Objective Capital Precious Metals, Diamonds and Gemstones Investment Summit The impact of turbulence in the financial markets on the euro, dollar and gold 20 May 2010 by Marino Pieterse - Goldletter International

1. PRECIOUS METALS,
DIAMONDS & GEMSTONES
INVESTMENT SUMMIT
11.25 - 11.50
The impact of turbulence in the financial markets on the
euro, dollar and gold
Marino Pieterse – Editor, Goldletter International
THE LONDON CHAMBER OF COMMERCE AND INDUSTRY ● THURSDAY, 20 MAY 2010
www.ObjectiveCapitalConferences.com

2. Goldletter INTERNATIONAL
th e in te rn a tio n a l in d ep en d en t in fo rma tio n a n d a d vi ce b u lle tin fo r g o ld a n d rela ted in v es tmen t s
The impact of turbulence on the financial markets
on the euro, dollar and gold
Marino G. Pieterse
publisher Goldletter International
Objective Capital’s
Precious Metals,
Diamonds and Gemstones Investment Summit
London, United Kingdom
May 20, 2010
2

3. Overview metal / oil prices (in US$)
May 15 April 30 Year-end Year-to-date Year-end Year-to-year June 30
2010 2010 2009 2010/09 2008 2009/08 2008
(in %) (in %)
Gold 1,239 1,179 1,104 12 865.00 28 932.75
Silver 19.29 18.64 16.99 14 10.79 57 17.65
Platinum 1,721 1,738 1,475 17 912 62 2069
Palladium 536 552 407 32 185 120 472
Copper 6,960 7,430 7,346 -5 2,902 153 8,775
Nickel 22,200 25,800 18,480 20 10,810 71 21,675
Lead 1,952 2,176 2,395 -18 949 152 1,735
Zinc 2,050 2,276 2,570 -20 1,121 129 1,875
Brent oil 76.52 85.88 77.20 -1 41.76 85 139.30
historic high: $ 147.00 (July 7, 2008)
low : $ 39.23 (December 5, 2008)
Uranium (U3O8) spot price 41.50 41.75 44.50 -7 53.00 -16 59.00
April 6, 2009 (Low ) 59.00 40.00
Long-term contract price 60.00
source: Goldletter International
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4. Measuring the new gold bull market
London trading Change Period of
in US$ in % change
December 1, 2003 400.00
December 2, 2005 500.00 +25 (2 years)
April 14, 2006 600.00 +20 ( 3 ½ months)
May 10, 2006 700.00 +17 (- 1 month)
May 12, 2006 725.25 +20 (- 1 month)
October 6, 2006 560.75 -23 (5 months)
► Year-end 2006 635.75 +14 (3 months)
April 20, 2007 691.40 +9 (4 months)
June 27, 2007 642.10 -7 (2 months)
September 18, 2007 714.75 +12 (2 ½ months)
► Year end 2007 836.50 +17 (3 ½ months)
March 17, 2008 (H) 1,030.80 +24 (2 ½ months)
May 1, 2008 853.00 -16 (1 ½ months)
July 16, 2008 977.50 +15 (2 ½ months)
September 11, 2008 740.75 -24 (2 months)
October 10, 2008 918.00 +24 (1 month)
October 24, 2008 (L) 692.50 -25 (2 weeks)
► Year end 2008 865.00 +25 (2 months)
February 20, 2009 (H) 989.00 +14 (-2 months)
(Interim high New York $ 1,006.30)
April 20, 2009 870.00 -12 (2 months)
June 1, 2009 987.00 +13 (-1½ month)
July 13, 2009 908.50 -8 (+1½ month)
September 17, 2009 1,020.50 +12 (2 months)
September 30, 2009 995.75 -2 (½ month)
December 3, 2009 (H) 1,226.10 +23 (2 months)
► Year end 2009 1,104.00 -10 (1 month)
January 29, 2010 1,078.50 -3 (1 month)
April 30, 2010 1,179.25 +9 (3 months)
May 15, 2010 (H) 1,248.95 +14 (3½ months)
source: Goldletter International
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5. Gold does not run its own course as a safe haven
Gold ($) €/$ Brent Oil Gold/Oil
$/barrel ratio
Year-end 2001 276.50 0.88 19.80 14.0
Year-end 2002 342.75 1.05 28.13 12.2
Year-end 2003 417.25 1.26 30.17 13.8
Year-end 2004 438.00 1.36 40.25 10.9
Year-end 2005 513.00 1.18 58.87 8.7
May 12, 2006 1) 725.75 1.29 68.05 10.7
October 6, 2006 2) 560.75 1.27 58.86 9.5
► Year-end 2006 635.70 1.32 60.14 10.6
June 30, 2007 650.50 1.35 72.82 8.9
1) 2006 high of gold price
September 18, 2007 3) 714.75 1.39 77.58 9.2 2) 2006 second half low of gold price after correction oil price
► Year-end 2007 836.50 1.47 93.89 8.9 3) Fed funds rate lowered for the first time (0.50% to 4.75%)
March 17, 2008 (High) 1,030.80 1.58 102.82 10.0 4) Fed funds rate lowered (0.25% to 2.00%)
April 30, 2008 4) 853.00 1.55 109.78 7.8 5) ECB rate lowered (0.25% to 4.25%)
June 30, 2008 930.25 1.58 139.30 6.7 6) Fed funds and ECB rates lowered 0.50% to 1.50% and 3.75%, respectively
July 9, 2008 5) 927.50 1.57 141.70 6.5 7) 2008 low of oil price
July 16, 2008 977.50 1.58 134.54 7.3 8) Fed funds rate lowered (0.75-1.00% to 0.00-0.25%)
September 15, 2008 775.00 1.43 90.38 8.6 9) ECB rate lowered 0.50% to 2.00%
October 8, 2008 6) 903.50 1.37 83.18 10.9 10) ECB rate lowered 0.50% to 1.50%
October 24, 2008 (Low) 692.50 1.26 60.41 11.5 11) ECB rate lowered 0.25% to 1.25%
12) ECB rate lowered 0.25% to 1.00%
November 24, 2008 822.50 1.28 52.19 15.8
13) Euro salvation package
December 5, 2008 7) 749.00 1.27 39.23 19.1
December 16, 2008 8) 838.25 1.37 44.11 19.0
► Year-end 2008 865.00 1.40 41.76 20.7
January 15, 2009 9) 810.00 1.31 44.50 18.2
March 5, 2009 10) 913.00 1.26 44.16 20.7
April 2, 2009 11) 897.75 1.34 53.14 16.9
May 13, 2009 12) 924.00 1.36 57.26 16.1
May 31, 2009 975.50 1.41 64.70 15.1
June 30, 2009 934.50 1.41 68.21 13.7
September 17, 2009 1,020.50 1.47 70.52 14.5
September 30, 2009 995.75 1.46 67.72 14.7
December 3, 2009 (High) 1,226.10 1.51 77.56 15.7
► Year-end 2009 1,104.00 1.43 77.20 14.3
January 29, 2010 1,078.50 1.40 70.56 15.3
March 31, 2010 1,115.50 1.35 81.23 13.8
April 30, 2010 1,179.25 1.33 85.88 13.7
May 10, 2010 13) 1,196.50 1.28 80.04 15.0
May 14, 2010 1,248.95 1.24 76.52 16.3
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6. The crisis resistance of the dollar
compared to gold price
euro/dollar gold price
Year-end 2007 1.47 836.50 Gold correlated to euro
March 17, 2008 1.58 1,030.80 2008 high
May 14 Year-end 2009 Change in %
June 30, 2008 1.58 930.20
September 15, 2008 1.46 996.00 Euro / dollar 1.24 1.43 -13
October 24, 2008 1.26 692.50 2008 low Gold 1,249 (H) 1,104 +13
December 16, 2008 * 1.37 838.25
Year-end 2008 1.40 865.00
February 27, 2009 1.26 952.00
June 30, 2009 1.41 934.50
May 13, 2009 ** 1.36 924.00
December 3, 2009 1.51 1,226.10 2009 high
Year-end 2009 1.43 1,104.00
March 31, 2010 1.35 1,115.50
April 30, 2010 1.33 1,179.25
May 14, 2010 1.24 1,248.95 2010 high
* Fed funds rate lowered 0.75%-1.00% to 0.00-0.25% (ECB 2.50%)
** ECB rate lowered 0.25% to 1.00%
source: Goldletter International
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7. THE COURSE OF THE DOLLAR AGAINST OTHER CURRENCIES
1 US$ =
Euro Jap. Yen RMB Rupee Cdn$ A$ SA Rand
(00) (00)
Year-end 2007 0.68 112 7.31 39.43 0.98 1.14 6.85
June 30, 2008 0.63 106 6.87 42.85 1.01 1.04 7.96
September 30, 2008 0.69 106 6.86 47.35 1.04 1.22 8.20
Year-end 2008 0.71 90 6.85 49.72 1.22 1.45 9.46
March 31, 2009 0.76 97 6.85 52.17 1.25 1.46 9.72
June 30, 2009 0.71 96 6.84 48.64 1.16 1.24 7.88
September 30, 2009 0.68 90 6.84 48.34 1.09 1.15 7.43
Year-end 2009 0.69 92 6.82 46.75 1.05 1.10 7.40
March 31, 2010 0.74 93 6.82 45.00 1.02 1.09 7.37
May 14, 2010 0.79 93 6.82 45.02 1.02 1.11 7.46
Euro Jap. Yen RMB Rupee Cdn$ A$ SA Rand
Change against dollar -14 -1 - +4 +3 -1 -1
2010 to date (in %)
7

8. Western Central Bank gold holdings
compared to non-gold monetary reserves
1950 1965 December 2009
11 Central Bank gold holdings 26,300 31,900 20,073 *
(in tonnes)
Value of gold reserves 29.5 33.4 696 **
(US$ billion)
Value of non-gold reserves 34.0 45.8 1,218
(US$ billion)
Gold in % of total reserves 84% 73% 36%
* 19 signatories to the second Central Bank Gold Agreement 3 (September 2009 - 2014)
including European Central Bank + United States
** based on gold price of US$ 1,040 per ounce
Related to currency basket of the US dollar index
(57.6% in euro’s, 13.6% in Japanese yen, 11.9%
in British pounds, 9.1% in Canadian dollars, 4.2%
in Swedish crones and 3.6% in Swiss francs).
Since the index went up in 1995 from a long term
resistance level of 80 to a high of 120 in 2001, at
the time the euro was introduced, it dropped to a
low of 72 in March 2008, but has been followed by
a strong upward correction to $ 87 well above the
historic resistance level. After a new correction to 74
early December 2009, the current level is 84/85.
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9. 9

10. World official gold holdings and total monetary reserves
Western countries Asia
December 2009 Gold reserves Total Gold as December 2009 Gold reserves Total Gold as
tonnes reserves % total tonnes reserves % total
(bln $) monetary (bln $) monetary
reserves * reserves
China 1,054 2400 1.5
United States 8,134 394 69
Japan 765 1065 2.4
Germany 3,408 175 65
Korea 14 234 0.2
France 2,445 128 64
Singapore 127 185 2.3
Italy 2,452 130 63 Taiwan 424 346 4.1
Switzerland 1,040 120 29 India 558 291 6.4
Netherlands 613 39 52
Portugal 383 15 84 Total 2,942 4,521
United Kingdom 310 69 15
Spain 282 27 35
Other countries
Austria 280 18 53
Sub-total 19,347 1,115 December 2009 Gold reserves Monetary Gold as
tonnes reserves % total
All countries 26,780 8,779 10.2 (bln $) monetary
reserves
World (incl.institutes) 30,117
Russia 608 404 4.7
Euro (incl.ECB) 10,799 1,808 55.7 Venezuela 356 33 35.7
Lebanon 287 36 26.5
ECB 501 85 19.7
Libya 144 104 4.6
Saudi Arabia 143 47 10.2
IMF 3,005 South Africa 125 40 10.5
BIS 120 Australia 80 44 6.0
* based on gold price of $ 1.040 per troy ounce Total 1,743 708
Source: IMF/World Gold Council/Goldletter International
10

11. World Gold Supply and Demand (in tonnes)
SUPPLY 2009 2008 Year-to-year 2007
change in %
Mine production 2,554 2,409 6 2,476
Official sector sales 44 236 -81 484
Recycled gold 1,549 1,217 27 956
Total supply 4,147 3,862 7 3,916
DEMAND
Jewellery 1,747 2,186 -20 2,405
Industrial & Dental 368 436 -16 462
Total Fabrication 2,115 2,622 2,867
Net producer de-hedging 257 363 444
Net retail investment 676 863 -22 433
ETF's similar products 595 321 85 253
Inferred Investments 504 -293 - -81
Total investment 1,775 891 605
Total demand 4,147 3,876 7 3,916
Gold price (London PM, US$/oz 972 872 695
source: GFMS
11

12. Demand in major consumer countries (in tonnes)
2009 2008 2007 2009 2008 2007 2009 2008 2007
jewellery net retail total
India 406 502 552 74 211 218 480 713 769
China 347 327 302 81 66 26 428 393 328
Middle-East 232 318 325 19 28 20 251 346 346
USA 150 188 258 113 79 17 263 267 275
Turkey 75 153 188 32 57 61 107 210 249
Vietnam 15 20 21 58 96 56 73 116 78
Japan 24 28 31 -10 -39 -56 14 -11 -26
Other 498 651 724 309 364 68 807 1015 792
World total 1,747 2,187 2,401 676 862 410 2,423 3,049 2,811
source: GFMS
India: Over the year 2007 tonnage off-take totalled 480 tonnes down 33% from 713 tonnes in 2008 (-233 tonnes).
Nevertheless held onto its position as the world's largest consuming nation.
► jewellery demand totalled 406 tonnes, down 19% on 502 tonnes in 2008, the weakest result sinde 1995
► investment demand 74 tonnes, a 65% decline on 211 tonnes in 2008
China: 22% increase in invstment demand and 6% increase in jewellery demand, translates to an increase in
total consumer demand of 9% (+35 tonnes) over 2008.
12

13. World Gold Mine Production (10-year comparison – in tonnes)
Gold production by continent
2008 1999
Asia 556 457
Latin America 486 381
Africa 484 661
North America (US, Canada) 331 500
CIS region * 313 263
Australia 215 300
Other Oceania 15 16
Europe 15 24
Total 2415 2603
* East European countries (Russia)
Central Asian countries (Uzbekistan)
(Kazakhstan)
(Kyrgyzstan)
(Tajiskistan)
source: GFMS
13

14. Shift in gold production from traditional to emerging countries
► China has surpassed South Africa as the worlds premier gold producer in 2007
Production in tonnes Production in tonnes
2008 1999 2008 1999
Traditional countries Emerging countries
United States 235 342 China 292 163
South Africa 233 477 Peru 180 129
Australia 215 300 Russia 189 138
Canada 96 158 Indonesia * 95 151
____ ______ _____ _____
Total 779 1276 Total 755 581
Total world production 2416 2603
% total world production 32 49 31 22
* in 2008 output of Grasberg (Freeport McMoran) contracted by 45 tonnes
source: GFMS
14

15. Annual gold output and reserves of the world's Top-12 gold producers
(in million ounces)
Country Company Production Reserves Mine life
2010 E 2009 2008 2007 Year end 2008 Reserves
(in years)
South-Africa AngloGold Ashanti 4.6 4.60 4.60 5.48 71.4 16
Gold Fields * 3.4 3.40 3.64 3.97 81.0 24
Harmony * 1.6 1.46 1.60 1.75 48.2 30
US Newmont Mining 5.3 - 5.5 5.26 5.18 5.32 91.8 17
Freeport-McMoran 1) 2.6 - 2.7 2.66 1.31 2.30 37.2 14
Canada BarrickGold 7.6 - 8.0 7.42 7.66 8.06 139.8 19
Goldcorp 2.6 2.42 2.32 2.29 48.8 19
Kinross Gold 2.2 2.24 1.84 1.59 51.0 23
Australia Newcrest Mining * 1.7 1.63 1.78 1.78 42.8 25
China Zijin Mining 2.7 2.42 1.84 1.68 17.3 16
Peru Minas Buenaventura 1.2 1.32 1.21 1.09 11.2 12
Papua New Guinea Lihir Gold 1.2 1.12 0.77 0.70 28.8 24
* per 30/6/09 1) leading market positions in copper and molybdenum
source: Goldletter International
15

16. WORLD TOP-20 LISTED GOLD PRODUCERS (March 31, 2010)
Traditional countries (12): Market capitalization In % total
in US$ billion
Canada (5) 90 41
South Africa (4) 33 12
United States (2) x 31 12
Australia (1) 15 7
____ ____
Sub-total 169 72
Emerging countries (8):
Russia (3) 17
China (1) 11
Peru (1) 8
Brazil (1) 7
Papua New Guinea (1) 7
Ghana (1) 5
____ ___
Sub-total 55 25
Total 224 100
x including $ 6 billion applying to 17% sare of gold Freeport McMoran 16

17. Market valuation of the world's top-20 listed gold producers
March 31, 2010 Trading Share price Change High Low Net shares Market capitalization
symbol Year end in % 12 month issued local currency US$ billion
Current 2009 (billion)
►Traditional countries:
Canada (5) Toronto Stock Exchange – in Cdn$ Cdn$
Barrick Gold ABX 38.97 41.46 -6 50.53 33.01 984.4 38.4 37.6
Goldcorp G 37.95 41.35 -8 48.37 32.39 733.8 27.8 27.3
Agnico-Eagle Mines AEM 56.47 56.92 -1 77.32 50.80 156.7 8.8 8.7
IAM Gold IMG 13.50 16.51 -18 21.95 8.94 370.5 5.0 4.9
Kinross K 17.37 19.37 -10 25.22 16.52 696.6 12.1 11.9
Subtotal 90.4
South Africa (4) JSE – in Rand Rand
AngloGold Ashanti ANG 277.95 306.29 -9 359.00 259.50 362.3 100.7 13.6
Harmony Gold HAR 68.80 75.79 -9 109.00 67.71 426.2 29.3 4.0
Gold Fields GFI 92.20 97.98 -6 116.46 83.10 705.4 65.0 8.8
LSE - in £ £
Randgold Resources RRS 50.15 50.00 0 54.50 27.60 90.2 4.5 6.8
Subtotal 33.2
USA (2) NYSE – in US$
Newmont Mining NEM 50.93 48.93 4 56.45 36.77 483.0 24.6
Freeport McMoran * FCX 83.54 80.29 4 90.55 43.19 432.6 36.1
Subtotal 60.7
Australia (1) ASX Sydney – in A$ A$
Newcrest Mining NCM 32.82 35.33 -7 39.75 27.64 483.4 15.9 14.6
Subtotal 14.6
* one of the world's major copper producers; approximately 17% of income applies to gold
17

18. Market valuation of the world's top-20 listed gold producers
►Emerging countries:
Russia (3)
Polyus Gold OPYGY 25.75 27.55 -7 32.4 17.27 381.3 9.8
Polymetal PMTL 10.70 9.4 14 10.80 6.00 399.4 4.3
Petropavlovsk PPLKY 35.50 33.05 7 44.00 13.10 91 3.2
Subtotal 17.3
China (1) Hong Kong (H shares) – in HK$ HK$
Zijin Mining ** 2899 6.12 7.42 -18 9.33 5.07 14,541.3 89.0 11.5
Subtotal 89.0 11.5
Peru (1) NYSE - in US$
Minas Buenaventura BVN 30.85 33.47 -8 42.50 19.00 274.9 8.5
Subtotal 8.5
Brasil (1)
Yamana Gold AUY 9.85 11.23 -12 14.37 7.36 733.4 7.2
Subtotal 7.2
Papua New Guinea (1)
Lihir Gold LGL 3.03 3.28 -8 3.77 2.41 2368.7 7.2 6.6
Subtotal 7.2 6.6
Ghana (1)
Red Back Mining RBI 20.75 15.00 38 22.13 6.53 232.1 4.8 4.7
Subtotal 4.7
Total 254.7
* also major copper producer
** integrated mining company; 10,535.9 million domestic A-shares + 4,005.4 million H-shares
18

19. LEVERAGE IN GOLD PRICE
Current 2009 2008 2007 2006
Gold price 1,200 972 896 667 628
Cash costs 500 480 458 389 307
____ ____ ___ ___ ___
Margin 700 492 438 278 321
in % 58 51 49 42 51
19

20. Global financial crisis 2008/2009 in perspective (in US$ billion)
► Prime mortgage crisis (from early 2007) 500
► Financial crisis / Credit crunch (from September 15, 2008 fall Lehman Brothers) 1,000
Global Financial Stability Report (IMF):
Rescue package United States $ 700 billion
Europe $ 300 billion
► Write-offs in bank sector : 60% American banks - 40% European banks 580
_____
Total 2,080
► Credibility crisis → Global stock markets crunch → Real economy losses
(in US$ billion)
Capital infusions and loan guarantees 1,400
of which:
United States 1,000
Eurozone 240
Japan 105
20

21. Stimulous packages : US$ billion
United States 787
consumer and small business loans (TALF) up to $ 1,000 billion
Fed plan to buy $ 300 billion of US government debt
China 586
Japan 162
G-20- / IMF 1,000
_____
Total 2,535
► IMF initially estimates total financial sector losses of $ 4,100 billion
US $ 2,700 billion
Europe $ 1,200 billion
Japan $ 149 billion
► as per October 1, 2009, IMF reduces estimated losses to $ 3,400 billion
21

22. Worldwide stock market losses
Valuation year-end 2007 61,000
losses in week of October 3-10, 2008 6,200
Losses full year 2008 -42% (MSCI-index) 25,000
Valuation year-end 2008 36,000
January/February 2009 6,500
March 2009 recovery +3,000
April 2009 recovery +1,100
22

23. History of financial crisis
Dow Jones
►1973 - 1974: Oil Crash (2 year) - 40%
► October 19, 1987 Black Monday - 22%
October 3 week fall - 34%
(blamed on the rise of computerized hedging strategies)
► 1997 - 1998 : Asian crisis
October 1997 - 11%
(Russian debt default 1998)
Asian growth of financial wealth US$ billion
► 2002 - 2009 growth monetary reserves China 2,200
► Sovereign Wealth Funds 2,500
23

24. Correlation between GDP – representing real economy –
and Market Capitalization
GPD in US$ billion Expected GDP growth Market capitalization Change
in % in US$ billion - year-end in %
2007 2008 2009* 2009 2010 2007 2008
United States 13,808 14,265 13,380 -2.7 +1.5 19,964 11,605 -41
Euro zone 12,182 12,267 11,752 -4.2 +0.3 9,993 4,766 -52
Japan 4,382 4,924 4,658 -5.4 +1.7 4,543 3,263 -28
China 3,280 4,402 * 4,776 +8.5 +9.0 4,479 1,759 -61
* corrected data including consumer spending
2009 GDP Market Capitalization 2010 Loss
(US$ billion year-end 2009 (US$ billion) in % in US$billion
Greece 331 32 -24 26
Spain 1,464 1,435 -22 259
Italy 2,118 656 -15 82
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25. 25

26. 26

27. 27

28. European bank debts and corporate debentures
in € billion Applying to:
Greece 302.6 UK 12.3
Portugal 10.3
Spain 1.2
Ireland 938.6 UK 193.0
Portugal 21.8
Spain 15.8
Portugal 286.7 Spain 88.5
UK 25.5
Spain 1,153.9 UK 119.5
Portugal 28.9
Total 2,681.8 of which:
UK 350.3
Spain 105.5
Portugal 61.0
28

29. Goldletter INTERNATIONAL
th e in te rn a tio n a l in d ep en d en t in fo rma tio n a n d a d vi ce b u lle tin fo r g o ld a n d rela ted in v es tmen t s
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Telephone 0031 20 470 0249
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www.goldletterint.com
info@goldletterint.com
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