SG CIB OIL MARKET OULOOK

1
Key drivers of the gold price
Milan, 3 May 2007
Stephen Briggs 44 20 7762 5384 stephen.briggs_at_sgci
b.com
2
Disclaimer
3
It is arguable that the gold bull market truly
started only in mid-2005. Corrections have
sometimes been very sharp
4
Inverse relationship with the US dollar has been
far from perfect but it has probably been the
single most important driver since 2001-02
5
Gold jewellery demand finally returned to being
very price sensitive last year
6
Tonnage may have been at its lowest since 1990
7
although it soared to record levels in value
terms
8
Contrary to widespread perceptions, there has
been no real Chindia effect here
9
Gold scrap supply responded strongly to higher
prices in 2006
10
Mine production has been distinctly sluggish in
recent years, many doubt that it will pick up
significantly in the near term
11
With the global hedge book now well under half
its high point, de-hedging by producers has
probably peaked
12
More positively, central bank gold sales will
very probably remain much lower than in 2005
13
Bar hoarding dipped in 2006 in reaction to higher
prices but ETF buying was far from deterred
14
Yet the paper market remains the big swing factor
15
Your partner in
Euro Capital Markets
Derivatives
Structured Finance