World Gold Council Releases Benchmark Study Measuring Retail Gold Investment; First to Highlight Role of the Private Investor.

Business Editors

TORONTO--(BUSINESS WIRE)--Nov. 15, 2001

A new study published by the World Gold Council today, reports that retail investors around the world purchased a net 2,227 tonnes of gold between the years 1993-2000.

The study, `Retail Gold Investment and Private Investor Stocks - A Review' - the first of its kind, examines the scope and growth potential of the retail gold investment market. Commissioned by the World Gold Council, the study was undertaken by the international consultancy firm, GFMS (Gold Fields Mineral Services).

Presenting details of the report at a specially convened conference organized by GFMS and The Silver Institute in Toronto, Albert Cheng, the World Gold Council's Head of Retail Investment said that too often in recent years people had been led to conclude there had been little interest in gold as an investment medium. But that, he said, was largely because they had focused upon the markets of Europe and North America. "Meanwhile, individuals throughout the rest of the world had managed to hoard over 2,100 tonnes of bullion during the 1993-2000 period with the bulk of this hoarding occurring in Asia, with strong demand from retail investors across a diverse group of countries that included Japan, India, Vietnam and China," he said.

Explaining why investment was not strong in Europe and North America, the report cites several factors including lack of promotion, a reduction in political tensions, low inflation and the boom in the value of other financial assets, especially equities. "Given this litany of undermining influences, it is reassuring to see that gold investment in these regions had stayed, on balanced and positive during these years. More importantly, most of these factors have lessened or been reversed. That means the ground has been set for a potential resurgence in gold investment," Cheng said.

He said that the study had shown that the actual level of net retail investment in 1993-2000 was quite stable, holding in a fairly narrow range of 240-390 tonnes a year, excluding a 117 tonnes anomaly in 2000. "This underlying stability was all the more remarkable given that the period covered the Asian financial crisis and the "Y2K" scares," he said.

Cheng observed that the report strikes a cautionary note, saying that people should not overstate the relative importance of retail investment to overall gold demand - in that it only accounted for around 7% of the total in 1993-2000. The study also points out that retail gold investment - whose annual value did not reach $5 billion in 1993-2000 is but a fraction of the size of other investments.

"However," said Mr. Cheng, "one should consider the exciting potential and opportunities that this situation affords investors and the market. Consider only a small shift in private investment portfolios will have a dramatic impact on gold demand and the price."

He told the conference that there were many reasons to consider gold retail investment in a very positive light. "Many people kept looking at the bearish implications of central bank selling. But consider, during the 1993-2000 period in question, official sector sales were only 20% higher than retail investment," he said.

He noted that an additional section to the report concerns an area never fully researched before, an estimation of total private investor stocks and their distribution by country. This shows how private investor stocks of bullion bars and coins have increased to reach a total estimated at 22,000 tonnes at the end of 2000. The majority of this privately-held bullion is located in a handful of countries, in particular, France, the United States, Japan, Switzerland, Germany, India, Turkey and Taiwan.

"The report is timely," said Mr. Cheng. "It is, to our knowledge, the first comprehensive study to measure the retail sector's importance to the gold market. It will be vital to anyone who mines, buys or sells gold and will certainly be of benefit to the trade in planning their future marketing activities."

"The more uncertain world since the terrorist attacks on the United States on September 11 could herald further buy-side interest in the years ahead. Hopefully, the report will help create a better understanding of the retail investment market and should help those seeking to exploit this potential for growth."