Decrease in ETF Demand and Increase in Jewelry Demand Stabilize Gold Prices: A Wall Street Transcript Interview with Kristoffer Inton, an Equity Analyst for Morningstar

Wall Street Transcript

67 WALL STREET, New York - December 27, 2013 - The Wall Street Transcript has just published its Gold and Precious Metals Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Precious Metals - Lower Gold Price Environment - Precious Metals Exploration and Production - Increasing Capital Expenditures - Emerging Markets Silver Consumption - Mining Safety and Environmental Concerns - Gold Production Cost Structures - Gold Price Stabilization

Companies include: Barrick Gold Corporation (ABX), Newmont Mining Corp. (NEM), Eldorado Gold Corp. (EGO), Goldcorp Inc. (GG) and many others.

In the following excerpt from the Gold and Precious Metals Report, an experienced Gold and Precious Metals mining company equity analyst discusses the outlook for the sector for investors:

TWST: It looks like gold has had a pretty tough go so far this year. What's going on?

Mr. Inton: After what was over a decade-long bull run, in April you saw the price decline dramatically. At the start of this year, the price was just under $1,700 an ounce, and in April, that rapidly declined to below $1,400 an ounce, which was a level that we hadn't really seen since 2011. There are a number of things that may have driven the decline. First, a number of indicators signaled the economy was improving. Second, the stock market continued to perform well and provide investors meaningful returns. Third, in May the Federal Reserve began talk of tapering its quantitative easing programs.

In all, this seems to have changed the attractiveness of gold for investors. Once prices started falling, investors, particularly those in exchange-traded funds, started exiting the market, capturing gains from the run-up in gold prices and allocating their money elsewhere. At the end of June, gold prices fell below $1,200 an ounce, later bouncing back to above $1,300 an ounce in July. Gold's current price is just under $1,300 an ounce.

It's interesting to note that with the massive decrease in exchange-traded fund demand, there was a meaningful increase in jewelry demand, which is typically the biggest source of demand for gold anyway. Jewelry demand picked up significantly, driven by consumers in China and India that saw lower gold prices as an opportunity to buy gold at a good price, partially offsetting the downward pressure on gold and preventing the price from staying below $1,200 an ounce.

TWST: So the consumers in Asian markets are really price-sensitive, I guess is the conclusion.

Mr. Inton: The prices encouraged existing consumer interest in something they already wanted to purchase. Gold has always had a place within their cultures, often given as gifts at weddings and other events.

TWST: What's going on, as the prices come down, with the ETFs that have become such a factor in this marketplace?

Mr. Inton: In the first half of this year, there was a significant exit of investors from ETFs, resulting in negative demand.

TWST: So they're really liquidating then.

Mr. Inton: Right.

TWST: And they continued with the price kind of stuck here at $1,250, plus or minus a bit.

Mr. Inton: In the third quarter, the ETFs continued to liquidate gold holdings as investors exited, albeit at a slower pace than earlier in the year.

TWST: I guess the question then is, where do we go from here?

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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