World Gold Council

WORLD GOLD COUNCIL

February 2002

Issue No. 38

2001 Highlights: Full year and fourth quarter Investment underpins gold demand In this issue

Page

Gold demand in 2001 ............... 2 Gold demand in key markets ... 3 India ......................................... 4 Pakistan .................................. 5 China ....................................... 5 Hong Kong ............................... 6 Taiwan ..................................... 6 Japan ....................................... 7 S Korea ................................... 8 Indonesia ................................. 9 Thailand ................................... 9 Vietnam ................................. 10 Malaysia ................................ 10 Singapore .............................. 10 Saudi Arabia ........................... 11 Gulf States ............................. 12 Egypt ..................................... 13 Turkey ................................... 13 USA ....................................... 14 Brazil ..................................... 15 Mexico ................................... 16 Italy ........................................ 16 Germany ................................ 17 France ................................... 17 UK ......................................... 17 Market factors ...................... 18 Worldwide demand ............ 23 WGC offices ............ Back page

After the turbulence of the third quarter, gold demand finished the year on a stronger note reaching 877.1 tonnes. While this was 2% lower than Q4’00 the latter - the all-time record - was an exceptionally strong quarter. For 2001 as a whole demand was 3,235.1 tonnes, also 2% below year-earlier levels. Jewellery demand at the start of the quarter remained overshadowed by the aftermath of September 11, suffering from the intensification of the economic slowdown, the loss in consumer confidence and the volatility of the gold price. As the quarter progressed and a sense of normality returned, so demand increased once more. Purchases for the quarter amounted to 767.1 tonnes, 4% below Q4’00. Annual demand was 2,840.3 tonnes, 2% below 2000. The investment component of demand made solid gains during Q4, 8% higher at 109.9 tonnes. This was largely due to initial “safe haven” buying following September 11, but was prolonged by financial uncertainties in Japan (where investment was 54% higher than a year earlier) and in some countries by falling interest rates on currency assets. 2001 investment demand therefore managed a rise of 4% to 394.9 tonnes against 378.5 tonnes in 2000. New annual records were set in Mexico, Saudi Arabia, the UAE, the UK and Vietnam. Jewellery demand in the US, despite the economic and political climate, was a record for the 11th successive year.

Total WGC markets: quarterly demand Demand (Tonnes)

Fourth quarter

Gold Price* (US$/oz)

1000

420

900

400

800

380

700

360

600

340

500 320

This publication is also available from our website: www.gold.org

400

For questions related to GDT

200

280

100

260

please e-mail [email protected]

300

300

0 Q4 1995

Q4 1996

Q4 1997

Q4 1998

Q4 1999

Q4 2000

240 Q4 2001

*Average quarterly gold price

Copyright © 2002, World Gold Council

A quarterly publication

WORLD GOLD COUNCIL

Market factors

Gold demand in 2001 The small, 2%, fall in annual gold demand in 2001 conceals a more turbulent picture underneath if the quarterly pattern is reviewed. The two major factors affecting the year were, first, the unexpectedly sharp slowdown in the global economy and, second, September 11 and its aftermath. Gold jewellery purchases - the major component of global gold offtake are sensitive to people’s incomes; hence it was not surprising that demand weakened as the slowdown took hold. The first quarter was vibrant, with jewellery purchases 7% up (total demand +6%) on the previous year due to still strong economic growth and a buoyant wedding season in India, the world’s largest gold market. Demand weakened noticeably in the second quarter, as economic deceleration spread, with jewellery purchases 2% below year-earlier levels and total demand 3% down. The weak trend continued into Q3 even before September 11 - and was

Changes in gold demand in 2001 change over same period of previous year, % Q1 Q2

Q3

Q4

Year

Jewellery Investment

7 0

-2 -14*

-11 23*

-4 8

-2 4

Total

6

-3

-7

-2

-2

* Comparisons affected by special commemorative coins in Taiwan (Q2’00) and Germany (Q3’01).

exacerbated by a prolonged period inauspicious for gold buying in India. The impact of September 11 on gold demand was multi-faceted (a fuller explanation was given in our previous report No. 37) but the shock to confidence, the sudden intensifying of the economic slowdown, the fall in tourism and the sharp upward movement in the gold price all hit jewellery demand, which posted an 11% fall from Q3’00. In contrast, a number of countries saw a surge in investment demand in the weeks following the atrocity as gold’s insurance or “safehaven” role in times of uncertainty came into play. Along with the suc-

cessful issue of a Deutsche mark commemorative coin, this generated a 23% year-on-year rise in investment. The surge in investment continued into the beginning of the fourth quarter receding in some countries as political uncertainties waned. (Japan, where investment buying continued for domestic reasons, was an important exception.) In contrast, jewellery demand started to recover as the quarter proceeded and as the volatility in the gold price lessened. The recovery was nevertheless limited by the global economic situation. Overall demand for Q4 was 2% below Q4’00 (jewellery –4%; investment +8%).

% Year-on-year growth in gold demand 100 Demand recovers after Asian Crisis

Jewellery Investment Total

80

Price spikes after Washington agreement

60

40

Dearth of Indian marriages

September 11 and DM commemorative coin

20

0

-20

Dishoarding due to Asian Crisis

Fears of Central Bank sales peak; gold price at low

-40 Investment build up due to Y2K fears

Investment fall when Y2K fears do not materialise

World Economic growth slows sharply

-60 Q1 '97 Q2 '97 Q3 '97 Q4 '97 Q1 '98 Q2 '98 Q3 '98 Q4 '98 Q1 '99 Q2 '99 Q3 '99 Q4 '99 Q1 '00 Q2 '00 Q3 '00 Q4 '00 Q1 '01 Q2 '01 Q3 '01 Q4 '01

2

Gold Demand Trends No 38

WORLD GOLD COUNCIL

Market factors

Gold demand in the key markets Largest consumer markets in 2001 855.2 (+ 0%)

India 855.2

409.5 (+ 3%) 396.4

USA 228.0 (+ 3%) 221.0 213.2 (+ 3%) 207.5 165.2 (+ 5%) 157.6

Saudi Arabia China Gulf States

124.5 (+ 3%) 120.5 120.0 (- 42%) 207.0

South Korea Turkey

Tonnes 2001 2000

120.0 (+ 0%) 119.7 119.4 (- 2%) 122.4 109.3 (+ 12%) 98.0 108.0 (+ 1%) 106.6

Egypt Pakistan Japan Indonesia 0

200

400

600

800

The chart above shows the eleven countries where gold consumption in 2001 exceeded 100 tonnes. In most countries annual demand was little changed from that in 2000 although this often concealed strong movements in different quarters. Some key results were: • India posted a very strong first half year, with demand rising 19% from a year earlier, followed by a fall of similar magnitude in the second half. • Despite the economic slowdown, jewellery demand in the USA posted a further record, up 2% on 2000. Purchases of new coins surged after September 11. • Demand rose 3% in Saudi Arabia to reach a new record, the previous one having been established in 1992. • Demand also reached a new record in the Gulf States, with UAE (+7%) surpassing 100 tonnes on its own. • Demand fell 42% in Turkey from the record level achieved in 2000 as a result of the country’s economic crisis • Demand in Japan rose by 12%, enabling the country to regain its place in the 100 tonnes plus league, thanks to a surge in investment in the last few months of the year. Domestic economic and financial concerns, together with the heightened global insecurity after September 11, were the main drivers of this demand. Outside the largest markets the UK also set a new annual record (up 7% on 2000) and there was strong growth in Vietnam (+22%) and Mexico (+7%). Economic problems caused sharp falls in demand in Hong Kong (-10%) and Taiwan (-35%).

Gold Demand Trends No 38

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WORLD GOLD COUNCIL

Regional markets

Indian subcontinent Covers jewellery, bar and coin demand in India and Pakistan

India: demand and rupee gold price

Gold Price* (Rupee/oz)

Fourth quarter

Demand (tonnes)

300

15000

250

14000 13000

200

12000 150 11000 100

10000

50

Indian gold demand sustains record 2000 levels

0 Q4 1995

9000

Q4 1996

Q4 1997

Q4 1998

8000 Q4 2001

Demand for the year was also affected by the Gujarat earthquake in January. In Q4, demand was 19% lower than a year earlier at 185.1 tonnes. Despite the Diwali festival and the arrival of the wedding season in Q4, the price volatility and fall in confidence following the events of September 11 served to discourage even the traditional purchases of gold during this season. A feature of 2001 was the sharp rise in official imports, up 11% year on year to 593.6 tonnes, at the expense of unofficial imports which fell sharply following the reduction in

Official gold imports into India

India:

1999

Total demand 2001 vs 2000

4

Q4 2000

* Average quarterly gold price

India posted a figure of 855.2 tonnes for 2001, unchanged from the record 2000 annual figure. There was a strong performance in the first half of the year when gold demand, boosted among other factors by a good number of auspicious days for weddings in the Hindu calendar, was 19% higher than in the first half of 2000. This was counterbalanced by weakness in the second half caused by a number of factors including a prolonged period that was inauspicious for gold buying during September and early October, concerns over economic slowdown and the volatility in the gold price following the events of September 11.

2001 2000 % change

Q4 1999

855.2 tonnes 855.2 tonnes 0%

Tonnes

2000

2001

Year

Q1

Q2

Q3

Q4

Year

Q1

Q2

Q3

Q4

Year

573.8

134.3

133.4

116.4

149.6

533.7

187.2

179.7

99.3

127.5

593.6

The difference between official imports and overall demand is met by other imports and recycled scrap gold.

Gold Demand Trends No 38

WORLD GOLD COUNCIL

Regional markets Pakistan:

Gold Price* (Pakistan Rupees/oz)

Pakistan: demand and rupee gold price

Total demand 2001 vs 2000

Demand (tonnes)

Fourth quarter

20000

90

2001 2000 % change

119.4 tonnes 122.4 tonnes - 2%

80 18000

70 60

16000

50 40

14000

30 20

12000

10 0 Q4 1995

Q4 1996

* Average quarterly gold price

Wedding season and currency strength lift Q4 gold demand in Pakistan

Q4 1997

Q4 1998

Q4 1999

Q4 2000

10000 Q4 2001

NB Quarterly data splits prior to 1998 are estimates only

import duty announced in the budget at the end of February. The outlook for gold demand at the start of 2002 is more promising than the experience of the second half of 2001. There are many auspicious days for weddings in the Hindu calendar and economic confidence is reviving. The start of the wedding season in Pakistan generated renewed interest in gold, which had suffered a poor third quarter. Official imports, which had almost dried up in the third quarter, rose sharply, reaching 15 tonnes. Gold demand as a whole reached 46.5 tonnes, 34% higher than a year earlier.

Demand was further encouraged by the appreciation of the rupee against the dollar, which capped the price of gold, and improved economic confidence following the latest package of loans provided by the IMF and the Paris Club. Gold coins and bars saw good interest; anecdotal evidence suggests that some investments were switched out of the stock market and bank accounts towards gold, in part due to continued concerns following September 11. For the year as a whole gold demand was 119.4 tonnes, 2% below 2000.

Greater China Covers jewellery, bar and coin demand in China, Hong Kong and Taiwan

Demand in China rises 3%

Gold Demand Trends No 38

Gold demand in Greater China in Q4 was 74.5 tonnes, 7% lower than a year earlier, similar to the 6% fall recorded in Q3. Sharp falls (33% and 13% respectively) were recorded in Hong Kong and Taiwan while there was a modest 3% fall in China. For the year as a whole demand in the

region was 298.3 tonnes, 9% lower than in 2000. Annual gold demand in China was 3% higher than 2000, reaching 213.2 tonnes thanks to a small rise in jewellery demand (up 2% at 210.5 tonnes) together with a surge in investment

5

WORLD GOLD COUNCIL

Regional markets

Greater China: demand and gold price Demand (tonnes)

Gold Price* (US$/oz)

Fourth quarter

160

420

140

400

120

380 360

100

340

80

320

60

300

40

280

20

260

0 Q4 1995

Q4 1996

Q4 1997

Q4 1998

Q4 1999

Q4 2000

240 Q4 2001

* Average quarterly gold price

Economic problems dampen demand in Taiwan

demand (up 80% at 2.7 tonnes). The Q4 picture was mixed, however, featuring a drop in jewellery demand of 5% - albeit from a high level - while investment demand came in at 0.7 tonnes against a zero figure for Q4 ‘00. The week long National holiday declared by the government in October stimulated sales of gold jewellery. However while the initial impact of the removal of government control over gold jewellery prices in August had been to spur demand, consumers subsequently held back purchases in anticipation of lower prices in the future.

Greater China: Total demand 2001 vs 2000

6

China 2001 2000 % change

213.2 tonnes 207.5 tonnes + 3%

Hong Kong 2001 2000 % change

20.9 tonnes 23.3 tonnes -10%

Taiwan 2001 2000 % change

64.2 tonnes 98.5 tonnes - 35%

Falling interest rates and a depressed stock market encouraged the surge in investment demand, which took the annual figure to 2.7 tonnes – 80% higher than 2000. Sales of Panda bullion coin, small coin pendants and the issuance of

several series of commemorative gold coins also contributed to the increase. The picture for Hong Kong during Q4 ’01 was less positive with demand posting a fall of 33%. After a slight downward revision to Q3 ‘01, this took the 2001 yearly total to 20.9 tonnes, down 10% on the previous year. Investment demand remained non-existent, continuing the trend in place since Q2 ’01. Sustained weakness in the domestic economy was responsible for a slump in jewellery demand to 4.0 tonnes (-33% year-on-year), outweighing the positive stimulus provided by the wedding season. Gold demand in Taiwan continued in the same vein as Q3 ’01, suffering further on the back of the weak economy. As a result, the quarterly demand total

Gold imports into Hong Kong & Taiwan (tonnes) 1999

2000

2001

Year

Q1

Q2

Q3

Q4

Year

Q1

Q2

Q3

Q4

Year

Hong Kong

120.4

16.4

20.5

31.6

60.6

129.1

52.4

16.8

13.0

6.3*

88.4**

Taiwan

84.2

23.9

26.8

16.7

32.2

99.6

24.1

8.4

7.3

12.7

52.4

*Oct/Nov only ** Jan/Nov only

Gold Demand Trends No 38

WORLD GOLD COUNCIL

Regional markets was 13% lower than Q4 ’00 at 13.5 tonnes, which fed through to an annual decline of 35%, making demand for the year 64.2 tonnes. October’s wedding and year-end present-giving seasons failed to combat the absence of demand for gold jewellery, which at 11.5 tonnes was 15% lower than a year earlier. This can partly be explained by increased trading-in and recycling of old jewellery. For the year as a whole, jewellery demand was 26% lower than in 2000.

Investment offtake proved somewhat more resilient at levels unchanged from a year earlier (2.0 tonnes). A resurgence of interest in the Year of the Horse and the Taiwan Aborigines commemorative gold coins was the primary reason for this. This brought annual investment demand to 6.5 tonnes; while only one third of the 2000 level, the comparison is skewed by the issue of the commemorative coin for the inauguration of President Chen in Q2 2000.

Japan & South Korea Covers jewellery, bar and coin demand in Japan and South Korea

Japan: demand and yen gold price Demand (tonnes)

Gold Price* (Yen/oz)

Fourth quarter

44000

60

42000

50

40000 40

38000 36000

30

34000

20

32000 10

Domestic uncertainties spur Japanese investment demand

0 Q4 1995

30000

Q4 1996

Q4 1997

Q4 1998

Q4 2000

28000 Q4 2001

*Average quarterly gold price

An increase in investment demand was responsible for the 20% increase in gold demand in Japan in Q4 ’01 to 32.5 tonnes, taking the total for the year to 109.3 tonnes. This compares to a 2000 figure of 98.0 tonnes (+12%), with investment demand, at 64.8 tonnes, 25% higher than in 2000. On the investment side, following the aftermath of September 11, the collapse of a leading supermarket chain, the fall

Gold Demand Trends No 38

Q4 1999

of Enron and the default of the Argentine government all raised the spectre of financial instability, fuelling the continued flight to gold. Consequently demand for bar and coin was up 54% against Q4 ’00 at 21.5 tonnes. The prospect of the government reducing protection for bank deposits in April served to underpin this investment interest as depositors sought safe haven alternatives such as gold and the rush to gold continued into the start of Q1 2002.

7

WORLD GOLD COUNCIL

Regional markets

Investment demand in Japan

Japan: Total demand 2001 vs 2000 2001 2000 % change

109.3 tonnes 98.0 tonnes + 12%

1999

2000

2001

Tonnes

Year

Q1

Q2

Q3

Q4

Year

Q1

Q2

Q3

Q4

Year

Bar

78.0

13.0

12.0

11.0

13.0

49.0

12.0

8.0

21.0

20.0

61.0

Coin

3.8

1.0

0.5

0.5

1.0

3.0

0.6

0.7

1.0

1.5

3.8

Total

81.8

14.0

12.5

11.5

14.0

52.0

12.6

8.7

22.0

21.5

64.8

In the jewellery sector, while renewed interest in yellow gold helped to push up demand this was offset by stock recycling and inventory trimming, with the result that jewellery demand for the quarter was down 15% yearon year at 11.0 tonnes. Tax reductions ignite demand in South Korea

It was jewellery rather than investment demand in Korea that drove gold demand up 10% during the fourth quarter to 33.0 tonnes; this is a key milestone being the highest quarterly offtake since 1996. That took the annual figure to 124.5 tonnes, 3% up on the 120.5 tonnes seen during 2000 and the highest annual figure since the all-time highs of 1996. Jewellery accounted for 109.5 tonnes and investment demand for 15.0 tonnes. Factors positively influencing Q4 demand for gold jewellery (up 12% year-

on-year to 29.0 tonnes) were partly seasonal (October wedding season and Christmas / New Year period), but also included the reduction of the Special Consumption Tax from 30% to 20%. This stimulated consumption, particularly when combined with the impact of the government’s decision to force local retailers to accept credit card payments, giving consumers an additional method of purchase. Although the strong quarterly performance in jewellery demand was not replicated in the investment sector in Q4 (flat on the year at 4.0 tonnes), the annual figure was more impressive, staging a rise of 7% to 15 tonnes. The events of September 11 were at the root of this increase, as the market sustained higher levels of investor interest in the weeks following. Gold Price* (Korean won/oz)

South Korea: demand and gold price Demand (tonnes)

Fourth quarter

50

500,000

0

450,000

-50 400,000 -100 350,000

South Korea:

-150

Total demand 2001 vs 2000

-200

2001 2000 % change

8

124.5 tonnes 120.5 tonnes + 3%

-250 Q4 1995

300,000

Q4 1996

Q4 1997

Q4 1998

Q4 1999

Q4 2000

250,000 Q4 2001

*Average quarterly gold price

Gold Demand Trends No 38

WORLD GOLD COUNCIL

Regional markets

South-east Asia Covers jewellery, bar and coin demand in Indonesia, Thailand, Vietnam, Malaysia and Singapore

Currency moves influence demand in South-east Asia

Vietnam was the star performer in South-east Asia, posting new all time highs for both investment and jewellery demand in 2001. Currency and interest rate fluctuations played a significant role in influencing gold demand across the region as a whole, which reached 285.2 tonnes for 2001 representing a 7% increase. Of this, jewellery accounted for 216.8 tonnes with investment soaking up the remaining 68.4 tonnes. Gold demand in Indonesia was again dictated by currency movements in the last quarter of 2001 with the result that the Q4 figure (27.0 tonnes) was down 13% against Q4 ‘00. Demand only managed a rise of 1% for the full year at 108.0 vs. 106.6 in 2000. The 20% depreciation in the Rupiah against the US$ and the resultant increase in the local price of gold took its toll on investment demand during the quarter, which fell 67% year-

South-east Asia

on-year to 2.0 tonnes. Flooding in the country together with economic difficulties exacerbated the problem and annual investment demand consequently posted a decline of 50% to 11.0 tonnes. Quarterly jewellery proved more resilient in the face of the currency weakness, although no gains were made from the same period a year earlier and demand remained flat at 25.0 tonnes. The yearly comparison is more positive however, as 2001 jewellery demand rose 15% to 97.0 tonnes. Thailand put in a more encouraging performance in the final quarter, gold demand at 22.9 tonnes managing an 18% increase on the same period a year earlier. The annual picture for 2001 was somewhat more temperate, rising 3% to 69.3 tonnes compared with 67.5 in 2000. Several factors combined to push jewellery demand to 18.8 tonnes for

South-east Asia: demand and gold price

Total demand 2001 vs 2000 Demand (tonnes)

Indonesia 2001 2000 % change Thailand 2001 2000 % change Vietnam 2001 2000 % change

108.0 tonnes 106.6 tonnes + 1%

Gold Price* (US$/oz)

Fourth quarter

140

420

120

400

100

380

80

360

60

340

40

69.3 tonnes 67.5 tonnes + 3% 73.0 tonnes 60.0 tonnes + 22%

320

20

300

0 -20

280

-40

260

-60 Q4 1995

Q4 1996

Q4 1997

Q4 1998

Q4 1999

Q4 2000

240 Q4 2001

*Average quarterly gold price

Gold Demand Trends No 38

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WORLD GOLD COUNCIL

Regional markets the quarter (+18% year-on-year), these being the appreciation of the Baht, lowering of domestic interest rates and the year-end festivities. A cautious return of consumer confidence offered further support but nevertheless the losses accumulated earlier in the year proved insurmountable, resulting in a fall of 3% in 2001 against 2000 (57.5 tonnes vs. 59.4).

Demand in Vietnam surges to all time high

Investment demand posted strong gains in both the quarter and the year as a whole, up 17% at 4.1 tonnes and 46% higher at 11.8 tonnes respectively. Investors continued actively to purchase gold both as a hedge against uncertainty in the wake of the September 11 attacks and as an alternative investment to less rewarding bank deposits. A strong fourth quarter in Vietnam took gold demand for the year to an all time high at 73.0 tonnes, well above the 60.0 tonne peak of 2000. Both jewellery and investment components also set new highs, at 32.0 and 41.0 tonnes respectively. For the quarter, demand at 20.0 tonnes was 25% higher than the same period the previous year.

South-East Asia Total demand 2001 vs 2000

10

Malaysia 2001 2000 % change

22.7 tonnes 21.1 tonnes + 8%

Singapore 2001 2000 % change

12.2 tonnes 12.1 tonnes + 1%

Interest rates on currency assets remained uninvitingly low while domestic wage growth was strong. Increasing disposable income propelled jewellery demand to 9.0 tonnes for the quarter (up 29% year-on-year). Investment demand benefited from

the lower interest rates on other assets, up 22% to 11.0 tonnes, as well as the growing demand for gold bars for use in property transactions. In November a decree authorised the establishment of the Vietnam gold trading centre, a step towards market deregulation. 2001 gold demand in Malaysia improved on 2000 by 8%, reaching 22.7 tonnes. The major gain came from investment, up 21% to 4.1 tonnes. Jewellery rose 5% to 18.6 tonnes. Although investor demand subsided from the sharp rally after September 11, it remained 5% higher than Q4 ’00 and demand for the year was a record. Jewellery sales were invigorated by government measures to increase civil service salaries and to promote the Malaysia Mega Sales and Ramadan Bazaar. The effects were to drive jewellery purchases for the quarter 8% higher to 7.7tonnes. The under-performer of the region in Q4, Singapore virtually wiped out the gains in gold demand seen during the previous three quarters to post 12.2 tonnes for the year as a whole, fractionally above the previous annual figure of 12.1 tonnes. Jewellery demand at 3.1 tonnes for the quarter – 16% below the same quarter a year earlier – took the yearly figure to 11.7 tonnes as compared to

Gold imports into Singapore 1999

Tonnes

2000

2001

Year

Q1

Q2

Q3

Q4

Year

Q1

Q2

Q3

Q4

Year

289.5

65.8

61.9

49.0

41.9

218.6

47.4

18.7

32.4

26.0

124.5

Gold Demand Trends No 38

WORLD GOLD COUNCIL

Regional markets the previous annual figure of 11.6 tonnes. Higher unemployment levels and a shaky economic background served to weigh down demand in both

the investment and jewellery sectors; the former came in flat for both the quarter and the year at 0.2 tonnes and 0.5 tonnes respectively.

Middle East Covers jewellery, bar and coin demand in Saudi Arabia, UAE, Bahrain, Kuwait, Oman, Qatar and Egypt

Strong quarter pushes annual demand for the region to record levels

The repercussions of September 11 continued to affect political and economic confidence in the Middle East region throughout most of Q4 with consequent effects on gold demand. Tourist and pilgrim numbers fell, reducing jewellery purchases through much of the quarter, while sales of bars and coins were stronger. The price rise in the weeks following September 11 also hampered demand. Towards the end of the period the traditional gold buying that marks the Eid al Fitr feast at the end of Ramadan – which last year fell in mid-December – reasserted itself, continued by the Christmas season, and jewellery sales grew once more. Overall gold demand in the region reached 121.8 tonnes in the quarter, a 5% rise over Q4 ‘00, it-

self a strong quarter. Coupled with the promising growth in the first half of the year this pushed demand for 2001 as a whole to 513.2 tonnes. This was a new annual record and 3% higher than the previous record for 2000. Demand in Q4 rose strongly in Saudi Arabia to 58.5 tonnes, 16% higher than a year earlier. This followed an erratic pattern in the rest of the year but brought annual demand to 228.0 tonnes. Not only was this 3% higher than 2000, itself a strong year, but it also beat the previous record (225 tonnes) set as long ago as 1992. As in the rest of the region there was a swing to gold investment through most of the quarter tailing off in the

Saudi Arabia: demand and gold price Demand (tonnes)

Gold Price* (US$/oz)

Fourth quarter

90

420

Middle East:

80

400

Total demand 2001 vs 2000

70

380

60

360

50

340

40

320

30

300

20

280

10

260

Saudi Arabia 2001 2000 % change

228.0 tonnes 221.0 tonnes + 3%

Gulf States 2001 2000 % change

165.2 tonnes 157.6 tonnes + 5%

0 Q4 1995

Q4 1996

Q4 1997

Q4 1998

Q4 1999

Q4 2000

240 Q4 2001

* Average quarterly gold price

Gold Demand Trends No 38

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WORLD GOLD COUNCIL

Regional markets

Gulf States:

Gulf States: demand and gold price

Total demand 2001 vs 2000

Demand (tonnes)

UAE 2001 2000 % change

101.3 tonnes 94.5 tonnes + 7%

Kuwait 2001 2000 % change

30.2 tonnes 29.2 tonnes +3%

Oman 2001 2000 % change

16.8 tonnes 16.7 tonnes + 0.6%

Gold Price* (US$/oz)

Fourth quarter

90

420

80

400

70

380

60

360

50

340

40

320

30

300

20

280

10

260

0 Q4 1995

Q4 1996

Q4 1997

Q4 1998

Q4 1999

Q4 2000

240 Q4 2001

*Average quarterly gold price

Bahrain 2001 2000 % change

9.6 tonnes 9.5 tonnes + 1%

Qatar 2001 2000 % change

7.3 tonnes 7.7 tonnes - 5%

final weeks. The country was not as exposed as some of its neighbours to the decline in tourism as many of its visitors are pilgrims. Nevertheless it was reported that over 40,000 people cancelled planned pilgrimages. Promotions also played a role in stimulating demand as did the fact that oil prices, while slipping back, remained at a fairly high level. The government has retracted its reduction to 5% in import duty on gold

jewellery and again increased it to 12%. There has been a two-year extension in the Saudi-ization programme by which nationals of the Kingdom are to increase their share of jobs in gold and jewellery shops; however, at the moment not less than 30% of the staff working in the shops have to be Saudi. Demand in the Gulf States was initially affected by the aftermath of September 11 with October being

Series of festivals proves supportive for the Gulf States Gold Price* (Egyptian £/oz)

Egypt: demand and gold price Demand (tonnes)

Fourth quarter

90

1,400

80 1,300 70 60

1,200

50 1,100 40

Egypt:

30

Total demand 2001 vs 2000

20

1,000 900

10

2001 2000 % change

120.0 tonnes 119.7 tonnes + 0.3%

0 Q4 1995

Q4 1996

* Average quarterly gold price

12

Q4 1997

Q4 1998

Q4 1999

Q4 2000

800 Q4 2001

NB Quarterly data splits prior to 1997 are estimates only

Gold Demand Trends No 38

WORLD GOLD COUNCIL

Regional markets a poor month everywhere but Qatar. Demand picked up in November and December boosted by a string of festivals – Diwali, Eid and Christmas – as well as the reasonably firm oil price. Again, demand for investment products was high throughout much of the quarter. Total fourth quarter demand ended just 1% higher than a year earlier at 38.9 tonnes, bringing the annual total to 165.2 tonnes, a new record. UAE – with its heavy dependence on tourism – suffered most during the quarter with demand falling 5% to 23.7 tonnes. Nevertheless the buoyancy of the first half year enabled annual demand to reach 101.3 tonnes, 7% higher than in 2000 and a new annual record.

Demand in Oman in Q4 was also 3% lower than a year earlier, but the other three states all posted increases (19% for Kuwait; 26% for Bahrain and 7% for Qatar). Kuwait, Bahrain and Oman all recorded small increases in demand for the year as a whole with a small fall in Qatar. In Egypt, gold demand in Q4 amounted to 24.4 tonnes, 9% lower than Q4’00. Economic problems and uncertainty, falling tourist numbers and a rising local currency price after September 11 deterred jewellery purchases although there was some increased demand for investment products. For 2001 as a whole demand was effectively unchanged from the previous year at 120.0 tonnes.

Turkey Covers jewellery, bar and coin demand

Economic problems continued to restrain gold demand in Turkey in Q4. However with some tentative signs of recovery from the crisis, and with the

lira appreciating against the dollar from October (thus limiting local currency price rises), the fall in demand – 13% below Q4’00 to 33.0 Gold price* (Turkish Lire/oz)

Turkey: demand and lire gold price Demand (tonnes)

Strong investment demand in Turkey although jewellery remains weak

Fourth quarter

90

450,000

80

400,000

70

350,000

60

300,000

50

250,000

40

200,000

30

150,000

20

100,000

10

50,000

0 Q4 1995

Q4 1996

Q4 1997

Q4 1998

Q4 1999

Q4 2000

0 Q4 2001

* Average quarterly gold price

Gold Demand Trends No 38

13

WORLD GOLD COUNCIL Turkey: Total demand 2001 vs 2000 2001 2000 % change

120.0 tonnes 207.0 tonnes - 42%

Regional markets tonnes – was more muted than in preceding quarters. Imports were close to normal levels. For the year as a whole demand was 120.0 tonnes, a 42% drop from the record 207.0 tonnes of 2000. Demand for coins was strong at the beginning of the quarter as a result of the global political situation and, unusually, there was some demand for kilobars. Investment purchasing continued into November and December at a reduced rate. The advent of euro notes and coins may also

have had some small positive impact on gold demand since a modest proportion of the estimated DM10bn held in Turkey was probably exchanged for gold Apart from the economic situation, negative factors were the decline in tourism and, at the end of December, a spell of very severe weather which prevented people from shopping other than for necessities. Although Turkey’s economic woes are not over, prospects for 2002 look better than 2001 suggesting a more positive climate for gold demand.

The Americas Covers jewellery and coin demand in USA and jewellery, bar and coin demand in Brazil and Mexico

Fourth quarter gold demand in the United States climbed 4% year-onyear to 132.0 tonnes, with jewellery demand rising 2% over year-earlier levels and investment (new coin) demand - under the influence of world events - jumping by 34% to 6.0 tonnes. Total yearly demand at 409.5 tonnes was 3% above 2000 Christmas sales draw out jewellery buyers in the US

and included a 2% increase in jewellery purchases, which, for the 11th year in succession, recorded a new high (395.2 tonnes). Investment for the year was 70% higher than in 2000. In the first half of the year new coin purchases continued the recovery from the de-

USA: demand and gold price Demand (tonnes)

Gold Price* (US$/oz)

Fourth quarter

160

420

140

400 380

120

360

100

340 80 320 60

USA: Total demand 2001 vs 2000 2001 2000 % change

14

409.5 tonnes 396.4 tonnes + 3%

300

40

280

20

260

0 Q4 1995

Q4 1996

Q4 1997

Q4 1998

Q4 1999

Q4 2000

240 Q4 2001

*Average quarterly gold price

Gold Demand Trends No 38

WORLD GOLD COUNCIL

Regional markets

Brazil & Mexico: Total demand 2001 vs 2000

Brazil 2001 2000 % change Mexico 2001 2000 % change

54.0 tonnes 60.0 tonnes - 10%

86.0 tonnes 80.3 tonnes + 7%

Brazil & Mexico: demand and gold price Demand (tonnes)

Gold Price* (US$/oz)

Fourth quarter

90

420

80

400

70

380

60

360

50

340

40

320

30

300

20

280

10

260

0 Q4 1995

240 Q4 1996

Q4 1997

Q4 1998

Q4 1999

Q4 2000

* Average quarterly gold price

pressed levels of the year 2000, when demand had suffered from the post-Y2K fallout. The events of September 11 then gave demand a substantial boost with sales soaring in September and October before returning to more normal levels later in the year. Research suggests that actual demand by individuals was stronger in September and October than the new sales figures indicate since it was met in part from high inventories that dealers had maintained since 2000. A difficult year ends more positively in Brazil

Lower interest rates combined with early and deeply discounted sales in December encouraged demand for jewellery in Q4 and, as consumer confidence recovered, jewellery sales crept up to 126.0 tonnes. Price-conscious consumers were drawn out by the sales on offer, buying more items at lower prices. The fact that demand for gold jewellery rose in the face of near recession may seem initially surprising. However, overall retail sales in the US were nearly 3% higher in Q4. Luxury goods in general suffered but plain gold items were seen as less

Gold Demand Trends No 38

ostentatious and more appropriate gifts in the aftermath of September 11; they were frequently purchased as keepsakes or as symbols of relationship and connection. General uncertainty as to the Christmas season nevertheless led retailers to reduce inventory so that the growth in consumers’ purchases was not reflected in retailers’ own purchases. A turbulent year in Brazil ended on a relatively positive note, as gold demand shrugged off economic troubles and recovered from weak second and third quarters almost reaching year-earlier levels (20.0 tonnes: -5%). The scenario for yearly demand was similar, at 54.0 tonnes falling shy of the 2000 figure by 10%. The recovery in the Brazilian real during the final quarter served to boost jewellery demand, which edged its way to 20.0 tonnes - unchanged from Q4 ‘00. A further positive influence was the “stay at home” effect of September 11, which resulted in higher levels of disposable income as travel expenditure was cut back.

15

WORLD GOLD COUNCIL

Regional markets Investment demand was non-existent in Q4, despite expectations that the events of September would generate renewed interest, and as a result the yearly investment demand was 40% lower than 2000 at 3.0 tonnes. The high level of interest rates in Brazil, and the low comparative real rate of return on gold as investment, explain this lack of interest during Q4.

Strong jewellery growth in Mexico lifts demand to new record

Mexico managed a rise of 9% in Q4 to a new quarterly record of 38.7 tonnes, attributable entirely to strengthened demand for jewellery. This took the yearly figure to 86.0 tonnes, itself an annual record representing a 7% increase on the previous year. Demand for jewellery proved resilient in the face of US economic problems, thanks to the appreciation of the domestic currency together with lower inflation, which fed

through to a lower local price of gold, and higher real wages. Jewellery demand for the quarter was up 13% at 34.0 tonnes, taking the cumulative yearly total to 75.7 tonnes (a rise of 8% on 2000). Both the quarter and the year set new highs. The pattern of demand shifted towards imported Italian jewellery following a decrease in import taxes. 14 carat continued to take a larger share of the market at the expense of 10 carat as consumers become more discerning in their purchases. The story was different for gold coin, as investment demand eroded the year-on-year gains made throughout the first three-quarters of the year, to sit 15% below the same period in 2000 at 4.7 tonnes. As a consequence, investment in 2001 was unchanged from 2000 at 10.3 tonnes.

Europe Covers jewellery demand in Italy, France, Germany and UK, and bullion coin demand in Europe

Italy extends rising trend in jewellery demand

16

Gold jewellery offtake in Europe was 2% higher for the quarter at 77.4 tonnes taking the full year figure to 245.9 tonnes, 1% higher than 2000. The improvements in both Italy and UK were almost cancelled out by a disappointing quarter for France and Germany, the latter suffering on the back of the sluggish economic picture in the country. Including demand for new coins, total offtake for Europe was 78.4 tonnes, 1% lower than Q4’00, bringing the yearly total to 260.7 tonnes, 3% up on 2000.

A 4% rise in Q4 Italian gold jewellery demand to 25.8 tonnes brought the total for 2001 to 79.7 tonnes, up 2% on the previous year. Reduced expenditure on travel in response to September 11 fed through to higher levels of disposable income for domestic purchases, which ensured a continuation of the modestly rising trend in jewellery demand through the previous two quarters of 2001. Preliminary fabrication numbers at 446.0 tonnes for the year were 9% lower than 2000 levels, owing to a

Gold Demand Trends No 38

WORLD GOLD COUNCIL

Regional markets

Europe:

Europe: demand and euro gold price

Total demand 2001 vs 2000

Italy 2001 2000 % change Germany 2001 2000 % change France 2001 2000 % change UK 2001 2000 % change

Coin demand 2001 2000 % change

79.7 tonnes 77.9 tonnes + 2%

Demand (tonnes)

Gold Price* (euro/oz)

Fourth quarter

160

420

140

400 380

120

360

100

340

42.2 tonnes 44.9 tonnes - 6%

80 320 60

300

40

54.8 tonnes 56.5 tonnes - 3%

280

20 0 Q4 1995

260

Q4 1996

Q4 1997

Q4 1998

Q4 1999

Q4 2000

240 Q4 2001

*Average quarterly gold price. Until 1998, DM converted to euro at Dec 31, 1998 exchange rate, euro thereafter

69.2 tonnes 64.9 tonnes + 7%

14.8 tonnes 9.0 tonnes + 64%

New annual record for UK

Gold Demand Trends No 38

10% decline in exports. This was largely due to the weaker US economy. Fabrication for the domestic market was relatively resilient, however, posting a small increase of 1%.

ance from traditional last minute Christmas purchases. Jewellery demand for 2001 was 54.8 tonnes, 3% down on 2000.

German gold jewellery demand for Q4 ’01 was 13.0 tonnes; following some minor revisions to previous figures this took the yearly total to 42.2 tonnes. Demand for gold jewellery fell victim to the ailing economic scenario and the rise in Euro-denominated gold prices, with silver jewellery stepping in to take up the slack. Nevertheless, a trend towards yellow gold has begun to assert itself and the outlook for gold jewellery offtake over the coming year is more favourable than the performance in 2001.

Jewellery demand in the UK sparkled in the last quarter, up 12% year on year at 21.6 tonnes. This, on top of a strong performance throughout the first three quarters, took offtake to a new annual record at 69.2 tonnes, 7% above 2000. Demand was underpinned by strong growth in consumer spending generally aided by a decline in travel expenditure following the events of September, which increased domestic spending power. The biggest growth was seen in 9 carat jewellery, with 18 carat some way behind and 22 carat posting weak gains.

Economic concerns came to the fore in France during Q4, the result being a drop in gold jewellery offtake of 2% to 17.0 tonnes. A slowdown in economic growth combined with worsening job prospects to produce a fall in consumer demand for gold jewellery, which received little assist-

New coin sales in Europe were weak, falling by 71% from year-earlier levels to 1.0 tonnes, although the dishoarding prevalent in earlier years appeared to have ended. Sales for the year as a whole reached 14.8 tonnes, 64% higher than in 2000, thanks to the issue of the DM commemorative coin in July.

17

18

M ar 1 4

Jun 1 4

Bank of England Auction

May 14

15 May

Physical market strong with bargain hunting in the Middle and Far east

A pr 1 3

14 Mar

Net CFTC short 181 tonnes

Barrick Homestake merger plan announced

Jul 1 3

11 July

Aug 1 4

Se p 1 4

Oct 1 2

12 Sept

Price Source: Data Ecowin PPriceData Datarice

Dec 14

23 Nov

Newmont launches counter-bid for Normandy

Chinese National Gold Exchange opens on a pilot basis

Nov 1 4

Diwali Commences

Anglogold bids for Normandy

11th September atrocity

Dollar Stabilising

Physical buying establishes new range

Chinese government liberalises gold jewellery prices Moves largely German currency Government driven coin issue sells well

Net CFTC turns long on short covering Equity markets very scramble; specualtive unsettled; dollar dropping interest Net CFTC turns US rate cuts starting to short impact on short side players Net CFTC goes long

$:Y at 2.5 year high

Auction disppointing

Net CFTC shorts at 208 tonnes

London PM Gold Fixing (USD)

Fe b 1 4

Sharp short covering and fund buying on rumours of distress hedge lifting

Borrowing rates still tight

One month market briefly in backwardation

Lease rates tightening

Gold Fields announces hedge closures 23rd Jan

US Jan PPI figures exceed expectation

Earthquake in India

Short covering

Heavy short sellling

250 Ja n 1 2

255

260

265

270

275

280

285

290

295

London P M G old Fixing (U S D ) 2001

WORLD GOLD COUNCIL Market factors

Gold Demand Trends No 38

US D /Tr O unce

WORLD GOLD COUNCIL

Market factors

Review of gold market developments in 2001 consumers). The third factor involves the physical demand side, predominantly because there is an underlying implication for both the opportunity cost of holding gold and the potential for inflationary expectations – although this latter external factor still remains to some extent on the backburner, given the slowdown in the western economies.

Spot gold in US $, Euro and Yen $, C

Yen

340

40,000 Yen

36,000

320

32,000 300

28,000 Euro

24,000

280

20,000 260

Interest rates a governing feature throughout the year – both external…

16,000 US $

Gold Demand Trends No 38

Jan-02

Oct-01

Dec-01

Sep-01

Jul-01

Aug-01

May-01

Apr-01

The movement in money market interest rates has a three-fold impact on the gold market. It affects the use of the forward markets by speculators and, on occasion, those involved in the hedging market (be it producers or

One-, three- and twelve-month lease rates (%) 7 6 5 4 3 2

12 months 1

3 months 1-Jan-02

4-Dec-01

18-Dec-01

6-Nov-01

20-Nov-01

9-Oct-01

23-Oct-01

25-Sep-01

11-Sep-01

28-Aug-01

31-Jul-01

14-Aug-01

3-Jul-01

17-Jul-01

5-Jun-01

8-May-01

22-May-01

24-Apr-01

10-Apr-01

27-Mar-01

13-Mar-01

27-Feb-01

13-Feb-01

30-Jan-01

19-Jun-01

1 month

0 2-Jan-01

Based on the London pm fix, the market ranged between a low of $255.95/ ounce (April 2) and $293.10/ounce (September 28) last year, averaging $271.05. The spot price opened the year at $271.10/ounce, and closed at $276.50. The chart on the opposite page shows the performance of gold in dollar terms over the course of the year, and pinpoints some of the more important market-influencing features.

The US Fed Funds rate fell over the course of the year from an opening level of 6.5% to finish the year at 1.75%. Gold contangoes expressed in US dollar terms fell accordingly. The loco London one month gold forward rate (as opposed to the borrowing rate) opened the year at 5.8% (annualised) and closed at 1.6%, while the 12-month forward rate started 2001 at 4.6% and ended the year at 1.3%. This, combined with generally low prices, deterred some would-be hedgers in the mining sector and in some cases helped towards a decision

The dollar price overall has effectively been steady but the sustained strength of the dollar itself means that in the majority of other currencies gold evinced a bullish tendency. In yen terms, it closed the year at the highs, before achieving a three-year high early in January 2002.

16-Jan-01

Jan-01

While the atrocities of September 11 will always overshadow the year 2001, both in emotional and, in some ways, financial terms, the majority of gold’s year was inextricably linked to interest rates, notably those in the US. On balance it was a year in which the market was characterised by steady physical demand, notably putting a floor in the market below $260/ounce, increasing nervousness on the part of some (but not all) short side traders. Latterly, there was an element of risk-hedging activity in the retail sector following September 11 and particularly in Japan thereafter because of that country’s economic and financial conditions.

Mar-01

Dec-00

Oct-00

Nov-00

Jul-00

Aug-00

Jun-00

Mar-00

May-00

Feb-00

12,000 Jan-00

240

19

WORLD GOLD COUNCIL to reduce the hedge book. Normandy Mining was a case in point in the fourth quarter of the year, with the company specifically stating that low contangoes were a contributory factor to a reduction in committed forward exposure. The speculative market and its activities were important throughout the year and are covered below, following a brief discussion of lease rates.

Market factors COMEX: net large-scale speculative positions vs spot gold Tonnes

$/oz

300

200 150

290 100 280 50 270

0 -50

260 -100 tonnes

spot $/ounce

250

-150

The spike in lease rates in late February and early March came after the market experienced a tightening in the availability of nearby metal and this was largely ascribed to the above-mentioned policy of pushing lending further down the curve. In the latter part of February the yield curve became inverted as market players covered nearby requirements, but rates subsequently rose across the whole range of dates as borrowing appeared also for further dated maturities. The situation was similar, but more marked, in the May rally which was driven by like changes.

20

This is a good snapshot of how supply and demand works in any market. Some members of the official sector are believed to have pushed their lending further down the curve because rates at the short end were, simply, too unattractive. This pushed nearby rates higher as demand ensued, some of it mildly panic-driven, and ultimately pushed rates higher across the board, albeit not by much. Later in the year, in the wake of September 11 and in a period of heightening political tension, it is believed that some members of the official sector looked to reduce their lending in the market as they wanted their gold “closer to home”; this is thought in most cases to have been temporary but it did contribute in the fourth quarter to some small volatility in borrowing rates as requirements were covered. Implications; nervous shorts The activity in lease rates over the year combined with steady physical demand to shake out from the market some of the short-side players. Part (but by no means all) of the purpose of trading from a speculative short bias is to earn the contango. The other

15-Jan-02

1-Jan-02

18-Dec-01

4-Dec-01

20-Nov-01

6-Nov-01

23-Oct-01

9-Oct-01

25-Sep-01

11-Sep-01

28-Aug-01

31-Jul-01

14-Aug-01

3-Jul-01

17-Jul-01

5-Jun-01

19-Jun-01

8-May-01

22-May-01

24-Apr-01

240 10-Apr-01

Currency interest rates are also important in a different context; their impact on gold lease rates themselves. There were a few occasions during the year when the market perceived a tightening in nearby availability of metal, partly as some members of the official sector continued to extend their lending patterns to longer-dated maturities rather than the nearby dates. This feature was an element in one or two short covering rallies (notably that in March). The desire for nearby liquidity was also a feature in the wake of September 11, and also following the Enron collapse – not because of any perceived Enron gold exposure, but as part of a ripple effect through the financial sector as a whole.

-200 27-Mar-01

... and internal

important part, of course, is to capitalise on any fall in the underlying price. At this point it is important to remember that rolling forward a short position involves borrowing metal, and the environment for these traders has not been as comfortable in 2001 as it had for a number of years previously. The contango has been low as a result of falling US rates, and although absolute borrowing rates have also been low, the fact that rates have occasionally spiked upwards introduces an unwanted element of lease rate risk for the naked short especially if those rates are rising because of a drive for liquidity as a result of nervousness elsewhere in the financial markets. With a physical demand side that has put a floor below the underlying price of the metal, it is little surprise that some of these players have closed out their positions. The rally at the end of May, from the $260 region to a test of $300, was less driven by a perceived need for nearby liquidity than by more rate cuts from the Fed. The Federal Reserve had cut rates in April, between FOMC meetings, and the next cut, in mid-May, took the Fed Funds rate to 4%. Gold borrowing costs at that stage were in the Gold Demand Trends No 38

WORLD GOLD COUNCIL

Market factors The May rally - a function of external rate cuts

September; a flight to quality? The market reaction to the events of September 11 and thereafter was mixed. The professional sector generally stood aside, awaiting developments and assessing the political response around the world before taking any view about flights to quality. As time wore on, the dollar and the Swiss Franc tended to be the currencies of choice on a day-to-day basis, but the performance of the gold price was interesting. While there was comparatively small fresh professional buying interest there was also short covering, but here the private individual sector came in to play. Interest was Gold Demand Trends No 38

(Index 2/1/01 = 100) 120

110 Gold 100

90 Dow Jones 80

strong more or less around the world, including Europe and the US, with demand for coin particularly noticeable and a number of US “online” organisations reported a sizeable increase in business, especially while the currencies were fluctuating. The US Mint reported that in the 10 days following September 12 it sold 45,000 ounces of Eagles, a level equal to twice that of its most successful months in the year to that point. After gold had run out of its initial upward momentum traders were reporting that the physical market was appearing as a buyer on dips in price, and that the price levels at which they were entering the market tended, on the whole, to be rising and this tended to attract some professional money managers also. The market price went into retreat once the dollar and equity markets stabilised. The combined impact of these factors meant that for most of the rest of the year, gold was, among the “major” reserve currencies (dollar, euro, yen and Swiss franc), the strongest performer. Once the dollar had stabilised, towards the end of October, gold retreated into support at the $270-275 range and stayed there for much of the rest of the year. Rallies tended to run out of steam towards the $280-282 region,

4-Dec

18-Dec

6-Nov

20-Nov

9-Oct

23-Oct

25-Sep

11-Sep

28-Aug

31-Jul

14-Aug

3-Jul

17-Jul

5-Jun

19-Jun

8-May

22-May

24-Apr

10-Apr

27-Mar

13-Mar

27-Feb

30-Jan

13-Feb

2-Jan

70 16-Jan

region of 2% (more or less across the curve) and this, combined with the fact that physical bargain hunting had defended the $255-260 support band, triggered short covering from speculators. An additional supporting factor was the reasonably good interest at the UK auction on May 15, with a cover of 3.7 times. The swing in speculative sentiment was illustrated by figures from the Commodity Futures Trading Commission, which showed that from a net short position on COMEX of 80.2 tonnes on May 8, exposure had changed to a net long of 121 tonnes by May 21. Technical features obviously kick in during a move such as this and automatic buy stops were accompanied by options-related activity to accelerate the rally. Buying fizzled out towards the highs and when it became clear that the psychologically important $300 level was not to be breached conclusively, profit taking and stale bull liquidation set in and prices retreated to the $265-275 range.

Spot Gold vs Dow Jones Industrial Average, 2001

with a mixed bag of US economic numbers generating uncertainty about the prognosis either for the economy as a whole or for Fed policy towards any further interest rate cuts. The market price showed a slight upward reaction to the news in late November that Enron was running into trouble, but as we outline above, there was more of an impact in the borrowing markets. Even that was comparatively muted. The opening of the National Gold Exchange in Shanghai on November 28 was an important event. To date the Exchange has only traded on a pilot basis, but has 108 members from all elements of the Chinese gold industry and is attracting considerable market interest. Price resistance at $282 gave way in the early part of 2002, with the market running up to test $290 in advance of the January UK auction, with fund buying and short covering generating lively activity. The move was relatively short lived however, and almost by definition ensured that the auction cover would be low, although the settlement price of $283.50 was only fractionally below the pm fix of the previous day ($284.20). As we go to press the previous resistance level of $282 has provided support with prices looking to test $290.

21

WORLD GOLD COUNCIL

Statistics

Sources and reliability of data Category / Country

Source

Reliability *

India, Pakistan, China, Taiwan, Hong Kong, SE Asia / S Korea, Saudi Arabia, Gulf States, Egypt, Turkey

Import statistics / trade sample

Measured / Indicated

Brazil, Mexico, Vietnam

-

Trade sample

Inferred

-

Hallmarking Trade data and trade sample Trade data and trade sample Issuing Mints’ sales data

Measured Indicated Indicated Measured

Europe Jewellery

Bullion Coins USA Jewellery

Bullion Coins Japan Jewellery Bars & Coins

UK and France Germany Italy

- Gold jewellery import data, trade panels of manufacturers and retailers representing 10, 14 and 18 carat (and higher) sales and manufacturing - Issuing Mints’ sales data

Indicated

- Import statistics/trade sample - Import statistics/trade sample

Measured / Indicated Measured / Indicated

Measured

* Measured : Data fully based on statistics believed to be reliable, such as government import and hallmarking statistics * Indicated : Information projected from a representative sample of data or comparable information * Inferred : Information derived from a small sample of data and/or informed contacts in the local marketplace.

Definitions Tonnes (mt): Metric ton = 1,000 kg or 32,151 ounces of fine gold. Import Data: Volume of gold imported into key bullion trading centres which serve as an important supply source for gold in the region. Fabrication: Total volume of gold, either newlymined or scrap, converted into the end-use products being reported on. Trade Purchases: Total volume of gold contained in products purchased by the trade, either retail or wholesale, for ultimate sale to consumers. Consumer Purchases: Volume or value of gold purchased by consumers in a given market. Usually measured by WGC’s representative panel of retail shops or by WGC surveys of consumer buying behaviour.

The aim of Gold Demand Trends is to review the latest state of demand for gold in the leading gold-consuming countries of the world. The areas covered are those where the World Gold Council is currently best positioned to provide a perspective on demand trends through field staff located in the key demand centres and in contact with the major entities in the gold business. The primary focus of the data is on the state of retail purchases of gold for the onward sale to the consumer, this being the common measurement parameter of demand in all World Gold Council markets and a proxy for consumer demand. At a subsidiary level, other data are provided, as available, which can help shed light on market trends e.g. gold imports, jewellery fabrication, consumer purchases. No attempt is made to arrive at a global demand figure. This is because the Council cannot track demand in countries where it is not represented (Africa, parts of Latin America, the former Communist bloc and parts of the Middle East) or where demand is difficult to measure (investment demand in Western markets). The Council estimates that the statistics in this survey represent approximately 80% of total global gold demand.

The statistics in Gold Demand Trends were revised to include demand data for Pakistan and Egypt with effect from issue 26. The Council stopped monitoring dental demand in Europe, USA and Japan at the beginning of 1998, and these data are no longer included for previous years. While every care has been taken, the World Gold Council cannot guarantee the accuracy of any statement or representation made. Persons considering direct or indirect investment in gold should consult their professional investment advisors.

22

Gold Demand Trends No 38

Gold demand in key markets worldwide (tonnes) 1995-2001 1995

1996

1997

1998

1999

2000

2001

Gold Price ($)

384.1

387.9

331.3

294.1

278.6

279.1

271.1

286.7 273.0 259.2 296.0

290.2 280.3 276.5 268.8

263.5 267.7 274.1 278.6

India

477.2

507.8

736.7

815.0

838.8

855.2

855.2

196.0 218.4 241.0 183.4

196.8 220.9 208.0 229.6

259.7 238.3 172.1 185.1

Pakistan Greater China - China - Taiwan - Hong Kong

99-1

99-2

99-3

99-4

00-1

00-2

00-3

00-4

01-1

01-2

01-3

01-4

43.2

53.7

81.8

98.2

121.8

122.4

119.4

31.5

30.1

32.3

27.9

28.4

27.0

32.4

34.6

29.8

21.8

21.3

46.5

427.3 223.9 160.2 43.2

374.4 210.7 123.3 40.4

406.9 213.8 142.1 51.0

314.6 191.6 91.2 31.8

343.4 205.0 109.7 28.7

329.3 207.5 98.5 23.3

298.3 213.2 64.2 20.9

87.6 55.0 25.3 7.3

81.8 46.0 29.1 6.7

87.6 48.0 32.0 7.6

86.4 56.0 23.3 7.1

90.8 56.5 27.5 6.8

85.1 46.0 34.1 5.0

72.9 46.0 21.4 5.5

80.5 59.0 15.5 6.0

82.8 57.2 19.0 6.6

72.7 49.0 18.2 5.5

68.3 50.0 13.5 4.8

74.5 57.0 13.5 4.0

Japan

272.1

152.2

107.1

110.4

121.8

98.0

109.3

36.0

26.0

36.0

23.8

22.0

23.5

25.5

27.0

22.1

19.7

35.0

32.5

S Korea

121.0

125.5

114.4 -162.5

118.5

120.5

124.5

29.5

31.0

27.0

31.0

30.0

31.0

29.5

30.0

29.5

30.5

31.5

33.0

SE Asia - Thailand - Singapore - Malaysia - Indonesia - Vietnam

324.7 116.0 24.1 29.6 119.0 36.0

329.6 106.0 20.0 33.6 129.0 41.0

204.0 14.0 22.4 30.1 92.5 45.0

51.5 19.0 14.1 14.4 -40.0 44.0

265.5 48.0 11.0 17.5 136.0 53.0

267.3 67.5 12.1 21.1 106.6 60.0

285.2 69.3 12.2 22.7 108.0 73.0

53.7 9.5 2.8 3.4 23.0 15.0

68.6 11.6 2.6 3.4 38.0 13.0

69.5 10.6 2.6 4.3 40.0 12.0

73.7 16.3 3.0 6.4 35.0 13.0

72.4 21.5 3.0 4.3 27.6 16.0

56.5 14.1 2.4 4.0 22.0 14.0

60.4 12.5 2.8 5.1 26.0 14.0

78.0 19.4 3.9 7.7 31.0 16.0

76.1 25.1 3.2 3.8 26.0 18.0

57.7 10.6 2.9 4.2 23.0 17.0

69.9 10.7 2.8 6.4 32.0 18.0

81.5 22.9 3.3 8.3 27.0 20.0

Saudi Arabia

193.1

184.9

199.0

208.4

199.4

221.0

228.0

63.1

51.1

46.1

39.1

65.5

55.5

49.5

50.5

63.5

60.5

45.5

58.5

Gulf States - UAE - Kuwait - Bahrain - Oman - Qatar

104.6 39.2 35.1 7.8 16.5 6.1

118.0 52.6 34.7 8.0 16.5 6.2

142.1 71.6 35.4 10.6 17.8 6.8

144.2 79.4 33.0 10.5 15.3 6.0

144.7 79.7 31.6 10.1 16.1 7.2

157.6 94.5 29.2 9.5 16.7 7.7

165.2 101.3 30.2 9.6 16.8 7.3

41.7 26.6 7.1 2.5 4.2 1.3

42.0 23.8 9.2 2.6 4.0 2.4

33.6 15.9 8.1 2.9 4.6 2.1

27.4 13.4 7.2 2.1 3.3 1.4

42.7 27.8 6.2 2.5 4.5 1.7

42.1 24.3 8.8 2.5 3.8 2.7

34.3 17.4 7.8 2.6 4.7 1.8

38.5 25.0 6.4 1.9 3.7 1.5

48.5 32.6 7.0 2.7 4.5 1.7

45.6 27.5 9.2 2.4 4.2 2.3

32.2 17.5 6.4 2.1 4.5 1.7

38.9 23.7 7.6 2.4 3.6 1.6

Egypt

67.0

75.7

97.6

104.4

124.8

119.7

120.0

31.5

27.7

37.7

27.9

30.7

29.7

32.5

26.8

31.0

33.6

31.0

24.4

Turkey

139.4

153.0

202.0

172.0

139.0

207.0

120.0

28.0

39.0

52.0

20.0

50.0

50.0

69.0

38.0

31.0

14.0

42.0

33.0

Americas - USA - Brazil - Mexico

399.7 314.7 54.0 31.0

431.7 331.7 59.0 41.0

469.0 362.0 58.0 49.0

547.4 428.4 64.0 55.0

586.3 459.7 57.0 69.6

536.7 396.4 60.0 80.3

549.5 409.5 54.0 86.0

Europe - Italy - France - Germany - UK - Coin demand

295.2 110.0 50.4 57.0 46.2 31.6

273.0 105.3 47.5 54.2 47.1 18.9

293.0 110.8 49.4 52.2 58.8 21.8

308.6 112.2 59.4 52.3 66.8 17.9

278.3 94.7 61.6 51.5 64.5 6.0

253.2 77.9 56.5 44.9 64.9 9.0

260.6 79.7 54.8 42.2 69.2 14.7

WGC Mkt Total

2864.5 2779.5 3053.6 2712.1 3282.3 3287.9 3235.1

Some data may have been revised since the last issue of Gold Demand Trends

134.1 130.9 141.6 179.7 113.6 98.0 118.4 129.7 10.5 14.5 13.0 19.0 10.0 18.4 10.2 31.0 55.1 16.7 14.1 10.6 11.9 1.8

59.1 18.0 15.2 11.0 13.9 1.0

75.9 29.0 13.6 12.9 18.8 1.6

88.2 31.0 18.7 17.0 19.9 1.6

787.7 805.7 880.4 808.5

110.1 112.2 130.3 184.0 88.1 77.0 103.7 127.5 10.0 14.0 15.0 21.0 12.0 21.2 11.6 35.5 51.7 13.7 13.2 9.8 13.6 1.4

56.1 16.4 13.8 9.9 14.8 1.2

66.1 23.1 12.1 10.4 17.2 3.3

79.2 24.7 17.4 14.8 19.3 3.0

791.1 789.6 810.4 896.7

N.B. Figures may not add due to rounding

116.7 115.0 127.1 190.7 93.5 80.5 103.5 132.0 10.0 13.0 11.0 20.0 13.2 21.5 12.6 38.7 50.7 13.7 12.8 9.7 13.7 0.8

55.4 16.6 13.1 9.6 15.9 0.2

76.2 23.6 11.9 9.9 18.0 12.8

78.4 25.8 17.0 13.0 21.6 1.0

841.4 764.7 752.1 877.1

WORLD GOLD COUNCIL

World Gold Council offices Headquarters United Kingdom 45 Pall Mall London SW1Y 5JG United Kingdom Tel. +44.(0)20.7930.5171 Fax. +44.(0)20.7839.6561

South Korea Website: www.gold.org E-mail [email protected]

Middle East

Americas

Regional Office & UAE

Regional Office & USA 444 Madison Avenue New York, NY 10022 Tel. +1 212.317.3800 Fax. +1 212.688.0410

Brazil Avenida Paulista 1499 Conj. 706 01311-928 Sao Paulo Tel. +55.11.3285.5628 Fax. +55.11.3285.0108

Mexico Consejo Mundial del Oro Av. Reforma No. 382, Despacho 701 Col. Juarez Delagacion Cuauhtemoc 06500 Mexico D.F. Tel/Fax +52.55.5514.5757 /7287 /2172

East Asia Regional Office & Singapore 6 Battery Road No. 24-02A Singapore 049909 Tel. +65.227.2802 Fax. +65.227.2798

China (Beijing Office) Room 1706, Scitech Tower, 22 Jian Guo Men Wai Da Jie, Beijing 100 004 Tel. +861.0.6515.8811 Fax. +861.0.6522.7587

China (Shanghai office)

19th Floor, Young Poong Bldg. 33, Seorin-dong, Jongro-ku Seoul 110 752 Tel. +82.2.399.5377 Fax. +82.2.399.5372

Indonesia Tamara Center Level 6, No 602 Jl. Jenderal Sudirman Kav 24 Jakarta 12920 Tel. +62.21.520.3693/94/95 Fax. +62.21.520.3699

Malaysia

Dubai World Trade Centre P.O. Box 9209 – Level 28 Dubai United Arab Emirates Tel. +971.4.3314.500 Fax. +971.4.3315.514 E-mail: [email protected]

Turkey Mim Kemal Öke Caddesi Dost Apt. 8/4 Nisantasi, 80200 Istanbul Tel. +90.212.225.1960/22 Fax. +90.212.225.1913

Menara Dion No. 12-05 27 Jalan Sultan Ismail 50250 Kuala Lumpur Tel. +60.3.381.2881 Fax. +60.3.381.2880

India

Thailand

101, Maker Chamber VI 10th fl., 220, Nariman Point Mumbai 400 021 Tel. +91.22.230.1323 Fax. +91.22.230.1324

14th Floor, Thaniya Plaza, 52 Silom Road, Bangrak Bangkok 10500 Tel. +662.231.2486/7 Fax. +662.231.2489

Regional Office & Mumbai

India (Chennai Office)

Room 808, 205 Tun Hwa N. Road Taipei Tel. +886.2251.47.400 Fax +886.2251.47.466

B-2 Alexander Square 34/35 Sardar Patel Road Guindy Chennai 600 032 Tel. +91.44.230.0083/0084 Fax. +91.44.230.0086

Vietnam

India (New Delhi Office)

Taiwan

No 6 Phung Khac Khoan St, Room G7 District 1, Ho Chi Minh City Tel. + 848 8256 653/654 Fax + 848 8221 314

Unit 3504, 35th Floor, Plaza 66 1266 Nan Jing Road (West) Shanghai, PRC 200040 Tel. +86.21.6289.2111/2555/2777 Fax. +86.21.6289.3222

Japan/Korea

Hong Kong

Regional Office & Japan

Unit 603, Low Block, Grand Millennium Plaza, 181 Queen’s Road Central Hong Kong Tel. +852.2521.0241 Fax. +852.2810.6038

Shin Aoyama Building / W21F 1-1-1 Minami-Aoyama Minato-ku, Tokyo 107 0062 Tel. +81.3.3402.4811 Fax. +81.3.3423.3803

47, Basant Lok Vasant Vihar New Delhi 110 057 Tel. +91.11.614.9394/95 Fax. +91.11.614.8281

India (Kolkatta Office) World Trade Center Calcutta Somnath Building, 4th Floor 8/1A, Sir William Jones Sarani Kolkatta 700 016 Tel. +91.33.249.4318 Fax. +91.33.292.2793

Gold Demand Trends is compiled and produced in-house by the World Gold Council and distributed worldwide through Council offices