W W W. G O L D . O R

w w w. g o l d . o r g

Gold Demand Trends AUGUST 2008

Second quarter and first half year 2008 EXECUTIVE SUMMARY

Table of contents

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Executive summary

1

Outlook

2

Demand

3

• The high and volatile gold price continued to dampen demand in tonnage terms during Q2, particularly for jewellery. While the average gold price, at $896.29/oz based on the London pm fix, was well below the peak of $1,011/oz seen in mid-March, it nevertheless represented a 34% rise on the average price of Q2 2007. Total identifiable demand fell 19% relative to yearearlier levels to 735.6 tonnes.

Overall trends

3

Jewellery

5

• In contrast, total demand in value terms rose 9% on year-earlier levels to reach US$21.2bn –

Industrial

a new all-time quarterly record. • In volume terms, jewellery was the biggest contributor to the overall annual decline, falling by

& dental

6

Investment

7

158.7 tonnes (24%) to 504.0 tonnes. However, despite the adverse economic conditions affecting much of the globe, consumers continued to increase their spending on gold jewellery. In value terms, demand rose 2% from year-earlier levels to $14.5bn, a new quarterly record.

Supply

9

• Identifiable investment demand was also softer than year-earlier levels as some investors took profits, but was nevertheless more resilient to the high gold price than jewellery demand. The 4% decline in tonnage relative to year-earlier levels represented a 9% decline in net retail investment, partly offset by a change from small net disinvestment to small net

Consumer demand in individual countries

11

investment in Exchange Traded Funds (ETFs) and similar products. Inferred investment demand (which cannot be directly measured and is proxied by the statistical residual) continued to enjoy sizeable inflows. • During July, total gold held in gold Exchange Traded Funds exceeded 1,000 tonnes for the first time.

India

11

Greater China

12

Other East Asia

13

Middle East & Turkey

14

USA

16

Europe

16

• Second quarter industrial and dental demand declined by 5% to 111.8 tonnes, primarily due to declining demand for gold in the dental and ‘other industrial’ sectors, in response to the continued high gold price. In value terms, this was equivalent to $3.2bn, a rise of 27%. • Gold supply grew by 1% in tonnage terms relative to year-earlier levels. A 13% increase in scrap due to the higher gold price was offset by a 4% reduction in mine output. Supply was also restricted by lower central bank sales. • India was the biggest contributor to the fall in gold demand during Q2, as it was in the first quarter. Both jewellery and investment demand were severely affected by the high and volatile gold price and higher local inflation, which has squeezed disposable incomes. Jewellery demand in Q2 was down 47% in tonnage terms on the levels of a year earlier, while net retail investment fell 41%. Indian demand also fell in US$ value terms, by 29% in jewellery and 20% in investment. Embargo: not for release before Wednesday August 13th 2008, 0700 hrs NY time

AUGUST 2008

1

Historical data

18

Focus on Vietnam

19

Notes & definitions

21

© 2008 World Gold Council and GFMS Ltd

Gold Demand Trends • Other major gold consuming nations experienced a more mixed quarter. On the jewellery side, only China and Egypt experienced a rise relative to year earlier levels in tonnage terms. In China’s case, the rise was just 2% while in Egypt the rise was somewhat larger at 8%. High levels of the gold price, and high volatility, have been a key deterrent along with rising petrol and food prices, which have squeezed disposable incomes. Countries and regions that suffered the largest decline in percentage terms (apart from India) included the US (-30%), Taiwan (-20%) and the UK (-20%), and the “Other Gulf” region (-23%), which was largely attributable to a decline in Kuwait. Nevertheless, the fact that the dollar spend on jewellery in most countries remains above last year’s levels is encouraging given the current economic environment. • Countries that enjoyed strong growth in net retail investment inflows included China, the US and Vietnam. Higher inflation and falling stock markets were a common theme in all three countries, highlighting the inflation hedging and safe haven motives for investing in gold. Net investment demand in Vietnam in H1 2008 totalled 56.8 tonnes, already just outstripping the 56.1 tonnes recorded for the whole of 2007. In Q2 2008, demand more than doubled in China from 4.3 to 9.8 tonnes, and in the US, rose from 1.2 tonnes to 11.3 tonnes. • In Japan, sales of existing gold holdings by investors seeking a profit outweighed purchases to the tune of 12.1 tonnes. This level of net selling back was well below the record 39.3 tonnes seen in the previous quarter, reflecting the move in the gold price down from its earlier highs.

Outlook for Q3 2008 While the sense of economic or financial crisis lasts, gold investment demand will continue to be robust, although high prices are likely to generate a certain amount of profit taking. Under these circumstances, jewellery demand is likely to remain subdued in most countries. Nevertheless, despite the adverse impact of rising food and energy prices on household budgets, the potential for stronger jewellery demand remains, once prices stabilise sufficiently to regenerate consumer purchasing in those countries sensitive to price volatility. Gold supply has remained constrained for some years. While the pace of net de-hedging that has contributed to the tight supply situation in recent years is not sustainable for much longer (if at all), net central bank sales appear to be slowing. Unless a substantial new seller emerges, net sales under the Central Bank Gold Agreement in the current CBGA year, which ends on September 26, could be the lowest since the first Agreement was signed in 1999. Source: GFMS Ltd, WGC

The figures used in this report The supply and demand data in this report are based on tonnage figures compiled independently for the WGC by GFMS Ltd. Any information from alternative sources is clearly indicated. Value figures for demand and supply are calculated by the WGC from the GFMS data. We are sometimes asked why we comment on value figures for demand as well as tonnage instead of just relying on tonnage figures, as is more common in most commodity markets. There are two main reasons for this. First, over 85% of demand is discretionary spending either on a consumer product (jewellery) or as an investment. In both these markets it is customary to comment on value figures. Second, since demand (as statistically defined) has to equal supply, changes in demand can simply reflect growth or contraction in the supply of gold to the market and are thus a poor guide to consumers’ or investors’ appetite for gold. Commenting on both value and on tonnage provides a more holistic picture. For global or regional value figures, the US dollar is used as the measure. Apart from the fact that it is the world’s major currency, most of gold’s main markets are in countries whose currencies are either linked, tightly or loosely, to the dollar or where exchange rates against the dollar do not normally change greatly from year to year, other than in line with inflation differentials. The use of the US dollar is thus appropriate. Not all investment flows can be measured and those that cannot be are proxied by the statistical residual from the supply and demand balance, known as “inferred investment”; this contains stock movements and other elements but it is usually dominated by those investment flows not susceptible to statistical capture.

AUGUST 2008

2

Gold Demand Trends DEMAND Table 1: Identifiable gold demand1 (tonnes)

2006

2007

Q1'07

Q2'07

Q3'07

Q4'07

Q1'08

Q2'082

% ch Q2'08 vs Q2'07

% ch H1'08 vs H1'07

2,284.0

2,400.2

565.2

662.7

602.2

570.2

444.3

504.0

-24

-23

Industrial & dental Electronics Other Industrial Dentistry

459.4 307.9 90.8 60.7

461.1 310.6 92.7 57.8

116.2 77.5 23.9 14.8

118.0 79.4 24.0 14.6

116.6 78.8 23.6 14.2

110.2 74.9 21.2 14.1

111.0 75.9 21.0 14.1

111.8 76.3 21.9 13.6

-5 -4 -9 -7

-5 -3 -11 -6

Identifiable Investment Net retail investment Bar Hoarding Official Coin Medals/Imitation Coin

661.6 401.5 235.3 128.9 59.4 -22.1

656.6 403.3 235.6 137.0 72.6 -42.0

147.3 110.9 66.6 37.7 20.4 -13.8

124.9 127.4 79.7 38.7 25.6 -16.5

244.6 105.1 59.6 38.2 18.3 -11.0

139.8 59.8 29.6 22.4 8.4 -0.7

134.0 61.3 34.9 27.7 9.7 -11.1

119.8 115.9 72.4 32.8 12.4 -1.7

-4 -9 -9 -15 -51 …

-7 -26 -27 -21 -52 …

260.2

253.3

36.4

-2.6

139.5

80.0

72.7

4.0

…

127

3,405.0 603.77

3,518.0 695.39

828.7 649.82

905.7 666.84

963.4 680.13

820.2 786.25

689.3 924.83

735.6 896.29

-19 34

-18 38

Jewellery consumption

Other identified retail invest.3 ETFs & similar products 4 Total identifiable demand London pm fix, $/oz

Source: GFMS Ltd. 1. Identifiable end-use consumption excluding central banks. 2. Provisional. 3. “Other retail” excludes bar and primary coin offtake; it represents mainly activity in North America and Western Europe. 4. Exchange Traded Funds and similar products including: LyxOR Gold Bullion Securities, Gold Bullion Securities (Australia), SPDR Gold Shares (formerly streetTRACKS Gold Shares), NewGold Gold Debentures, iShares Comex Gold Trust, ZKB Gold ETF, GOLDIST, ETF Securities, XETRA-GOLD, Central Fund of Canada and Central Gold Trust.

Overall trends The second quarter of 2008 saw gold demand in tonnage terms

In value terms, however, the analysis of the second quarter tells a

extend the declining trend that began in the fourth quarter of 2007.

more positive story with new all-time quarterly spending records set

Although the gold price corrected back from the highs reached

for total identifiable demand and, despite the strain on household

earlier in the year, it remained relatively high on a historical basis

incomes from rising fuel and food costs, for jewellery demand. Total

during the second quarter, dampening jewellery demand.

identifiable demand rose by 9% to US$21.2bn and jewellery

Deteriorating conditions across many economies, and in particular

demand was 2% higher than a year earlier at US$14.5bn.

the increasing presence of rising inflation, acted as a further barrier

Investment spending was 29% higher than Q2 2007 at US$3.5bn

to spending on gold jewellery. Similar factors also explain a reduc-

and industrial demand grew by 27% to US$3.2bn. The use of US

tion in demand for gold used in industrial applications during the

dollar values of gold demand is relevant as many of gold’s main

quarter. In the investment sector, meanwhile, the picture was mixed.

markets are countries whose currencies are linked to the dollar;

Net investment at the retail level was lower than a year ago,

such value figures therefore provide a reasonable approximation of

although substantially higher than in Q1. Demand for Exchange

spending on gold in national currency terms.

Traded Funds (ETFs) and similar products saw net redemptions at the beginning of the quarter followed by a recovery, eventually

The circumstances that have been dampening demand for jew-

surpassing previous peak holdings, in May and June; this continued

ellery, namely rising inflation, slowing economic growth and the ris-

into July.

ing gold price, have conversely created positive conditions for rising investment demand for gold. Despite sometimes substantial bouts

Total identifiable demand in Q2 2008 was 735.6 tonnes, 19% below

of profit taking, retail investment, ETFs and the residual “inferred

the same period of 2007. Of this total, jewellery demand accounted

investment” category have continued to attract fresh net inflows.

for 504.0 tonnes (-24%), industrial demand absorbed 111.8 tonnes (-5%) and the remaining 119.8 tonnes was taken up by the invest-

Returning to the jewellery sector, the fall in the volume measure of

ment sector (-4%). The figures for the first half year, compared with

consumption in the second quarter was largely the result of the

the first half of 2007, show a very similar picture.

sharp drop in the key market of India, where high and volatile prices

AUGUST 2008

3

Gold Demand Trends Table 2: Identifiable gold demand1 ($m)

2006

2007

Q1'07

Q2'07

Q3'07

Q4'07

Q1'08

Q2'082

% ch Q2'08 vs Q2'07

% ch H1'08 vs H1'07

44,495

53,597

11,808

14,208

13,168

14,413

13,212

14,523

2

7

8,929 5,985 1,765 1,179

10,296 6,939 2,067 1,290

2,428 1,619 499 309

2,531 1,703 515 313

2,550 1,724 516 311

2,787 1,892 537 358

3,301 2,258 625 418

3,221 2,199 630 391

27 29 22 25

32 34 24 30

Other identified retail invest.3 ETFs & similar products 4

12,761 7,818 4,591 2,505 1,158 -435 4,943

14,638 8,860 5,153 3,020 1,586 -899 5,778

3,077 2,317 1,392 788 426 -289 760

2,678 2,732 1,709 829 549 -354 -55

5,349 2,299 1,303 836 400 -240 3,050

3,534 1,511 749 567 212 -17 2,023

3,983 1,822 1,038 824 289 -329 2,161

3,454 3,338 2,086 945 358 -50 115

29 22 22 14 -35 … …

29 2 1 9 -34 … 223

Total identifiable demand

66,184

78,531

17,313

19,417

21,066

20,734

20,496

21,198

9

14

Jewellery consumption Industrial & dental Electronics Other Industrial Dentistry Identifiable Investment Net retail investment Bar Hoarding Official Coin Medals/Imitation Coin

Source: WGC calculations based on data from GFMS Ltd. 1. Identifiable end-use consumption excluding central banks. This table was formerly called "End-use gold demand". 2. Provisional . 3. “Other retail” excludes bar and primary coin offtake; it represents mainly activity in North America and Western Europe. 4. Exchange Traded Funds and similar products including: LyxOR Gold Bullion Securities, Gold Bullion Securities (Australia), SPDR Gold Shares (formerly streetTRACKS Gold Shares), NewGold Gold Debentures, iShares Comex Gold Trust, ZKB Gold ETF, GOLDIST,ETF Securities, XETRA-GOLD, Central Fund of Canada and Central Gold Trust.

Source: WGC based on Global Insight data

AUGUST 2008

4

Gold Demand Trends combined with inflation pressures restrained spending. It is worth

Chart 3: Gold price and volatility

noting, however, that the second quarter of 2007, with which we are comparing our data, was particularly strong thanks to the prevailing conditions at the time, which included relatively stable prices and a

1100

45%

booming domestic economy. 1000

The dollar value of global spending on gold jewellery over the first

900

30%

half of 2008 was 7% higher than for the first half of 2007. Given the 800

widespread climate of economic slowdown and rising inflation, the fact that gold jewellery is clearly accounting for a greater level of

700

discretionary consumer spending is an encouraging message.

15%

600

Finally, a note on gold supply; this has been more or less static

500

over the last year, as constraints on mine production and a slow-

400

down in official sector sales have been countered by rising scrap

0% Apr 05 Oct 05 Apr 06 Oct 06 Apr 07 Oct 07 Apr 08

supply and deceleration in producer de-hedging. This illustrates quite clearly the point that the 34% rise in the US$ price between

Gold price, $/oz, lhs

Q2 2007 and Q2 2008 was largely the result of an expansion in

22-day rolling volatility, rhs

underlying demand. Source: Global Insight, WGC

Jewellery Jewellery demand in the second quarter of 2008 recovered from

during the second quarter) it has surrendered around 10% of its

the depressed levels of the previous quarter to reach 504.0 tonnes.

market share over the last 12 months as demand has almost halved

When compared with the second quarter of 2007, however, it reg-

during that time. In rupee spending terms, Q2 demand was 28%

istered a significant decline; down 24%. In marked contrast to this,

below Q2 2007 levels as high and volatile gold prices continued to

the value of spending on gold jewellery in US$ terms increased 2%

weigh on the market. Additionally, the spectre of rising inflation gave

over Q2 2007 levels and set a new quarterly record of US$14.5bn.

consumers further reason to withhold their purchases as disposable income was constrained.

For the first half of the year as a whole, jewellery demand amounted to 948.3 tonnes, equating to a 23% drop compared with the first six

It was a similar story across many of the countries in the Middle East

months of 2007. Over the same period, the value of gold jewellery

region, where high gold prices and rising inflation deterred gold jew-

demand rose 7% to US$27.7bn.

ellery spending. The exception was Egypt, which was one of the few countries to experience a rise in gold jewellery demand in the sec-

The primary factor driving demand lower during the quarter was the

ond quarter. Consumers here are becoming increasingly accus-

continued strength in the gold price. Although the price

tomed to lofty price levels and the dip in the price from the Q1

corrected back from the record levels set during the first quarter, it

record highs was greeted with hefty bouts of buying. However,

remained high and volatile. Price volatility is a major deterrent to

demand across the rest of the region suffered, particularly in the

demand in a number of countries, most notably India, which is the

Other Gulf group of countries where a sharp drop in demand in

world’s largest market for gold jewellery. Additionally, demand was

Kuwait accounted for much of the decline.

hampered by rising inflation, which has started to spread across the globe, and slowing economic growth in many countries as the fall-

Turkey, the second largest market for gold jewellery, experienced

out from the US-led credit-crunch unfolds. Consumers are finding

a difficult start to the quarter with political turmoil adding to price

their disposable income increasingly constricted by rising house-

pressures to constrain demand. While demand picked up in April

hold costs as food and fuel prices spiral. This has weighed on

and May, the volume of gold jewellery demand for the quarter as a

consumer confidence, compounding the effect on gold jewellery

whole was 15% below year-earlier levels, although in local currency

demand as spending on such discretionary items is reined in.

terms spending was 7% higher. The value of gold demand grew by a similar rate over the first six months of the year.

Although India retains its position as the largest consumer of gold Conditions in the US gold jewellery market deteriorated further

jewellery (accounting for around 23% of global jewellery demand

AUGUST 2008

5

Gold Demand Trends during the second quarter of 2008. Spending was stifled in all but

lar, with demand of 222.8 tonnes, 5% below the 234.0 tonnes seen

the top brackets of the gold jewellery market as the repercussions

in H1 2007.

of the credit crunch and the soaring price of oil had a severely detrimental impact on consumers and their household budgets. For the

In a repeat of the first quarter, the smallest decline occurred in the

first half of the year, gold jewellery offtake amounted to 72.5 tonnes,

electronics sector where demand was 4% below Q2 2007. The

a 27% drop on the corresponding period of 2007. However, the fig-

sharp economic downturn in the US, coupled with rising global infla-

ures for demand in value terms over the same period hint at a more

tion and a weaker global economic outlook, has had a negative

resilient US consumer as the value of spending actually rose by 1%

impact on consumer activity in a number of markets. Consumer

to US$2.13bn.

spending on non-essential items has therefore been constrained, which helps to explain the fall in demand in this sector. That said,

Western European consumers were similarly affected by a combi-

however, recent US data suggest retail sales in some segments are

nation of the high gold price and deteriorating economic conditions.

performing better than expected – notably flat panel televisions,

Demand in Italy (-17%) and the UK (-20%) were hit hard and spend-

notebook computers and wireless applications. Japan, the US,

ing in the lower and middle price brackets dried up as consumer

South Korea and Taiwan all experienced a decline in demand for

confidence slumped. Russia’s market was considerably more

gold used in electronics. The exceptions were China and Russia,

resilient, virtually unchanged in volume terms and 34% higher in

where demand rose by 3% and 6% respectively. Growth in China’s

US$ terms. Spending on gold jewellery in the first half of the year

electronics sector during the period reflects continued success in

reached US$1.13bn, not far shy of the US$1.22bn spent during the

the automotive industry and growth in demand for mobile phones,

first nine months of 2007.

notebook computers and MP3 players.

In contrast to most other countries, demand in China proved to be

Demand for gold in the dental sector fell to 13.6 tonnes, a 7%

relatively robust, resulting in a 2% rise in the volume of gold jew-

decline on year-earlier levels. The movement towards substituting

ellery consumed in the second quarter. For the first half year, the

gold with alternative materials continues, a trend exacerbated by

growth rate over the same period of 2007 was 6% and this translates

gold remaining at lofty levels around US$900/oz throughout much

to an increase of 35% in local currency value terms.

of the quarter. Substantial declines were recorded in the two largest markets: Japan (-6%) and the US (-13%). German demand also posted another notable decline, down 9% on year earlier levels.

Demand across the rest of the Asian region was not quite so robust for the second quarter, with Japan and Vietnam witnessing declines of 5% and 7% respectively. Consumption in Indonesia was particular-

Once again it was the other industrial and decorative segment of

ly weak, posting a fall of 16%. In US$ value terms, however, demand

industrial demand that recorded the largest fall; at 21.9 tonnes, this

in all three markets was higher than for the year earlier period and the

was 9% below the 24.0 tonnes consumed in the second quarter of

first half year comparison on this basis was also very encouraging.

2007. Demand in this sector continues to be hampered by gold prices at historically high levels. Demand for traditional jari (the gold

The picture for gold jewellery demand remains mixed as a volume

thread used particularly in making wedding saris) has been heavily

measure shows a decline across virtually all markets, with just two

affected by the sustained rise in the gold price. Furthermore, reports

notable exceptions (China and Egypt), while a value measure

also suggest that fashion trends in India are going through a secu-

shows that spending in many countries was above the levels of last

lar change, with younger generations shifting away from more tra-

year. While the gold price remains at historically high levels – and

ditional saris, often containing the gold metal jari, to a more western

particularly while price volatility remains a feature – this trend is like-

approach, with their clothes now regularly purchased from depart-

ly to continue as consumers maintain spending levels but are not

ment stores and boutiques for special occasions.

able to buy the same quantity as earlier. The most striking feature of this scenario, however, is that consumers are able to maintain

Demand in this category from Switzerland recorded a double digit

spending on gold jewellery despite the increasing pressures that

percentage decline in growth, but this was offset by rises of 7% and

are being exerted on disposable income across much of the globe.

3% respectively for Italy and China due to sustained demand for plating and electro-forming production. For the first six months of the

Industrial and dental

year, demand in this sector was 11% below the same period of 2007.

Second quarter demand for gold in industrial and dental applications recorded a modest decline compared with year earlier levels, falling 5% to 111.8 tonnes. The picture for the first half year is simi-

AUGUST 2008

6

Gold Demand Trends Table 3: Investment demand (tonnes except where specified)

2006

2007

Q1'07

Q2'07

Q3'07

Q4'07

Q1'08

Q2'081

% ch Q2'08 vs Q2'07

% ch H1'08 vs H1'07

Identifiable Investment

661.6

656.6

147.3

124.9

244.6

139.8

134.0

119.8

-4

-7

Net retail investment

403.3 235.6

110.9

127.4

105.1

59.8

61.3

115.9

-9

-26

Bar Hoarding

401.5 235.3

66.6

79.7

59.6

29.6

34.9

72.4

-9

-27

Official Coin

128.9

137.0

37.7

38.7

38.2

22.4

27.7

32.8

-15

-21

59.4

72.6

20.4

25.6

18.3

8.4

9.7

12.4

-51

-22.1

-42.0

-13.8

-16.5

-11.0

-0.7

-11.1

-1.7

…

-52 …

260.2

253.3

36.4

-2.6

139.5

80.0

72.7

4.0

…

127

168.3

-21.9

-37.9

-143.2

-39.6

198.8

109.6

58.5

…

…

Medals/Imitation Coin Other identified retail invest.2 ETFs & similar products

3

"Inferred investment"4 "Total" investment "Total" investment, $m

829.9

634.7

109.4

-18.3

205.0

338.6

243.6

178.4

…

363

16,136

14,937

2,286.4

-391.8

4,482.0

8,560.0

7,243.3

5,140.5

…

554

Source: GFMS Ltd. 1. Provisional . 2. “Other retail” excludes bar and primary coin offtake; it represents mainly activity in North America and Western Europe. 3. Exchange Traded Funds and similar products including: LyxOR Gold Bullion Securities, Gold Bullion Securities (Australia), SPDR Gold Shares (formerly streetTRACKS Gold Shares), NewGold Gold Debentures, iShares Comex Gold Trust, ZKB Gold ETF, GOLDIST, ETF Securities, XETRA-GOLD, Central Fund of Canada and Central Gold Trust. 4. See notes to table 4.

Investment Total identifiable investment in gold (excluding ‘inferred investment’)

levels of price volatility have been a deterrent. Bar hoarding was

during Q2 2008 totalled 119.8 tonnes, down from 134.0 tonnes in

more resilient, falling 9%, with selling out of Japan and India being

Q1 and 124.9 tonnes in Q2 2007. This 4% decline relative to year-

offset by strong demand out of China and Vietnam. The credit

earlier levels represents the combination of a 9% fall in net retail

crisis, rising inflation and weak stock markets have all led to a shift

investment demand (mainly medals and imitation coins), partly

in portfolios towards the safety of gold. Offtake of official coins was

offset by a change from small net disinvestment to small net invest-

15% lower than a year previously, primarily due to lower demand in

ment in Exchange Traded Funds (ETFs) and similar products. Net

Turkey compared to a strong Q2 2007.

retail investment was, however, 89% higher than in the first quarter, primarily as the pull-back in the gold price from the peaks seen in

The recent worsening in inflation concerns in many parts of the

March reduced profit taking, while net inflows into ETFs were

world has had a conflicting impact on investment demand for gold.

sharply lower (see following page).

In some countries, declining disposable incomes have resulted in a contraction in funds left over for savings and a reduction in gold

In dollar terms, the value of identifiable investment demand in Q2

investment demand. India fits into this category. In Q2, investment

declined to $3.5bn from $4.0bn the previous quarter. Nevertheless,

demand in India totalled 43.4 tonnes, down from 73.0 tonnes a year

this still marked a 29% rise on the levels of the previous year. When

earlier, and down by 19% in Rupee terms. However, this decline in

inferred investment is added, total investment demand for the quar-

Indian demand was largely offset by a rise in demand in China, the

ter was 178.4 tonnes ($5.1bn) compared to 243.6 tonnes ($7.2bn)

US and Vietnam – all three countries benefited from the inflation and

in Q1. While Q2 2008 represents a marked improvement on Q2

safe haven motives.

2007’s net disinvestment of 18.3 tonnes (-$0.4bn), this should be interpreted in the context of the timeline of the credit crisis, which

Vietnamese investment demand in H1 2008 totalled 56.8 tonnes,

only started to hit media headlines in Q3 2007. The credit crisis and

already just outstripping the 56.1 tonnes recorded for the whole of

its flow-on effects have been a key driver of investment demand for

2007. A loss of confidence in the currency, high inflation and declin-

gold since that time.

ing equity prices all helped fuel demand for gold. The declining sharemarket and safe haven motives were also evident in mainland

Investment in medals and imitation coins, which was down 51% on

China, where retail investment more than doubled from 4.3 tonnes

year-earlier levels, was the biggest contributor to the decline in net

in Q2 2007 to 9.8 tonnes in Q2 2008.

retail investment. This largely reflects lower investment demand in India, where disposable incomes have been negatively affected by

In the US, economic concerns stimulated demand for bars and

sharply rising inflation and where the higher gold price and high

coins. Retail investment demand reached its highest level for almost

AUGUST 2008

7

Gold Demand Trends seven years at 11.3 tonnes, equivalent to US$326m, up from just

(formerly streetTRACKS Gold Shares, Ticker:GLD), which is by far

US$26m in Q2 2007. At times, sentiment towards the economy

the largest gold ETF. While the majority of investors in GLD, as in

appeared to improve and the flow-on effects of the sub-prime crisis

other gold ETFs, are retail investors who tend to have a long term

were seen to be nearing an end. At other times, concerns appeared

horizon, there are also several large institutional investors with a

stronger than ever.

shorter time horizon. These institutional investors can, at times, dominate quarter-to-quarter movements in this category. The net

The two countries where disinvestment has remained a theme are

ETF outflow in April appears largely to reflect such selling (see

Japan and France. Net profit-taking has been evident in Japan since

charts 4 and 5).

2006. Investors have been selling back the holdings they bought in earlier years when the gold price was much lower and this dis-

The start of Q3 has marked the introduction of the SPDR Gold

hoarding has outweighed new investment. Selling surged in Q1 as

Shares’ Hong Kong and Tokyo cross-listing. It was launched in Tokyo

the price peaked, resulting in disinvestment of a record 39.3 tonnes.

on June 30 and in Hong Kong on July 31. Both launches were suc-

While this net selling eased back to 12.1 tonnes in Q2 with the fall in

cessful, generating significant media publicity. Trading volume in the

the price, it nevertheless exceeded the levels of a year earlier (10.5

Hong Kong product on launch day totalled US$18.8m. During July,

tonnes). In France, the net dishoarding of bars and coins totalled

total investment in ETFs exceeded 1,000 tonnes for the first time.

4.1 tonnes in Q2, a modest improvement on Q1 levels. The ‘inferred investment’ component of investment demand has conThe other component of identifiable investment demand, that of

tinued to enjoy sizeable inflows. Demand totalled 58.5 tonnes, well

ETFs and similar products, experienced a small net inflow of 4.0

down on the levels of the previous two quarters but still significantly

tonnes during Q2 compared with a 72.7 tonne inflow in Q1. In value

better than the net outflow of 143.2 tonnes seen in Q2 2007. Inferred

terms, this equated to investment of US$115m. The recent quarter

investment is calculated as a statistical residual and is therefore

was marked by two distinct trends. During April, gold ETFs suffered

subject to statistical uncertainty. It includes most, though not all,

an outflow of 61 tonnes. By May, however, the inflow had recovered

short-term speculative inflows and the implication of the Q2 number

to 22 tonnes, and strengthened again in June to 45 tonnes. This

is that institutional investor interest remained relatively buoyant,

largely reflects flows in and out of the US listed SPDR® Gold Shares

underpinned by the uncertain economic and financial environment.

Source: Source: www.exchangetradedgold.com; Global Insight

AUGUST 2008

Source: www.ishares.com; www.exchangetradedgold.com; www.etfsecurities.com; Zurich Kantonalbank; Finans Portföy; www.Deutcshe-Boerse.com; Global Insight

8

Gold Demand Trends SUPPLY Table 4: Gold supply and demand (WGC presentation) Note: jewellery data in this table refer to fabrication not consumption and quarterly data differ from the data in Tables 1 and 2.

2006 Supply Mine production Net producer hedging Total mine supply

2007

Q1'07

Q2'07

Q3'07

2,485 -410 2,075 370 1,129 3,573

2,475 -447 2,028 501 967 3,496

591 -94 496 72 243 811

613 -197 416 154 227 797

2,284 459 2,743 424 -22 260 3,405

2,400 461 2,861 445 -42 253 3,518

586 116 702 125 -14 36 849

697 118 816 144 -17 -3 940

"Inferred investment"4

168

-22

-38

-143

-40

London PM fix (US$/oz)

603.77

695.39

649.82

666.84

680.13

Official sector sales2 Old gold scrap Total Supply Demand Fabrication Jewellery Industrial & dental Sub-total above fabrication Bar & coin retail investment3 Other retail investment ETFs & similar Total Demand

640 -82 558 178 216 951

629 117 746 116 -11 139 991

Q4'07

Q1'08

Q2'081

% ch Q2'08 vs Q2'07

% ch H1'08 vs H1'07

547 -128 418 81 318 817

590 -131 458 88 256 802

-4 … 10 -43 13 1

462 111 573 72 -11 73 707

512 112 623 118 -2 4 743

-27 -5 -24 -18 … … -21

127 -19

199

110

59

…

…

786.25

924.83

896.29

631 -74 558 97 281 936

488 110 598 60 -1 80 738

34

-6 … -4 -25 22 1

-24 -5 -21 -29 …

38

Source: GFMS Ltd. Data in this table are consistent with those published by GFMS but adapted to the WGC’s presentation and take account of the additional demand data now available. The “inferred investment” figure differs from the “implied net (dis)investment” figure in GFMS’ supply and demand table as it excludes “ETFs and similar” and “other retail investment”. 1. Provisional. 2. Excluding any delta hedging of central bank options. 3. Equal to net retail investment from Table 1 less the 'other identified retail investment' category. 4. This is the residual from combining all the other data in the table. It includes institutional investment other than ETFs & similar, stock movements and other elements as well as any residual error. In previous editions of GDT it was referred to as the “balance”.

At 802 tonnes, second quarter supply was little changed from one

Q2 was a further quarter of substantial de-hedging, although it was

year earlier. This concealed contrasting movements in the different

less than in the exceptionally high quarter of Q2 2007. The 131

components with a sharp reduction in official sector sales offset by

tonnes reduction was partly due to a major buyback programme by

the combined effects of a rise in scrap supply and a deceleration in

Anglogold Ashanti and to a number of smaller operations by sever-

net de-hedging.

al companies. Overall mine supply, at 458 tonnes, was 10% higher than a year earlier, although for the first half as a whole it was 4%

Mine output is provisionally estimated to have been 4% lower than

below year earlier levels.

a year earlier at 590 tonnes. There was a sharp rise in Russian output largely due to enhanced production at Polyus’s Olimpiada mine

Net central bank sales were broadly similar to levels seen in Q1.

following the commissioning of a new sulphide ore processing

They were substantially lower – 43% down – on levels recorded for

plant. Chinese output also appears to have increased. However

Q2 2007; net sales in Q2 and Q3 2007 were relatively high due

gold output in Indonesia fell sharply, primarily due to planned mine

primarily to rapid selling by the Swiss National Bank. Sales under

sequencing at the Grasberg mine but also due to a fall in output at

the Central Bank Gold Agreement amounted to around 317 tonnes

the Batu Hijau mine, while output in South Africa and in Australia

by 31st July and have been running below last year’s levels. Indeed,

seems likely to have remained weak. For the first half as a whole,

taking account of publicly available information on central bank

and taking account of a weak (revised) Q1 figure, output was 6%

intentions, it seems possible that net selling in the current CBGA

below year-earlier levels.

year, which ends on September 26, could be the lowest since the

AUGUST 2008

9

Gold Demand Trends first CBGA was signed in 1999 (the previous low figure being the

generally and partly as retailers are being more cautious in their

385 tonnes recorded for the last year of the first Agreement).

purchasing and only acquiring lines they are fairly confident of selling.

It also seems likely that sales during the final year of the Agreement will be low unless a major new seller emerges. As is well known, the IMF has plans to sell around 400 tonnes of its gold and has indicated that it hopes to do this gradually over a period of years and in association with Central Bank Gold Agreements, so that the sales do not represent a net addition to the quantity of gold the market is

Chart 6: Net central bank sales, tonnes 300 250

already anticipating from the official sector. However, this requires a formal 85% vote in favour from its membership. The USA has a

200

16.8% vote and the US representative cannot vote in favour without explicit Congressional approval. Formal agreement to the sales plan cannot therefore happen unless and until the proposal has been

150 100

passed by the US Congress and the time needed for this means any potential IMF selling cannot be imminent.

50

Scrap supply, at 256 tonnes, was 13% higher than in Q2 2007 but lower than the levels seen in the first quarter. Supplies from Asia and the Middle East were lower than in February and March due to the

0 -50 Q1 ‘02

Q1 ‘03

Q1 ‘04

Q1 ‘05

Q1 ‘06

Q1 ‘07

Q1 ‘08

lower prices. In North America and Western Europe scrap supplies have been boosted by advertisements encouraging people to take advantage of the high gold price to sell back jewellery. In contrast,

CBGA sales Non-CBGA sales

sales for re-melt of unsold stock by suppliers and retailers have declined, partly as traders are now working on lower stock levels Source: GFMS, IMF, WGC

AUGUST 2008

10

Gold Demand Trends CONSUMER DEMAND TRENDS IN INDIVIDUAL COUNTRIES 1

Table 5: Consumer demand in selected countries: Q2 2008 (tonnes) 2007

India Greater China China Hong Kong Taiwan Japan Indonesia Vietnam Middle East Saudi Arabia Egypt UAE Other Gulf Turkey Russia2 USA Italy2 UK2 Europe excl CIS3 Total above Other World

Jewellery 551.7 331.3 302.2 14.4 14.7 30.6 55.2 21.4 325.5 117.9 67.8 99.8 40.0 188.1 85.7 257.9 59.2 50.1 ... 1956.6 443.6 2400.2

Net retail invest. 217.5 34.0 25.6 1.0 7.4 -56.3 0.3 56.1 20.1 9.0 0.7 7.5 2.9 61.1 ... 16.6 ... ... 9.6 359.2 44.1 403.3

Q2 20081

Q2 2007 Total 769.2 365.3 327.8 15.5 22.1 -25.7 55.5 77.5 345.6 126.9 68.5 107.3 42.9 249.3 85.7 274.5 59.2 50.1 9.6 2315.8 487.7 2803.5

Total Jewellery 296.1 118.0 81.6 75.5 71.7 68.7 3.9 3.5 6.0 3.2 -2.8 7.3 12.4 10.3 21.3 4.7 97.4 80.7 42.5 33.7 13.3 14.1 29.8 24.4 11.9 8.5 70.8 42.5 18.3 18.2 48.5 33.0 12.8 10.6 8.6 6.9 -1.5 ... 663.5 407.6 126.6 96.4 790.2 504.0

Net retail invest. 43.4 12.0 9.8 0.3 2.0 -12.1 0.2 25.3 5.4 2.2 0.5 2.2 0.6 16.1 ... 11.3 ... ... 1.8 103.3 12.5 115.9

% ch. Q2 2008 vs Q2 2007 Total Jewellery 161.4 -47 87.5 1 78.5 2 3.8 -3 5.2 -20 -4.8 -5 10.5 -16 30.0 -7 86.1 -12 35.9 -15 14.6 8 26.6 -12 9.0 -23 58.6 -15 18.2 -1 44.3 -30 10.6 -17 6.9 -20 1.8 ... 510.9 -26 108.9 -13 619.8 -24

Net retail invest. -41 83 125 -7 4 ... 15 55 -9 -23 125 10 -35 -22 ... 834 ... ... ... -7 -21 -9

Total -45 7 9 -3 -12 ... -16 41 -12 -15 10 -11 -24 -17 -1 -9 -17 -20 ... -23 -14 -22

Source: GFMS Ltd. 1. Provisional. 2. Jewellery only. 3. Net retail investment only.

India High and volatile gold prices, among other factors, continued to

Continued gold price volatility was an added deterrent to gold

hamper gold demand in India during the second quarter. As a result,

jewellery demand during the quarter. India is well known for being a

jewellery demand was 47% below year-earlier levels and investment

market where volatility in the gold price is as important as the out-

demand was 41% lower. Growth rates in demand for the first half

right price level, if not more so. While the correction in the gold price

year were of a similar magnitude. It is worth mentioning however,

from the first quarter record highs was positive for demand, the

that Q2 2007 was a record quarter for both components of con-

instability in the price encouraged many consumers to adopt a ‘wait

sumer demand.

and see’ policy in their gold purchasing decisions, which was also reflected in the jewellery trade’s reluctance to commit to high inven-

In the jewellery sector, demand for gold amounted to 118.0 tonnes,

tory levels.

compared with 223.1 tonnes (an all-time high) in the corresponding period of last year. During the quarter, the global economic down-

The Akshaya Thritiya festival in May, which is now established

turn began to infect consumer sentiment. In what is fast becoming

country-wide as a key gold buying occasion, provided some

a global theme, the rising price of oil stimulated inflation in India.

positive news in an otherwise gloomy quarter. Although the volume

This, particularly when combined with a subsequent rise in interest

of sales generated by the festival was lower than for the 2007 event,

rates, had the effect of reducing disposable income and discourag-

the decline was only in the region of 11% - compared with the 47%

ing consumers from spending on gold jewellery. To illustrate this

drop for Q2 as a whole – and the estimated sales as a result of the

point, spending on gold jewellery declined 28% in local currency

festival were around 50 tonnes. The traditional May wedding season

terms to Rp141.7bn.

was not able to stem the decline in demand, however, as the number of auspicious wedding days in May this year was much smaller than last year.

1 Consumer demand is gold bought by individuals – i.e. as jewellery and net retail investment. Unless otherwise specified all data in this section refer to tonnage figures and growth rates are comparisons with the same period of the previous year.

AUGUST 2008

11

Gold Demand Trends Table 6: Consumer demand in selected countries: first half year

Jewellery

H1 2007 Net retail invest

Total

Jewellery

H1 20081 Net retail invest.

% ch. H1 2008 vs H1 2007 Net retail Jewellery invest. Total

Total

India

363.8

134.5

498.3

189.1

74.4

263.5

-48

-45

-47

Greater China

161.9

17.1

179.0

168.2

28.7

196.9

4

68

10

China

146.6

13.6

160.2

155.3

24.8

180.1

6

83

12

Hong Kong

7.4

0.6

7.9

6.9

0.5

7.4

-6

-5

-6

Taiwan

8.0

3.0

10.9

6.0

3.4

9.4

-25

15

-14

Japan

15.3

-25.3

-10.0

14.7

-51.4

-36.7

-4

...

...

Indonesia

27.8

0.4

28.2

21.6

-3.0

18.6

-22

...

-34

11.5

31.3

42.8

9.6

56.8

66.4

-16

81

55

Middle East

171.4

10.3

181.7

145.7

10.9

156.6

-15

6

-14

Saudi Arabia

65.8

4.6

70.4

53.2

3.7

56.9

-19

-20

-19

Egypt

28.6

0.4

29.0

30.7

1.8

32.5

8

359

12

UAE

56.0

3.9

59.9

46.3

4.5

50.8

-17

18

-15

Other Gulf

21.0

1.5

22.5

15.5

0.9

16.4

-26

-41

-27

Turkey Russia1

83.5

36.8

120.4

71.4

24.3

95.7

-15

-34

-20

35.4

...

35.4

38.5

...

38.5

9

...

9

USA Italy1

99.7

5.8

105.5

72.5

18.4

90.9

-27

218

-14

22.0

...

22.0

18.6

...

18.6

-15

...

-15

UK1

16.2

...

16.2

12.4

...

12.4

-24

...

-24

... 1,008.6 219.3 1,227.9

-1.7 209.3 29.1 238.4

-1.7 963.5 219.8 1,183.3

... 762.1 186.2 948.3

8.2 167.4 9.7 177.1

8.2 1,264.4 215.9 1,480.4

... -24 -15 -23

... -20 -67 -26

... 31 -2 25

Vietnam

Europe2 Total above Other World total

Source: GFMS Ltd. 1. Provisional. 2. Jewellery only. 3. Net retail investment only.

Consumer demand for the first six months of the year totalled 263.5 tonnes, compared with 498.3 tonnes for the first half of 2007. Of this,

Chart 7: China demand, tonnes and RMB

jewellery demand accounted for 189.1 tonnes and retail investment 74.4 tonnes. For the second quarter, retail investment demand reached 43 tonnes, a 41% drop from year-earlier levels. Demand for gold investment products was similarly discouraged by the price volatility, while rising inflation had the further effect of reducing the amount of savings that consumers were able to put towards gold investment products. There is some optimism that the upcoming Diwali festival and the second wedding season later in the year will provide a degree of respite to the decline in jewellery consumption. However, for consumption in India to stage any meaningful recovery will require a period of more stable gold prices, since gold price volatility is a key deterrent to gold purchases.

200

40000

180

35000

160

30000

140 120

25000

100

20000

80

15000

60

10000

40

5000

20 0 H100

H102

Tonnes

H104

H106

H108

0

RMB m, rhs

Greater China During the second quarter of 2008, total consumer demand for gold across Greater China was 7% above that of Q2 2007. For the first half year, the growth rate over H1 2007 was 10%. Jewellery consumption

Source: GFMS and WGC

across the region stalled during the second quarter, with a slight rise in demand in mainland China cancelled out by a noticeable decline

In mainland China, Q2 gold jewellery demand inched up 2% over

in Taiwan. Q2 retail investment almost doubled, however, thanks to a

year earlier levels to 68.7 tonnes. Jewellery purchases were

surge in demand among retail investors on the mainland.

restrained as a result of volatility in the gold price and the combina-

AUGUST 2008

12

Gold Demand Trends tion of rising inflation and a plummeting stock market, which

is likely to strengthen as inflationary pressures build and economic

squeezed disposable income and perceived wealth. Falling

growth decelerates, particularly in light of recent turbulence in

property prices further added to pressure on consumers, whose

domestic stock markets. Continued high gold prices would also

confidence began to wane during the quarter. Nevertheless, retail

attract further investment interest in gold. Gold jewellery demand,

sales remain robust and looking at jewellery demand in terms of

on the other hand, is likely to experience something of a lull, partic-

RMB spending shows a rise in gold jewellery consumption of 24%

ularly during the Olympics. Rising inflation, slowing economic

over the same quarter in 2007.

growth and a gradual building of caution among consumers across the region are likely to ensure that gold jewellery consumption

The real success story in mainland China during the second quarter

remains relatively subdued over the coming months.

was retail investment demand for gold, which rocketed to 9.8 tonnes – an increase of 125% over the 4.3 tonnes consumed in Q2 2007.

Other East Asia

Interest in gold investment products (bars and coins) was fuelled

Total consumer gold offtake in Japan during Q2 was a negative 5

both by the rising price of gold and by the poor performance of the

tonnes as selling back of investment gold outweighed purchases for

domestic stock market, which encouraged Chinese investors to put

jewellery. Jewellery demand, at 7.3 tonnes, was down slightly on the

their money into other vehicles such as the perceived ‘safe haven’ of

levels of the previous quarter and down 5% on the levels of a year

gold. The last batch of the commemorative Beijing Olympics bar was

earlier. This gradually declining trend has been in place for some

released into the market during the quarter and this also helped to

time. In yen terms, jewellery demand has remained strong, rising

stimulate interest in gold as a retail investment product.

11% between Q2 2007 and Q2 2008. Levels of disinvestment totalled 12 tonnes, a marked improvement on the previous quarter’s

In Hong Kong, gold jewellery consumption slipped 3% to 3.5

-39 tonnes. However, this still represented a worsening on year

tonnes from 3.6 tonnes in the corresponding period of 2007. In

earlier levels (-10 tonnes).

value terms, this translates to an increase of 30% from US$77m to US$101m. Although still robust, economic growth is slowing in

While the decline in jewellery demand during the year to June

Hong Kong. The US economic downturn has started to bite and

appears relatively modest in comparison to the more severe weak-

domestic consumers are growing more cautious as inflation accel-

ness seen in some other countries, it should be viewed in a longer

erates, pushed higher by spiralling oil and food prices. This was

term context. On the one hand, Japan failed to enjoy the surge in

reflected in the volume figures for gold jewellery demand. Demand

jewellery demand during 2007 that was evident in the Middle East,

for gold investment products by retail investors was virtually static at

China and India and the fact that it is not suffering the same magni-

0.3 tonnes. Recent developments in this market are noteworthy, as

tude of correction now is not surprising. At the same time, however,

the end of July witnessed the listing of the SPDR Gold Shares

total spend has been negatively affected by a trend towards lower

(formerly known as StreetTRACKS Gold Shares) on the Hong Kong

caratage jewellery, which is acting as a drag on net demand. The

Stock Exchange. SPDR Gold Shares is the first gold-backed

18-carat jewellery which previously dominated the market is

exchange-traded fund (ETF) to list in Hong Kong and turnover on

progressively being replaced by 14-carat and in some cases 10-

the first day of trading was US$18.8m.

carat jewellery in a trend that currently shows no sign of abating.

High and rising inflation in Taiwan took its toll on jewellery demand,

Profit-taking continued to be a key feature of investor flows,

which fell 20% from year-earlier levels to 3.2 tonnes. Against a back-

although levels of disinvestment were significantly lower than were

drop of stagnant wages and concern over the risk of contagion from

seen during the previous quarter as the price fell back from the

the US economic slowdown consumers held off on purchases of

March peak, reducing the incentive to take profits. Recent trends

luxury items such as gold jewellery. Retail investment demand for

look more encouraging, although it is difficult to say how long this

gold was somewhat more robust, increasing marginally to 2.0

may last.

tonnes. Investors took advantage of the pull-back in the gold price from the mid-March highs and solid buying was reported at this

The cross-listing of the SPDR Gold Shares Exchange Traded Fund

time. The falling domestic stock market provided further motivation

(ETF) on the Tokyo stock exchange on June 30 generated signifi-

for investors to inject funds into gold retail investment products such

cant publicity. Coming at a time when the local stock market was

as the ‘Gold Passbook’.

weak and the sub-prime crisis was raising awareness of portfolio risk, the cross-listing heightened investor awareness of gold (both

The outlook for gold demand across Greater China during the third

through ETFs and through the physical market) as a means of

quarter is somewhat mixed. Demand for retail investment products

obtaining diversification. Concerns surrounding the implications of

AUGUST 2008

13

Gold Demand Trends excessive leverage and portfolio risk have provided support for

However, there continued to be a noticeable move towards lower

gold. ETFs and Gold Accumulation Plans are seen to be positive in

caratage jewellery. The more ornate designs that were previously a

this regard, in particular due to the ability to reduce entry price risk

feature of 18-carat jewellery are now being manufactured in 9-carat

through dollar cost averaging of gold exposure. However, some

gold. Furthermore, there is more mixed-metal jewellery and a mix

investors continue to prefer the attraction and simplicity of physical

of gold with other non-metal materials.

delivery, in an environment where the complicated debt structures that have been a feature of the sub-prime crisis have gained ongo-

While the disinvestment that occurred in Q1 has abated, total net

ing negative publicity.

investment remained low at 0.2 tonnes. Several large investors have bought on price dips, but this has been offset by selling by

Jewellery demand in Vietnam in Q2 was again restrained by the

small “mum and dad” investors.

high price of gold and fell 7% in tonnage terms from year-earlier levels; this was, however, equivalent to an increase of nearly 40% in national currency terms. In contrast, the boom in investment

Middle East and Turkey

demand continued as investors sought gold as a safe haven due to conditions of high inflation (averaging 16% for the first half year) and

Middle East

concerns over the Dong. Additional incentive was provided by the

Jewellery demand in the Middle East, which accounts for more than

increase in the interest rate that commercial banks pay on gold

90% of total offtake in the region, was 12% lower in tonnage terms

deposited with them (see Focus on page 18) – this rose as high as

in the second quarter of 2008 relative to the previous year.

7% in some cases. Q2 offtake reached 25.3 tonnes, 55% higher than

However, the decline in annual terms was exaggerated by a strong

a year earlier. Together with the 31.5 tonnes recorded for Q1 this

result for the June quarter 2007. This 12% annual percentage

brought net investment for the first half year to 56.8 tonnes – already

decline compares favourably to a 19% decline in the March quarter

exceeding total offtake for 2007 and four fifths of the record annual

2008 relative to a year earlier. Furthermore, demand in the most

total of 2006.

recent quarter remains well above the levels of a year ago in value terms.

As a result of the investment boom gold imports for the first half year reached 56.8 tonnes, compared to the authorised quota for the year

Like many other parts of the world, inflation is squeezing disposable

as a whole of 73.5 tonnes set by the State Bank of Vietnam. In con-

incomes. Inflation in Saudi Arabia recently hit double-digits for the

ditions of rising concern over the deteriorating balance of payments

first time since the 1970s. Nevertheless, the region is in a much

current account, the State Bank announced a ban on gold imports

stronger position going forward than most other parts of the world.

in June. This is not expected to have a substantial impact on

The pain of higher petrol prices on consumers is significantly lower,

consumption for the rest of the year since any significant premium

and high oil prices have a stimulatory rather than contractionary

in the local gold price over the international price results in gold

effect on economic activity.

being smuggled in from neighbouring countries, as was the case in the past. With inflation expected to accelerate in the second half

Jewellery spending patterns across the various countries differed

year gold investment demand is therefore expected to remain high.

widely. Demand in Egypt was up 8% in tonnage terms on the levels of the previous year, but demand was down 15% in Saudi

Total consumer offtake in Indonesia in Q2, at 10.5 tonnes, was

Arabia, 12% in the UAE and 23% in the Other Gulf countries.

down 2 tonnes (16%) on the levels of a year earlier. Jewellery demand, which comprises most of this total, continued the sharply

In Egypt, demand has been resilient to the higher gold price.

weaker trend that was evident in Q1, declining 16%. The higher gold

Demand in dollar terms remains 45% higher than the levels of a year

price has been a key driver of this weaker trend along with double-

earlier. The downward correction in the gold price from its March

digit inflation, which has squeezed disposable incomes.

peak had a positive impact on sentiment, along with a growing

Nevertheless, similar to the trend seen in most other countries, the

acceptance of these generally higher price levels relative to earlier

value of jewellery spending sustained a healthy growth rate over the

years. Furthermore, the narrower trading ranges compared to the

levels of a year earlier.

previous quarter proved positive for demand. In the March quarter, the gold price ranged from a low of $846.75 to a peak of $1,011.25

Spending in the cities was significantly more resilient to the rise in

based on the daily London pm fix i.e. a range of $164.50. In the

the gold price than the rural regions, with buying emerging on dips.

June quarter, the range from peak to trough was $93.0. These

AUGUST 2008

14

Gold Demand Trends reduced trading ranges were also positive for demand in other parts

Turkey

of the region. Buyers have emerged on dips and there appears to

Total Q2 offtake in Turkey, at 58.6 tonnes, was down 12 tonnes

be further pent up demand that is hoping for even larger dips.

(17%) on the levels of a year earlier. Net retail investment fell 22% and jewellery 15%.

In Dubai, the centre of jewellery demand in the UAE, an increase in tourist numbers had a positive influence on jewellery demand, espe-

Jewellery demand was down 15% in tonnage terms on the levels of

cially towards the end of the quarter when the Dubai Summer

a year earlier, a similar magnitude of decline to that experienced in

Surprises campaign started. Second only to the Dubai shopping

Q1. A 14% rise in US dollar terms suggests an underlying level of

festival in its impact on gold demand, Summer Surprises has been

resilience in total spending on jewellery, although this rise was

running for 11 years.

somewhat smaller in local currency terms (7%). This reflects the appreciation in the lira during the period, which saw the lira gold

The second quarter also saw the traditional pre-vacation purchasing

price rise 27% relative to the 34% rise in the US dollar price.

of jewellery as gifts and an increase in advertising activity within the jewellery sector in both the UAE and Saudi Arabia. Historical trends

Notably, the lira’s strength was largely a H2 2007 story. During the

suggest a strong correlation between jewellery campaigns and

first quarter of this year, the lira depreciated abruptly, triggered by

spending patterns in those markets, and this quarter was no differ-

severe political upheaval following a lawsuit filed against the ruling

ent. The fact that the plain 21k market which dominates sales has

AKP party to close the party and ban 71 of its members from poli-

been more strongly affected by high prices than branded jewellery

tics. Some of this currency depreciation was reversed in the second

partly relates to the success of targeted jewellery advertising. This

quarter, and this strengthening has continued into the third quarter,

advertising coincided with the upcoming wedding and pre-vacation

helped by the lawsuit being resolved largely in the AKP’s favour.

gifting season. Jewellery demand started the second quarter on a weak note, but The gold festival which is currently underway in Saudi Arabia

improved as the quarter progressed. April saw a continuation of the

appears to be going well, which bodes well for a good start to the

sharply lower levels seen during the first quarter in response to the

third quarter. However, whether or not this is sustained depends on

surge in the gold price. However, there was a reasonable recovery

the gold price and whether volatility is kept at bay.

in demand during May and June as the gold price fell back from its highs, helped by the onset of the traditional wedding season. At the

Kuwait is a more unusual case. Consumers have not shown the

same time, the very high levels of scrap that were a feature of the

same degree of price acceptance that has been evident in other

first quarter have abated.

parts of the Middle East. The fabrication sector has been hit - several small family run businesses have closed and inventory is being

Tourist demand remained relatively resilient during the quarter with

sold back to the market as scrap. Kuwait was the driver behind the

the help of a significant increase in tourist numbers compared to

weakness in the Other Gulf countries, where demand experienced

2007. Statistics from the Turkish Ministry of Culture and Tourism

the biggest decline relative to last year in the Middle East region.

reported a 16% increase in tourist arrivals in the first six months of the year compared to a year earlier.

Retail investment tends to comprise a relatively small component of total offtake in the region, reflecting the investment aspect of own-

Turkey is a key source of global retail investment demand, amount-

ing high caratage jewellery. In the UAE, investment demand eased

ing to 61 tonnes during calendar 2007. However, levels of invest-

back from a very strong March quarter, but remains well above the

ment fell off sharply to only 4.6 tonnes in the fourth quarter 2007,

levels of last year. The move back into bars and coins that started

and although there was a recovery to 8.2 tonnes in Q1 and 16.1

last quarter has continued.

tonnes in Q2, this remains below the levels of the last two years. In Q2, investment demand in tonnage terms was down 22% on corre-

This region is not experiencing the same economic concerns as

sponding 2007 levels. Monthly investment patterns were similar to

other parts of the world, reflecting the positive (rather than negative)

that seen in the jewellery sector, with demand improving during May

impact of high oil prices. This generally positive economic outlook

and June following significant weakness during April.

should enable the recent resilience in gold demand relative to other parts of the world to continue. Nevertheless, the level of demand in

The outlook for Turkish demand is for some improvement in the sec-

absolute terms will continue to depend on both the gold price and

ond half of Q3 after quite a slow start due to the final phase of the

its volatility.

lawsuit against the AKP. While the improvement in demand levels

AUGUST 2008

15

Gold Demand Trends and reduction in scrap during May and June is encouraging for the

maintain prices below US$100 for the mass market. Contrastingly,

future, the recent bombings in Istanbul could have some negative

the high-end of the market has seen consumers respond to high

effect on tourism numbers; in contrast the settlement of the lawsuit

prices by demanding a greater weight of gold in their branded

against the AKP leaving only a financial burden on the party should

pieces as the intrinsic value of the gold increases. In value terms,

help boost confidence in the remainder of the 3rd quarter.

gold jewellery consumption fell 6% from US$1.02bn to US$0.95bn.

USA

In marked contrast to the jewellery market, US retail investment

Demand for gold in the US had a mixed second quarter, with a

demand reached its highest level for almost seven years at 11.3

sharp fall in jewellery consumption contrasting with a huge jump in

tonnes. This translates to a remarkable 834% rise over Q2 2007,

investment demand. Consequently, total second quarter demand

when retail investment demand for gold amounted to just 1.2

reached 44.3 tonnes, a relatively muted 9% reduction on the same

tonnes. The fast-deteriorating economic climate has raised the profile of gold as a perceived ‘safe haven’ asset, while the record price

period of last year.

levels that gold reached early in the year attracted considerable The decline in the country’s economic fortunes during the quarter,

media attention which has been sustained throughout the second

coupled with a persistently high gold price, resulted in a 30% fall in

quarter. This combination of factors has convinced a growing num-

demand for gold jewellery to 33.0 tonnes from 47.3 tonnes in the

ber of investors to put their money into gold bars and coins and the

second quarter of 2007. The economic slowdown worsened

increase in demand has pushed the value of retail investment up

markedly as the housing, credit and financial markets all continued

from US$26m in Q2 2007 to US$326m in Q2 2008.

to deteriorate. US consumer confidence consequently slumped, which in turn had a predictably negative effect on retail sales. With

Looking ahead, the prospects for gold demand over the coming

rising food and energy prices accounting for an ever larger portion

months remain challenging. The US economic malaise has persisted

of disposable income, and gold prices remaining at historically high

– indeed worsened – in the third quarter so far and the combination

levels, consumers have been less inclined – and less able – to

of rising inflation, continuing high gold prices and flagging con-

spend money on relatively high ticket items such as gold jewellery.

sumer confidence will likely make for a very tough retail climate over

The jewellery sector has suffered accordingly and a number of busi-

the next couple of quarters. That said, there are signs that the mar-

nesses have been forced to shut down, while those remaining have

ket is becoming accustomed to prices around the US$900 level and

witnessed a shift towards silver and gold-plated items in order to

any periods of relatively stable gold prices are likely to witness an increase in interest.

Chart 8: US jewellery demand 4-qtr moving average

Europe Gold jewellery demand in Italy during the second quarter of 2008 came to 10.6 tonnes, 17% lower than the same period in 2007. In 1750

110 100

value terms this translates to a drop of 4% in spending on gold jewellery to €196m (vs. €203m in Q2 2007). Consumer confidence has

1500

90

been falling sharply, reflecting growing concern over inflation and

80

1250

job prospects as the economy continues to deteriorate. Household

70

spending has therefore been held back and retail consumption

1000

60

across virtually all sectors was correspondingly weak. Gold jew-

50

750

ellery was no exception: the middle-lower end of the market, in par-

40

ticular, was affected by the slump in demand.

500

30 20

The slowdown in gold jewellery demand in the UK was equally

250

10

severe. At 6.9 tonnes, Q2 consumption was 20% below year-earlier

0

0 Q1 02

Q3 03

Q1 05

Q3 06

levels, although in value terms it was 9% higher at £101m. In a sim-

Q1 08

ilar story to many other regions, UK consumers were hit by rising Tonnes

inflation and a marked slowdown in economic growth, with the

US$bn, rhs

threat of further contagion from the severe downturn in the US economy. Higher borrowing costs and a sharp reduction in the availability of credit further depressed confidence levels among consumers,

Source: GFMS and WGC

AUGUST 2008

16

Gold Demand Trends who consequently became more frugal in their spending habits. Not

mass market was somewhat daunted by higher gold prices and

surprisingly, discretionary purchase items such as gold jewellery

import problems also had a knock-on effect on demand. The over-

suffered. Hallmarking figures confirm this downturn in demand,

all picture in Russia for the second quarter is therefore reasonably

showing a decline in the number of items being hallmarked across

positive. While the high gold price environment may have proved

all segments of the market. The total number of items being hall-

discouraging to some, the overall rate of spending on gold

marked in the second quarter fell by 30% compared with the same

jewellery has not slackened.

period of the previous year. European net retail investment remained positive during the At 18.2 tonnes, Russian jewellery demand was more or less static

second quarter as the deteriorating global economic scenario

during the second quarter, just 1% below the comparable period

encouraged investment purchases of the yellow metal. Demand

of 2007. In US$ terms however, demand staged an impressive

for bars and coins reached 1.8 tonnes in Q2, compared with net

34% rise as spending on gold jewellery reached US$524m. The

disinvestment of 1.5 tonnes in the same period of 2007. In

Russian economy has so far been largely immune to the econom-

Germany and Switzerland, investment purchases continued

ic woes plaguing much of the world, although inflationary pres-

apace, growing by 56% and 11% to reach 2.5 tonnes and 2.0

sures are starting to build. Economic growth remains buoyant and

tonnes respectively. Although French investors remained net sell-

private consumption continues to grow, underpinned by solid real

ers of gold investment products, the pace of selling back slowed

wage rises. Gold jewellery has clearly been a beneficiary of this,

to -4.1 tonnes compared to -6.5 tonnes in Q2 2007. Demand from

given the rise in value of consumption. This was largely the result

the rest of Europe made up the remainder at 1.4 tonnes, 24%

of sustained demand from the higher end of the market, while the

higher than in Q2 2007.

AUGUST 2008

17

Gold Demand Trends HISTORICAL DATA FOR IDENTIFIABLE GOLD DEMAND Table 7: Historical data for identifiable gold demand1 y g Tonnes ETFs & Industrial & similar dental

Jewellery

Net retail invest.

2000

3,204

165

-

2001

3,008

356

-

2002

2,660

339

2003

2,482

2004

2,613

2005

$bn ETFs & Industrial & similar dental

Total

Jewellery

Net retail invest.

451

3,820

28.75

1.48

-

4.05

363

3,726

26.21

3.10

-

3.16

32.47

3

358

3,360

26.48

3.38

0.03

3.56

33.45

292

39

382

3,195

28.99

3.41

0.46

4.46

37.32

338

133

414

3,497

34.53

4.46

1.83

5.44

46.26

2,708

385

208

432

3,733

38.68

5.45

3.03

6.17

53.33

2006

2,284

401

260

459

3,405

44.49

7.82

4.94

8.93

66.18

2007

2,400

403

253

461

3,518

54.20

8.93

5.72

10.40

79.25

Q1’05

683

120

89

106

998

9.39

1.65

1.22

1.46

13.71

Q2’05

740

110

-2

111

959

10.16

1.51

-0.02

1.52

13.18

Q3’05

613

86

38

108

844

8.66

1.22

0.53

1.53

11.93

Q4’05

672

69

84

107

932

10.47

1.08

1.30

1.66

14.50

Q1’06

491

89

113

112

805

8.75

1.59

2.01

2.00

14.34

Q2’06

529

93

49

115

787

10.68

1.89

0.99

2.33

15.88

Q3’06

557

108

19

116

800

11.13

2.16

0.38

2.32

15.99

Q4’06

707

111

79

116

1,013

13.94

2.18

1.56

2.29

19.97

Q1’07

565

111

36

116

829

11.81

2.32

0.76

2.43

17.31

Q2’07

663

127

-3

118

906

14.21

2.73

-0.05

2.53

19.42

Q3’07

602

105

139

117

963

13.17

2.30

3.05

2.55

21.07

Q4’07

570

60

80

110

820

14.41

1.51

2.02

2.79

20.73

Q1’08

444

61

73

111

689

13.21

1.82

2.16

3.30

20.50

2

504

116

4

112

736

14.52

3.34

0.12

3.22

21.20

Q2’08

Source: Tonnage data are GFMS Ltd; Value data are WGC calculations based on GFMS data. 1. See footnotes to Table 1 for definitions and notes. 2. Provisional

AUGUST 2008

18

Total 34.28

Gold Demand Trends FOCUS ON: VIETNAM With a population of 85.1m

2

Vietnam is the world’s 13th most

populous country. It is still one of the poorest countries – Gross

Chart 9: Gold demand in Vietnam (tonnes)

National Income at US$790 per head, or $2,550 on a purchasing power parity basis, places it in the World Bank’s “Low Income” category – but its economic growth in recent years has been impressive. Nevertheless, 2008 has seen economic crisis with high infla-

120 100

tion, Dong depreciation and a rising balance of payments current account deficit – and a sharp surge in gold buying as individuals

80

sought to protect their savings from the resulting risks. 60

Vietnam has a long history – over two thousand years – of using gold as money. Historically copper (the word Dong means copper in Vietnamese) and gold were the means of exchange with silver and zinc being added early in the 19th century. Paper money was only introduced in the second half of the 19th century under French

40 20 0

colonial rule. A long-standing history of Chinese influence in the

1992 1994 1996 1998 2000 2002 2004 2006 12 mths to Jun 08

country meant that the Chinese measurement standard of a tael was, and still is, used for gold bars. The tael bar of 37.5 grams

Net retail investment

remains the dominant form of gold investment.

Jewellery

The long years of the Vietnam war in the last century (1945 to 1975,

Source: GFMS Ltd

following immediately on from World War II) saw gold retain its role as a means of saving and a hedge against the many risks of the conflict. After the Communist takeover of the South in 1975, gold

1% in June 2007). Margin trading and gold derivative products were

trading was outlawed until 1988, but the underground market,

authorised in 2005 while gold trading centres and gold bonded

supplying mainly gold bars or gold rings, remained very active due

warehouses were in operation in both Ho Chi Minh City and Hanoi

to raging inflation in the 1980s (which peaked at nearly 1,000% in

by 2007.

1987) and public distrust of the Dong. Statistics do not exist for this period but average annual consumption has been estimated at

Gold jewellery today

around 20 tonnes.

The main occasions for jewellery buying are the wedding season between October and February, Christmas, New Year and the

Consumption rose to around 31 tonnes per year in the early 1990s,

Vietnamese Tet New Year (the same date as the Chinese New Year).

of which around 85% was in the form of gold bars. Offtake rose

Demand doubled between 1995 and the early years of the current

through the 1990s. A World Gold Council presence was established

decade reaching 24 tonnes in 2002 and 2003, and rising further to

from 1995; programmes were introduced to improve jewellery

27 tonnes in 2005, before the increase in the gold price reduced off-

quality, design, merchandising and distribution as well as to sustain

take in volume, although not in value, terms. Jewellery is bought for

investment demand. A ban on imports was introduced in 1997 by

both adornment and for investment with the savings motive being

the State Bank of Vietnam, which controls the gold market, but had

particularly strong in rural areas. Around 50% of gold jewellery sales

limited effect on consumption since gold was smuggled in from

are 24-carat plain items but 18 carat and gemset items are steadily

neighbouring countries.

increasing their share. The industry remains fragmented with few large wholesalers and caters mainly for the domestic market; quality

A deregulation policy, on which the WGC had helped to advise the

and design are not generally high enough to support an export

State Bank, was established in 1999. From 2002, imports were once

trade although the industry is being increasingly influenced by

again officially authorised and from 2003 import tax on bullion was

designs from countries such as Hong Kong and Taiwan. Imported

reduced from 3% to 0.5% (although it was subsequently raised to

jewellery carries a 20% import tax.

2

World Bank data for 2007 – other sources give higher figures.

AUGUST 2008

19

Gold Demand Trends With rising global food and energy costs adding to upward pressure on prices, consumer price inflation in the first half of 2008 averaged

Chart 10: Vietnam economic indicators

16% and is expected to rise to over 20% in the second half year. The

30

current account deficit is forecast to exceed 10% of GDP. This situa-

25

tion provoked an economic crisis in the second quarter of 2008 with

20

the Dong depreciating rapidly, the stock market crashing and the

15

government imposing a series of stabilisation measures including capping price increases and raising interest rates.

10 5

The high level of inflation, fears of Dong depreciation and the plunge

0

in the stock market, along with gold’s own price performance, has

-5

resulted in heavy demand for gold in the first half of 2008 with net investment reaching 31.5 tonnes in Q1 and a further 25.3 tonnes in

-10

Q2 – the total for the two quarters already just outstripping demand

-15 1996

1998

2000

2002

2004

2006

for the whole of 2007. An additional attraction was the interest that

2008 (est)

banks were able to pay on gold deposited with them. High domestic interest rates meant that it was feasible for banks to sell such

Current account as % GDP

gold, lend proceeds of the sale as Dong loans at high domestic

Real GDP change over previous year

interest rates, buy an equivalent amount of gold forward from an Consumer prices change over previous year

international bullion bank, and still make a profit on offering an interest rate - rising to 7% in the second quarter - to the depositor.

Source: IMF, International Financial Statistics, Economist Intelligence Unit

The State Bank had authorised a quota of 73.5 tonnes of gold bullion imports for 2008 as a whole. By June imports had already

Investment

reached 62 tonnes, at a cost of around $1.8bn which was adding to

Inflation has so eroded the value of the Dong that it is now one of

the strains on the Balance of Payments. An import ban was imposed

the two or three lowest value currencies in the world (at the time of

in June, although it is expected that gold will simply be smuggled in

going to press US$1=16,750 Dong). Coupled with the memories

so that consumption will be little affected.

of the political and economic problems of the last seven decades, this has meant a continuing role for gold tael bars not just as a

There are aspects of Vietnamese gold investment which are

means of investment or saving, but also as a means of payment for

unique to the country; demand is clearly boosted by the limitations

major transactions, notably real estate, which are often priced in

of the financial system as well as by the classic motives for gold

tael bars. Vietnam is largely still a cash society and with single

investment that apply world-wide. Gold investment may ultimate-

properties costing up to 3 to 4 billion Dong, payment by banknotes

ly be reduced to some extent once the financial system is mod-

is simply not practical. Tael bars – with one bar currently worth

ernised, which must happen at some point in time, although it

around 19 million Dong – are much more convenient to count and

seems unlikely to happen in the near future. Nevertheless, trust in

check. Demand for bars has thus often been influenced by fluctua-

gold is deeply rooted and has clearly been enhanced by the his-

tions in the property market.

tory of the last 68 years; gold demand should remain solid even once the current crisis is past. Meanwhile, the experience of

Vietnam enjoyed a period of substantial economic success in the

Vietnam amply demonstrates the potential of gold not just as a

current decade with real GDP growth rising from just under 7% at the

means of saving, but as a means of dealing with shortcomings in

turn of the century to 8.5% in 2007. In recent years it has started to

economic policy and financial structure.

attract significant inflows of direct investment from other countries while the stock market index nearly quadrupled between 2005 and 2007. This rapid growth eventually caused the economy to overheat – easy credit and expansionary fiscal policy, coupled with large inflows of foreign capital which were not sterilised by the central bank, resulted in rising inflation from the second half of 2007 and a sharp deterioration in the current account of the balance of payments.

AUGUST 2008

20

Gold Demand Trends Notes and definitions All statistics (except where specified) are in

Retail investment. For the three bar, coin

Industrial demand. The first transformation of

weights of fine gold.

and medallions categories this comprises

raw gold into intermediate or final products des-

Tonne = 1,000 kg or 32,151 troy oz of fine gold. Na

= not available

…

= not applicable

individuals’ purchases of coins and bars

tined for industrial use such as gold potassium

defined according to the standard adopted by

cyanide, gold bonding wire, sputtering targets.

the European Union for investment gold.

This includes gold destined for plating jewellery.

Medallions of at least 99% purity, wires and lumps

Dental. The first transformation of raw gold into

sold in small quantities are also included. In prac-

intermediate or final products destined for dental

Mine production. Formal and informal output.

tice this includes the initial sale of many coins

applications such as dental alloys.

Net producer hedging. The change in the

destined ultimately to be considered as numis-

Tourist purchases and “luggage trade”.

physical market impact of mining companies’

matic rather than bullion. It excludes second hand

Purchases by foreign visitors which are normally

gold loans, forwards and options positions.

coins and is measured as net purchases.

for their own use or for gifts are included in

Official sector sales. Gross sales less gross

“Other” retail investment refers to Western

demand in the country of purchase. Bulk pur-

purchases by central banks and other official

Europe and North America. It includes net

chases by foreign visitors (“luggage trade”) which

institutions. Swaps and the effect of delta hedging

investment in physical bullion as defined by the

appear to be intended for resale in the visitors’

are excluded.

EU (other than new coins which are included in

country of origin or a third country are attributed

Old gold scrap. Gold sourced from old fabri-

the two coin categories), individuals’ paper trans-

to the country in which they are resold.

cated products which has been recovered and

actions with a direct physical counterpart plus

Revisions to data. All data may be subject to

refined back into bars.

Over The Counter activity and changes in metal

revision in the light of new information.

Jewellery. All newly-made carat jewellery and

account holdings where measurable and retail

gold watches, whether plain gold or combined

targeted.

Historical data

with other materials. It excludes second-hand

Consumer demand. The sum of jewellery

Data covering a longer time period will be avail-

jewellery, other metals plated with gold, coins and

and retail investment purchases for a country –

able on Bloomberg from August 18th; alterna-

bars used as jewellery and purchases funded by

ie the amount of gold acquired directly by

tively contact GFMS Ltd (+44 (0)20 7478 1777;

the trading in of existing jewellery.

individuals.

[email protected]).

Sources, copyright and disclaimers © 2008 The World Gold Council and GFMS Ltd. All rights reserved. This document is World Gold

Issued by:

Council (WGC) commentary and analysis based on gold supply and demand statistics compiled by

World Gold Council

GFMS Ltd for the WGC along with some additional data. See individual tables for specific source

55 Old Broad Street

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AUGUST 2008

21