gain (Loss)T-Note Gain (Loss)S&P National AMT-Free Municipal Bond TR Gain (Loss)
-20.00%
-10.00%
0.00%
10.00%
20.00%
30.00%
40.00%
Jan-
12
Feb-
12
Mar
-12
Apr-1
2
May
-12
Jun-
12
Jul-1
2
Aug-
12
Sep-
12
Oct
-12
Nov
-12
Dec
-12
Jan-
13
Feb-
13
Mar
-13
Apr-1
3
May
-13
S&P 500 Gain (Loss)Gold Gain (Loss)T-Note Gain (Loss)S&P National AMT-Free Municipal Bond Index TR Gain (Loss)
44
Gold has not outperformed other asset classes so far to 2013Gold outperformed most
assets in early 2012 in anticipation of
additional monetary easing, heightened
geopolitical risk, and economic uncertainty
Following the February meeting of the Federal
Open Market Committee, gold fell
when Federal Reserve Chairman Ben
Bernanke did not announce additional
monetary policy easing
The FOMC QE3 announcement in September 2012
triggered a gold rally, which subsequently
fizzled out
Since the end of 2012 the equity rally has
noticeably outpaced gold resulting in a rotational shift out of bullion and
into stocks
Source: Reuters
Returns for various asset classes, 2012 through mid-May
55
Gold timelineGold prices have been very sensitive to Fed statements
Prices dropped following statements by the FOMC
and Fed Chairman Bernanke to Congress
earlier in the year
QE3 expectations followed by a FOMC announcement
triggered a gold rally
Gold weakened significantly after the US
election and after the December FOMC
announcement of QE3
Gold mounted a short-lived near the 20 March FOMC,
which confirmed accommodative policies
Prices crashed in April weighed down partly by
the release of FOMC minutes which showed
some Fed members calling for a tapering off of QE by
year end
Source: Bloomberg, HSBC
Fed statements and testimonies are highly influential on gold prices
1,3001,3501,4001,4501,5001,5501,6001,6501,7001,7501,800
Jan-
12
Feb-
12
Mar-1
2
Apr-1
2
May-1
2
Jun-
12
Jul-1
2
Aug-
12
Sep-
12
Oct-1
2
Nov-1
2
Dec-1
2
Jan-
13
Feb-
13
Mar-1
3
Apr-1
3
May-1
3
Jan 24:FOMC statement
Feb 29:Bernanke Testimony
to Congress
April 24:FOMC statement
June 7:Bernanke
Testimony to JEC
USD/oz
Aug 22:FOMC statement
Aug 31:Bernanke Jackson
Hole Speech
Sep 13:QE3 & "Mid-2015"
guidanceNov 6:
US Elections
Dec 12:FOMC announces
new QE
Jan 30:FOMC statement
Mar 20:FOMC statement
Apr 10:FOMC minutes
May 1:FOMC statement
Asset correlations with the risk on – risk off factor
Source: Bloomberg, HSBC
66
Risk assets and gold
Traditionally, gold moves positively with risk
Since the beginning of the global economic and
eurozone sovereign-debt risk crises, gold has tended
to moved with risk
Gold shifted to occupy a neutral area between
“risk-on/risk-off” assets for most of the past 24 months
More recently, gold has moved towards risk on assets but overall risk
correlations have weakned
Strongly risk on Uncorrelated with RORO Strongly risk off
77
Gold and inflation expectation
Gold has fallen in the absence of inflationary
pressures
Source: HSBC, Bloomberg
Gold and inflation expectation
1.7%
1.9%
2.1%
2.3%
2.5%
2.7%
1,300
1,400
1,500
1,600
1,700
1,800
1,900
Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13
Gold USD/oz (LHS) US breakeven 10Y (RHS)
88
Gold and inflation expectations cont…
Gold is among the hard assets that generate
excess returns compared with other assets in an
inflationary scenario
Falling inflation expectations may
undermine the need to own gold
Hard assets like gold are traditionally a hedge against inflation
Source: HSBC, Thomson Reuters Datastream
13.0%
-2%
0%
2%
4%
6%
8%
Oil
Comm
oditie
s
Metal
s
REIT
s
Gold
TIPS
EM E
quitie
s
UST
5Y
DM E
quitie
s
UST
10Y
High
Yiel
d Cre
dit
Agric
ultur
e
Excess Return in inflationary scenario compared to whole sample average
99
Gold and inflation expectations cont…
During periods when the velocity of money is
rising gold, along with other assets tends to rise
If inflation is driven by velocity of money, it is “risk-on” and good for gold
Source: HSBC, Thomson Reuters Datastream
-10%
0%
10%
20%
30%
-10%
0%
10%
20%
30%
Equit
ies
EM E
quitie
s
UST
10Y
TIPS
IG C
redit
HY C
redit Oi
l
Metal
s
Gold
REIT
s
Average 6 month return when velocity of money is increasing followinghaving decreased minus average 6 month return
1010
Gold and inflation expectations cont…
Measured by Personal Consumption
Expenditure (PCE) US inflation is only at half
the Fed’s 2% target. This exerts a negative impact
on gold.
Core PCE have fallen from 2% but core PCI has not
Source: HSBC, Bureau of Labor Statistics, Bureau of Economic Analysis
0.5
1.0
1.5
2.0
2.5
3.0
07 08 09 10 11 12 13
Core CPI inflation, % year-on-yearCore PCE inflation, % year-on-year
2% inflation goal
1111
Dollar and gold trade inversely most of the time
Gold and the USD’s traditionally inverse relationship is based
on:
• Desirability of paper vs hard
assets
• Mining economics
• Consumer demand outside
the USD bloc
USD weakness is viewed as fueling
gold’s long-run advance
The relationship has periodically broken
down during the eurozone’s sovereign-
debt crisis but appears to have re-emerged
Source: Reuters
The EUR and gold
0.9
1
1.1
1.2
1.3
1.4
1.5
1.6
1.7
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
May-03 May-04 May-05 May-06 May-07 May-08 May-09 May-10 May-11 May-12 May-13
USD/
EUR
USD/
oz
Gold (LHS) EUR/USD (RHS)
1212
Gold is down in terms of all currencies
Throughout 2011 and 2012 gold gained against all major
freely floating currencies,
reaffirming its status as a surrogate
currency
Recently losses have resulted in gold falling
against the AUD, EUR, CHF, GBP,
NOK SEK and SGD
Source: HSBC, Bloomberg
Gold’s returns compared to those of various currencies and platinum
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
ZAR JPY BRL PLATINUM GOLD AUD EUR CHF GBP NOK SEK SGD
% performance in 2011 - Present versus USD
1313
Funds’ dollar positions generally mirror gold positions
The USD/gold relationship is
demonstrated by the net spec positions on the Comex and IMM
A widening of short USD positions typically
coincides with a build in long gold positions
Historically, funds like to be long gold, but
occasionally they go long the USD and reduce long gold
positions
However, for a while, funds went long USD
and increased long gold positions; this is
generally a sign of elevated investor risk
Recently net gold longs have dropped as long
USD positions jumped
Source: CFTC
Gold and USD net speculative positions
-50
-40
-30
-20
-10
0
10
20
30
40
50
-35
-25
-15
-5
5
15
25
35
May-02 May-03 May-04 May-05 May-06 May-07 May-08 May-09 May-10 May-11 May-12 May-13
Total Speculative position on COMEX (LHS) Net USD Positions (RHS)
moz USDm
1414
Gold and scenario probabilities
The table is produced by HSBC’s Asset
Allocation team and shows a normalization in the global economy
The reduction in fat risk events has
undermined the safe haven demand for
gold and in our view helps explain some of the rationale behind
bullion’s decline
Source: HSBC
HSBC asset allocation team’s scenario probabilities
Q1-13 Sep-12 Dec-11 Jun-11 Oct-10Inflationary growth 10% 5% 5% 5% 5%Goldilocks 10% 5% 5% 15% 15%Trend 15% 0% 0% 5% 15%Stagnation 30% 40% 35% 40% 45%Stagflation 20% 15% 10% 15% 5%Recession 15% 35% 45% 20% 15%Above trend growth 35% 10% 10% 25% 35%Above trend inflation 30% 20% 15% 20% 10%
160170180190200210220230240250260
1,300
1,400
1,500
1,600
1,700
1,800
1,900
2,000
Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13
Gold USD/oz (LHS) FTSE All-World Index (RHS)
1515
Gold and equities
Gold and equities decoupled in late 2012
and are trading divergently
The rotational shift out of commodities
generally and into equities is an important
reason behind gold’s decline
Source: HSBC, Bloomberg
Gold and equities
1616
Gold in exchange-traded funds
After peaking in late 2012 at the equivalent
of c90% of annual mine output, gold
exchange traded fund holding have fallen
ETF holdings now stand at 70.4moz,
down 14.3moz from the peak of 84.6moz
This liquidation helps explain gold’s decline
Source: HSBC, Bloomberg
Total gold holdings in exchange-traded funds
65
67
69
71
73
75
77
79
81
83
85
Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13
Moz
1717
Gold and commodities
Gold’s decline was also part of an overall
commodities rout.
Source: HSBC, Bloomberg
Gold’s returns compared to other commodities
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
2-Jan 16-Jan 30-Jan 13-Feb 27-Feb 13-Mar 27-Mar 10-Apr 24-Apr 8-May
Gold Silver Copper Brent Crude Soybean
1818
ETFs dominate investment demand
Note: Comex positions are considerably more
volatile than those of exchange-traded funds
The greater ETF positions relative to the Comex show the
shift in the gold market, from more-
volatile Comex trading to more-stable ETF
accumulation
Net long speculative positions were volatile in 2012 and currently
stand at c22.7moz
ETF holdings are c70.4moz, down only
slightly from a record 84.6moz and are still
equivalent to three quarters of annual
mine production
ETF and Comex positions (moz)
Source: HSBC, Gold Bullion, iShares, CFTC, ETF Securities
0
20
40
60
80
100
120
300
500
700
900
1,100
1,300
1,500
1,700
1,900
2,100
Feb-
04
Aug-
04
Feb-
05
Aug-
05
Feb-
06
Aug-
06
Feb-
07
Aug-
07
Feb-
08
Aug-
08
Feb-
09
Aug-
09
Feb-
10
Aug-
10
Feb-
11
Aug-
11
Feb-
12
Aug-
12
Feb-
13
Spec position in COMEX (RHS) Gold in ETFs (RHS) Gold Price Usd per oz (LHS)
1919
Gold and US federal debt
Declines in federal debt ratios coincided with a fall in the gold
price in the 1990s
Rising debt levels since 2000, particularly
since 2007, have coincided with a huge
gold run
Historically, rising government debt has been positive for gold
prices
The nonpartisan Congressional Budget
Office noted an improvement in the
budget deficit as a percentage of GDP but
longer debt-to-GDP ratios are forecast to
remain high
Source: Congressional records, Reuters
Gold and US public debt
0%
20%
40%
60%
80%
100%
120%
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
Feb-
71
Feb-
73
Feb-
75
Feb-
77
Feb-
79
Feb-
81
Feb-
83
Feb-
85
Feb-
87
Feb-
89
Feb-
91
Feb-
93
Feb-
95
Feb-
97
Feb-
99
Feb-
01
Feb-
03
Feb-
05
Feb-
07
Feb-
09
Feb-
11
Feb-
13
Gold (LHS) Gross Federal Debt as a % of GDP
02004006008001,0001,2001,4001,6001,8002,000
0102030405060708090
100
Nov-79 Nov-83 Nov-87 Nov-91 Nov-95 Nov-99 Nov-03 Nov-07 Nov-11
Dissatisfied (%) (LHS) Gold (RHS)
02004006008001,0001,2001,4001,6001,8002,000
0
10
20
30
40
50
60
70
80
Nov-79 Nov-83 Nov-87 Nov-91 Nov-95 Nov-99 Nov-03 Nov-07 Nov-11
Satisfied (%) (LHS) Gold (RHS)
2020
Gold and public satisfaction
Gallup asks a representative sample
of more than 8,000 Americans every month, “Are you satisfied with the
direction the country is headed?” followed by
the question, “Are you dissatisfied with the
way the country is headed?”
Gold prices tend to be high during periods
when the polling finds that the public is
dissatisfied with the direction in which the country is headed and
low when the survey finds the public is
satisfied
Low satisfaction ratings tend to support
gold and a rise in confidence coincides
with a decline in prices
Source: Reuters, AP/Gfk, Gallup
Gold rallies as satisfaction falls
Source: Reuters, AP/Gfk, Gallup
Gold rallies as dissatisfaction remains high
0
50
100
150
200
250
300
350
600
800
1,000
1,200
1,400
1,600
1,800
2,000
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
Gold Price (USD/oz) (LHS)Economic Policy Uncertainty Index (7 day moving average) (RHS)
2121
Gold and economic policy uncertainty
The Economic Policy Uncertainty Index is
an index that measures the number of
newspaper articles that mention the 3 sets of terms including the economy, uncertainty
and congress
Gold prices tends to rally during
heightened periods of economic uncertainty
and falls during periods of low
economic uncertainty
High economic policy uncertainty tend to
support gold
Recently economic policy uncertainty has
dropped, along with gold prices
Source: Bloomberg, Economic Policy Uncertainty
Gold rallies on economic policy uncertainty
2222
Gold and the US president’s approval and disapproval ratingsGold has traded
inversely to the US president’s popularity
A look at gold prices during President
Obama’s time in office shows that gold’s low
coincides with his highest approval
rating and his lowest disapproval rating, set during the week of his
inauguration
Gold prices began to accelerate in April
2010 as the president’s approval rating fell
below 50%
An uneven increase in approval ratings has
been accompanied by a gold price decline
Source: Gallup, Bloomberg
Source: Gallup, Bloomberg
Disapproval ratings
Approval ratings
30%
35%
40%
45%
50%
55%
60%
65%
70%
800
1,000
1,200
1,400
1,600
1,800
2,000
Jan-
09
Apr-0
9
Jul-0
9
Oct-0
9
Jan-
10
Apr-1
0
Jul-1
0
Oct-1
0
Jan-
11
Apr-1
1
Jul-1
1
Oct-1
1
Jan-
12
Apr-1
2
Jul-1
2
Oct-1
2
Jan-
13
Apr-1
3
Gold Price USD/oz (LHS) Approval (RHS)
0%
10%
20%
30%
40%
50%
60%
70%
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
Jan-
09
Apr-0
9
Jul-0
9
Oct-0
9
Jan-
10
Apr-1
0
Jul-1
0
Oct-1
0
Jan-
11
Apr-1
1
Jul-1
1
Oct-1
1
Jan-
12
Apr-1
2
Jul-1
2
Oct-1
2
Jan-
13
Apr-1
3
Gold Price USD/oz (LHS) Dissaproval (RHS)
2323
Gold coins
The drop in price has led to a surge of
physical demand
The US Mint is the largest bullion mint in the world and report a
marked jump in demand, inside and
outside the US
Source: HSBC, US Mint
Gold coin sales by the US Mint
400
600
800
1,000
1,200
1,400
1,600
1,800
0
50
100
150
200
250
Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13
Coin sales (LHS) Gold price (USD/oz) (RHS)
000 oz
2424
Gold as a percentage of currency reserves
Western central banks hold large percentages of
their foreign exchange reserves in gold
Most other countries have smaller allocations
of gold in their foreign exchange reserves
Emerging-market central banks have shifted to
being net buyers of bullion, while Western
central banks have effectively stopped selling
gold
In 2011, central banks bought c456t of gold and about the same for 2012
We believe that central banks will buy at least
400t of gold this year
Gold as a % of currency reserves
Source: WGC/IFS
0%
10%
20%
30%
40%
50%
60%
70%
80%
01,0002,0003,0004,0005,0006,0007,0008,0009,000
US
Ger
man
y
IMF
Italy
Fran
ce
Chi
na
Switz
erla
nd
Rus
sia
Japa
n
Net
herla
nds
Gold (tonnes) % of reserves
2525
Gold and central banks
Source: Bloomberg, HSBC, World Gold Council
Gold sales and (purchases) by the official sector
-600
-400
-200
0
200
400
600
800
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
f
tonnes
Central banks have swung to being net
buyers of bullion for some of the following
reasons:
Gold is historically used ‘war chest’ or in times of
crisis
Can be utilized to settle underlying balance of
payments deficits
Can be useful in stemming a run on a
currency
Is a traditional proven diversifier in a US dollar-
laden portfolio
High gold reserves have significant prestige value
2626
Gold and central banks since 2012
Official sector buyers are comprised entirely of
Emerging Market and transitional nations
Sellers are few, with most bullion sold to support domestic coin minting
programs
The slide in prices is likely to encourage
central bank appetite for gold
Central bank gold purchases/sales, 2012 to present (tonnes)
Source: HSBC, Thomson Reuters Datastream
PurchasesTurkey 214Russia 99Korea 50Kazakhstan 41Brazil 34Philippines 34Iraq 24Mexico 18Paraguay 8Ukraine 8Belarus 6Others 25SalesCzech Republic -1Germany -5Sri Lanka -12
2727
Gold and China
The drop in prices has set off a wave of demand in price
sensitive gold-consuming nations
This chart shows the strong increase in
imports into China from Hong Kong in
reaction to lower prices
Source: HSBC, Hong Kong Census and Trade Statistics
China gold import from Hong Kong
0
50
100
150
200
250
Sep-
08
Dec-0
8
Mar-0
9
Jun-
09
Sep-
09
Dec-0
9
Mar-1
0
Jun-
10
Sep-
10
Dec-1
0
Mar-1
1
Jun-
11
Sep-
11
Dec-1
1
Mar-1
2
Jun-
12
Sep-
12
Dec-1
2
Mar-1
3
Tonnes
2828
Gold mine production
High prices have stimulated production, and gold prices are still
well above marginal costs of production
There is no Saudi Arabia of gold
Gold production is constrained by:
•Falling grades
•Inadequate infrastructure
•Resource nationalism
•Power and fresh-water shortages
•Labor and skilled personnel shortages
•Long waiting times for mining equipment
Gold mine production (tonnes)
Source: HSBC, Thomson Reuters/GFMS, Bloomberg
02004006008001,0001,2001,4001,6001,800
2,200
2,300
2,400
2,500
2,600
2,700
2,800
2,900
3,000
2005
2006
2007
2008
2009
2010
2011
2012
2013
f
Mine production - LHS Gold (USD/oz) - RHS
2929
Gold jewelry demand
Jewelry is the biggest single source of physical demand, but it is losing
market share to investment
Emerging-market gold demand is highly price-sensitive; this is helping
to make gold prices more volatile
The recent price plunge should encourage greater
physical demand
Gold jewelry demand (tonnes)
Source: HSBC, Bloomberg, World Gold Council
0
500
1,000
1,500
2,000
2,500
3,000
2005
2006
2007
2008
2009
2010
2011
2012
2013
f
3030
India and China: Gold jewelry demand
Both nation’s demand for gold jewelry has increased, in reaction to lower prices
The two nations together account for more than half
of gold jewelry demand worldwide
Source: Bloomberg, HSBC, World Gold Council
India and China: Gold jewelry demand
0
50
100
150
200
250
Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13
India Gold Jewellery Demand China Gold Jewellery Demand
tonnes
3131
Indian gold jewelry demand and the INR
The weaker the INR, the lower local gold demand is,
typically and the stronger the INR the greater
demand
We expect to see a notable rise in Indian demand this
year but this is more because of weaker gold
prices in USD terms than because of a stronger INR
Source: Bloomberg, HSBC, World Gold Council
Indian gold jewelry demand and the INR
38
40
42
44
46
48
50
52
54
56
58
0
50
100
150
200
250
Jun-
04
Dec-0
4
Jun-
05
Dec-0
5
Jun-
06
Dec-0
6
Jun-
07
Dec-0
7
Jun-
08
Dec-0
8
Jun-
09
Dec-0
9
Jun-
10
Dec-1
0
Jun-
11
Dec-1
1
Jun-
12
Dec-1
2
India Jewellery Demand (LHS) USD-INR (RHS)
tonnes
3232
Gold scrap
Higher prices have helped trigger a surge in
recycled gold
In addition to higher prices, economic
hardship has buoyed scrap supplies until
recently
The drop in prices will discourage price-
sensitive scrap supplies
Old gold scrap (tonnes)
Source: HSBC, Bloomberg
02004006008001,0001,2001,4001,6001,800
800900
1,0001,1001,2001,3001,4001,5001,6001,7001,800
2005 2006 2007 2008 2009 2010 2011 2012 2013f
Old gold scrap - LHS Gold (USD/oz) - RHS
3333
A question of reserves
Traditional producers are losing market
share due to declining reserves
Source: USGS, GFMS, HSBC
52%51%52%51%
54%54%54%53%56%57%57%
58%60%60%
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009e 2010e 2011e 2012etonn
es
South Africa US Australia China Canada Russia
% global production
Gold reserves in major producing countries
3434
Gold and free markets versus less-free markets
Gold prices tend to fall during periods when free markets are on
the ascent
Gold tends to rise when governments
intervene more in the economy
The global financial crisis has shifted
power away from free markets and toward
more government intervention
Left grouping = State intervention. Right grouping = Free market approach.Source: HSBC
Government planning
Producer cartels OPEC
Government banks
‘Arab Spring’
European Union Anglo-Saxon
model
Capital mobility
Transparency
Public debt
China
CensorshipGlobalization
Fixed exchange rates
Resource nationalism
Foreign policy
Free trade
United States
Internet – free exchange of information
Immigration
National oil companies Protectionism
trade barriers
Government investment
abroadRussia
IndiaPrice controls
/ subsidies
Sovereign wealth funds
Regulation
Floating exchange rates
Japan
Private section banks
WTO
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