| Filed Pursuant To Rule 433 Registration No. 333-167132 March 2, 2012 |
Filed Pursuant To Rule 433
Registration No. 333-167132
February 28, 2012
Gold: A Unique Asset Class
The Strategic Case for Portfolio Construction
Agenda
Rediscovering the role of gold within an investment portfolio
– “True” portfolio diversification: low and negative correlation
– Risk management: liquidity, moderate volatility, no credit risk and tail risk protection
– Capital preservation: inflation and currency hedge
Fundamental drivers for the gold market
– Supply and Demand
– Structural changes – India, China and central banks
Gold bull market in perspective Ways to access the market
p. 2
Rediscovering the Role of Gold within an Investment Portfolio
p. 3
Why should Gold Receive a Strategic Allocation?
“True” portfolio diversification
– Long-run lack of correlation to most assets
– Negative correlation to equities during negative economic environments
Risk management
– liquidity, moderate volatility, no credit risk and tail risk protection
Capital preservation
– Inflation/deflation hedge
– Currency hedge
p. 4
Gold Has Low Correlation Relative To Most Assets in The Long -Run…
(US$ Correlation ); January of weekly 1987 – returnsJuly 2010* between gold (US$ /oz) and selected asset classes
JPM 3-month T-bill Index JPM US Treasury Index BarCap Global Tsy Agg ex US
BarCap US Credit BarCap US High Yield JPM EM sovereign debt MSCI US
MSCI EAFE MSCI EM S&P GSCI® Gold (US$/oz)
-1.0 -0.8 -0.6 -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0 %
*Except for MSCI EM index (December 1987 – July 2010) and JP Morgan EM sovereign debt index (December1990 – July 2010) due to data availability.
Source: Barclays Capital, Bloomberg, JP Morgan, LBMA, World Gold Council p. 5
…And It Is Negatively Correlated in Tail Risk Events
The “conditional” correlation between gold and other assets aids in risk management
Weekly -return correlation between equities, gold and commodities when equities move by more than 2 (Standard deviation) January 1987 – June 2010
S&P 500® return more than +2s
S&P 500 return less than—2s
-0.50 -0.25 0.00 0.25 0.50 0.75 1.00
Correlation between S&P 500 and gold (US$/oz) Correlation between S&P 500 and S&P GSCI
Source: LBMA, Bloomberg, World Gold Council p. 6
Gold’s Volatility Tends To Be Lower Than Equity and Commodity Indices …
Annualized volatility (%) of weekly returns for selected asset classes; January 1987 – July 2010*
JPM 3M T-Bill Index BarCap US Treasury Agg BarCap US Credit Index BarCap US High Yield BarCap Global Tsy Agg ex US JPM EM sovereign debt Gold (US$ /oz) MSCI US
MSCI EAFE S&P GSCI
MSCI EM
| 5 |
|
10 15 20 25 % |
*Except for MSCI EM Index (December 1987 – July 2010) and JP Morgan EM Sovereign Debt. Index (December 1990 – July 2010) due to data availablility.
Source: Barclays Capital, LBMA, MSCI Barra, Standard & Poor’s, World Gold Council p. 7
…Especially in Periods of High Market Volatility
90-day annualized volatility ratio of the S&P 500 and Gold (US$ /oz)
Volatility Ratio
3.0
2.5
2.0
ASPX > AGold 1.5 1.0 0.5 ASPX < AGold
0.0
2002 2003 2004 2005 2006 2007 2008 2010 2011
Source: Bloomberg, World Gold Council. p. 8
Gold’s Volatility is Lower on the Downside Than on the Upside
Annualized volatility of positive and negative weekly returns for gold (US$/oz) and S&P 500 (January 1987 – July 2010)
%
25 20 15 10 5
0
Negative returns Positive returns
Gold ($US/oz) S&P 500 Index
Source: Bloomberg, LBMA, World Gold Council p. 9
Gold Reduces Portfolio VaR and Increases Risk -adjusted Returns
Increases in information ratio resulting from adding gold to portfolio
%
3.00 2.50 2.00 1.50 1.00 0.50
0.00
Conservative (3.7%) Standard (3.6%)
Case gold %
Standard portfolio is constrained to have 55% equities, 25% fixed income and at most 5% cash. Conservative portfolio is constrained to have 30% equities, 50% fixed income and at most 10% cash. These portfolios contain the hedge fund composite as a proxy for a hedge fund allocation.
Sources: World Gold Council p. 10
Gold Reduces Portfolio VaR and Increases Risk -adjusted Returns (Continued)
VaR reductions from adding gold to a portfolio with alternative assets
‘000s
20 18 16 14 12 10 8 6 4 2
0
Conservative (3.9%) Standard (4.4%) Case gold %
Standard portfolio is constrained to have 55% equities, 25% fixed income and at most 5% cash. Conservative portfolio is constrained to have 30% equities, 50% fixed income and at most 10% cash. These portfolios contain the hedge fund composite as a proxy for a hedge fund allocation.
Sources: World Gold Council p. 11
In Practice, it Reduces Losses when Tail Risk Events do Occur
Outperformance of a US$ 10M standard portfolio containing gold during selected crises
US$ ‘000s
200 180 160 140 120 100 80 60 40 20 0 -20
Black LTCM crisis Dot-com September 2002 Great Sov’n debt monday bubble 11th recession recession crisis
Standard portfolio defined as one having 55% equities, 25% fixed income and at most 5% cash with the remaining weights optimally Allocated in alternative assets including gold, commodities, fund of HFs, private equity and real state. Gold’s allocation when included
Id 4.4% . Black Monday: 9/87-11/87, LTCM: 8/98. Dot-com: 3/00-3/01, Sept. 11th: 9/01, 2002 recession: 3/02-7/02, Great recession: 10/07-2/09,
Sov’n debt crisis I: 1/10-5/10. p. 12 Source: Barclays Capital, Bloomberg, Hedge Fund Research, JP Morgan, Thomson Reuters, World Gold Council
Gold Acts As a Currency Hedge and in Particular Is Negatively Correlated to the US dollar
Gold versus US trade -weighted dollar index and Euro basket
US$/oz Index level
2000 140
1800 120 1600 1400 100 1200 80 1000 60 800
600 40 400 200 20
0 0 1999 2000 2001 2001 2002 2002 2003 2003 2004 2005 2005 2006 2006 2007 2008 2008 2009 2009 2010 2010 2011 Gold spot price (US$/oz, LHS) US trade-weighted dollar index (RHS) BOE effective FX Euro
Sources: Bloomberg, World Gold Council. p. 13
Performance of Gold under Different Inflation Scenarios
Real returns for gold under different inflation environments
%
18 16 14 12 10 8 6 4 2
0
Low (<2%) Moderate (2%—5%) High (>5%)
US CPI YoY
Sources: Bloomberg, World Gold Council. p. 14
The Gold Market is Large Even When Compared To Traditional Markets
Size of various markets
US$ bn
10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0
US Gold US German UK Gilts Exxon Apple Oil* Treasury Agency Bunds Mobil debt debt
*Based on open interest in oil figures contracts across major oil futures exchanges.
Source: BIS, Bloomberg, Thomson Reuters, GFMS, SIFMA p. 15
Gold Is Also a Highly Liquid Asset
Average daily turnover*
%
9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0
0.0
Gold US Treasuries Japanese US agencies German UK Gilts gov’t bonds Bunds
*Daily turnover is calculated as average daily volume divided by total outstanding value. In the case for gold, total outstanding is calculated using private and public bullion holdings.
Source: German Finance Agency, Japanese MOF, SIFMA, Thomson Reuters GFMS, UK DMO, World Gold Council p. 16
Gold Market Fundamentals
Drivers Behind Gold’s Bull Run
p. 17
Physical above Ground Stock Breakdown
67ft
Total above ground stocks
= 166,600 tonnes (US$ 8.1 trillion) 1
| * |
|
| * |
|
Jewellery
67ft Official sector 84,200t 29,000t 50.5% 17.4%
| 1 |
|
Based on end-2010 volume and Q2 2011 average gold price. |
| 2 |
|
Includes “other fabrication” (11.2%) and “unaccounted for” (2.2%) |
Source: Thomson Reuters GFMS, US Geological Survey, World Gold Council p. 18
Diversification of Supply and Demand
5-year average annual demand (Q4’06-Q3’11) 5-year average annual supply (Q4’06 Q3’11)—Annual average: 3,935 t Annual average: 3,935 t
Jewelry (2,139 t) 54%
Mine production** (2,351 t) 60% Investment* (1,259 t) 32% Recycled gold (1,414 t) 36% Technology (454 t) 12% Official Sector (171 t) 4%
| * |
|
Includes identifiable and non- identifiable investment |
** Net of producer hedging t: tonnes t: tonnes Source: GFMS
p. 19
Central Banks Are Now a Net Source of Demand
1-year annual demand (Q4’10 –—Q3’11) 1-year annual supply (Q4’10—Q3’11) Total: 4,400 t Total: 4,400 t
Jewelry (2,033 t) 46%
Investment* (1,619 t) 37% Mine production** (2,753 t) 63% Technology (468 t) 11% Recycled gold (1,647 t) 37% Official sector (349 t) 8%
** Net of producer hedging * Includes identifiable and non- identifiable—investment t: tonnes t: tonnes Source: GFMS
p. 20
Where Is Demand for Gold Coming from?
Europe and Russia
North 16% Middle America East and Turkey
13% 9%
Greater China
19%
India
26%
Others
19%
Source: Thomson Reuters GFMS, World Gold Council
Note: Based on 2010 figures. It includes jewelry, technology, bars, coins and ETF demand. It excludes over-the-counter transactions and central bank purchases. p. 21
The Geographical Landscape of Demand Has Changed Considerably over the Last 40 Years
Distribution of gold demand by region
1970 1980 1990 2000 2010 Gold Price (US$/oz) 213 1549 653 357 1449
Gold Price Volatility 0.07 0.52 0.18 0.14 0.16 Gold Demand by Region Europe 497.3 541.3 833.9 812.6 621.6 Middle East 109.3 70.5 443.1 714.5 380.6
North America 192.7 413.8 353.4 302.6 452.6 Latin America 94.3 63.3 76.1 119.6 62.9 Indian Sub cont. 265 50.7 293.3 895.3 1101.8
East Asia 242.7 132.1 954.8 1026 1198.4 Africa 54.9 127.9 56.1 38.4 45.3 Oceanic 7.9 11.3 17.1 11.5 19.8 CIS 0 0 121.7 43 84.5 Other World 0 0 15.9 47.1 30.8 World 1464.1 1410.9 3165.4 4010.6 3998.1
Gold price volatility = average daily volatility of London pm fix for reference year; CIS = Commonwealth of Independent States p. 22 Source: Thomson Reuters GFMS, LBMA, Bloomberg, World Gold Council
China and India Play an Increasingly Important Role in Global Demand
Indian and Chinese consumer demand 1 as a share of total consumer
% US$/oz
60 2000
1800 50 1600
1400 40 1200
30 1000
800 20 600
400 10 200
0 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20112
Share of global (%, lhs) London PM fix (US$/oz, rhs)3
1. Consumer demand includes jewellery, bar & coin, technology and ETFs
2. 2011 is computed by annualizing Q1, Q2 and Q3 data
3. Annual ave. price to 2010, YTD 2011 p. 23 Source: Thomson Reuters Datastream. Thomson Reuters GFMS, World Gold Council
2011 Is Projected To Have the Highest Investment Demand or Record
Global investment demand remains strong*
1600
1400
?
1200
1000
Tons 800 600
400
200
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Total Bar and Coin Demand ETFs & Similar Products
*2011 Investment demand is calculated by annualizing 3 quarters of data
Sources: Thompson Reuters GFMS, World Gold Council p. 24
Central Banks Have Turned Net Buyers of Gold again
Net official sector transactions
600
400
What is now a 200 source of demand
0
-200 …used to be a -400 source of supply
-600
-800
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011*
*2011: Central bank purchases are calculated by summing 3 quarters of available data
Source: Thomson Reuters GFMS, World Gold Council p. 25
… As Emerging Market Central Banks Continue To Be Buyers …
Large gold acquisitions or announcements since January 2009
500
454 450
400
350 320 300
250
200 200
150
99
100 68
50 25 21 0 China Russia India Mexico Thailand South Bolivia Korea
IMF International Financial Statistics, World Gold Council p. 26
…As They Need To Catch Up with Their Western Peers
Central bank gold holdings in tonnes
UK Switzerland
Netherlands Total gold holdings: 18,384t France % of total reserves: 58% Italy Germany US
Thailand Indonesia
Taiwan Gold reserves at 2.6%: 3,041t Gold reserves at 10%: 11,572t S.Korea Japan India China
0 2,000 4,000 6,000 8,000 10,000 Tonnes
Source: IMF IFS, World Gold Council p. 27
Gold Bull Market in Perspective
p. 28
A Measured Appreciation, Not a Parabolic Rise
Gold price 1970 –1980 versus 2000 –2010
Index level
2500 2000 1500 1000 500
0
1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 1970–1982 (Jan 1,1970=100) 1999–2011 (Jan 1, 2000=100)
Source: Bloomberg, LBMA, World Gold Council p. 29
Global Allocations To Gold Remain Small
Total above ground stocks of gold in Size of financial markets (US$ 146 trillion)* private hands = 31,100 tonnes by end 2010 Gold holdings as a % of total global assets were no more than 1% by end 2010
Money markets (9%) Bonds (49%) Equities (37%) Alternatives (4%) Gold (1%)
*Figures are estimated as of December 2010 using: the global market capitalization of all publicly traded stocks and REIT; the total value of outstanding bonds & money market instruments; total open interest on commodity futures plus above ground stocks of metals in private hands; the assets under management of private equity and hedge funds; and private holdings of gold bullion. Central bank holdings of gold and bonds were excluded.
Source: BIS, Hedge Fund Research, J.P. Morgan, Preqin, World Federation of Exchanges, World Gold Council
p. 30
Many Options To Suit Needs and Preferences
Coins and bars
– Bullion versus numismatic
– Economy of scale
Gold accounts — available from bullion banks
– Allocated: specific bars identified by number, hallmark and weight
– Unallocated: share in a pool of gold; can be lent out
Mining equities
– A complement to bullion
Over -the-counter products ETFs
– Fully-backed by bullion
– Leveraged
Gold futures and options
– Exchanges around the world — COMEX being the largest for gold
p. 31
Disclosure
FOR INVESTMENT PROFESSIONAL USE ONLY. NOT FOR PUBLIC USE
IMPORTANT RISK INFORMATION
As with in all the investments, future or that investing gold will in continue gold entails to exhibit risk. There low to can negative be no correlation assurance with that other gold will asset maintain classes its . You long -could term value loose in money terms by of investing purchasing in gold.
ETF trade like stocks, fluctuate in market value and may trade at prices above or below the ETFs’ net asset value. Brokerage commissions and ETF expenses will reduce returns.
Although shares of GLD have historically been readily tradable on securities exchanges, there can be no assurance that an active trading market will be maintained.
Diversification does not ensure profit or guarantee against loss.
Commodities and commodity-index linked securities may be affected by changes in overall market movements, changes in interest rates, and other factors such as weather, disease, embargoes, or political and regulatory developments, as well as trading activity of speculators and arbitrageurs in the underlying commodities.
This presentation is provided solely for general information and educational purposes. It is not, and should not be construed as, an offer to buy or sell, or as a solicitation of an offer to buy or sell, gold, any gold related products or any other products, securities or investments. It does not, and should not be construed as acting to, sponsor, advocate, endorse or promote gold, any gold related products or any other products, securities or investments.
This presentation does not purport to make any recommendations or provide any investment or other advice with respect to the purchase, sale or other disposition of gold, any gold related products or any other products, securities or investments, including without limitation, any advice to the effect that any gold related transaction is appropriate for any investment objective or financial situation of a prospective investor. A decision to invest in gold, any gold related products or any other products, securities or investments should not be made in reliance on any of the statements in this presentation. Before making any investment decision, prospective investors should seek advice from their financial advisers, take into account their individual financial needs and circumstances and carefully consider the risks associated with such investment decision.
While the accuracy of any information communicated herewith has been checked, neither the World Gold Council nor any of its affiliates can guarantee such accuracy. In no event will the World Gold Council or any of its affiliates be liable for any decision made or action taken in reliance on the information in this presentation or for any consequential, special, punitive, incidental, indirect or similar damages arising from, related to or connected with this presentation even if notified of the possibility of such damages.
Expressions of opinion are those of the author and are subject to change without notice.
p. 32
Disclosure (Continued)
Important Information Relating to SPDR Gold Trust:
The SPDR Gold Trust (“GLD”) has filed a registration statement (including a prospectus) with the Securities and Exchange Commission (“SEC”) for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents GLD has filed with the SEC for more complete information about GLD and this offering. You may get these documents for free by visiting EDGAR on the SEC website at www.sec.gov or by visiting www.spdrgoldshares.com. Alternatively, the Trust or any authorized participant will arrange to send you the prospectus if you request it by calling 1-866-320-4053. GLD is not an investment company registered under the Investment Company Act of 1940 (the “1940 Act”) and is not subject to regulation under the Commodity Exchange Act of 1936 (the “CEA”). As a result, shareholders of the Trust do not have the protections associated with ownership of shares in an investment company registered under the 1940 Act or the protections afforded by the CEA.
GLD shares trade like stocks, are subject to investment risk and will fluctuate in market value. The value of GLD shares relates directly to the value of the gold held by GLD (less its expenses), and fluctuations in the price of gold could materially and adversely affect an investment in the shares. The price received upon he sale of the shares, which trade at market price, may be more or less than the value of the gold represented by them. GLD does not generate any income, and as GLD regularly sells gold to pay for its ongoing expenses, the amount of gold represented by each Share will decline over time. Investing involves risk, and you could lose money on an investment in GLD. Please see the GLD prospectus for a detailed discussion of the risks of investing in GLD shares.
The MSCI Emerging Markets Index, MSCI EAFE Index and the MSCI US are trademarks of Morgan Stanley Capital International.
S&P GSCI® is a trademark of Standard & Poor’s Financial Services, LLC. and has been licensed for use by Goldman, Sachs & Co.
All information provided herein regarding JPMorgan Index products (referred to herein as “Index” or “Indices”), including without limitation, the levels of the Indices, is provided for informational purposes only and nothing herein constitutes, or forms part of, an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction, or a valuation or price for any product referencing the Indices. Nor should anything herein be construed as a recommendation to adopt any investment strategy or as legal, tax of accounting advice.
“SPDR” is a registered trademark of Standard & Poor’s Financial Services LLC (“S&P”) and has been licensed for use by State Street Corporation. STANDARD & POOR’S, S&P and S&P 500 are registered trademarks of Standard & Poor’s Financial Services LLC. No financial product offered by State Street Corporation or its affiliates is sponsored, endorsed, sold or promoted by S&P or its affiliates, and S&P and its affiliates make no representation, warranty or condition regarding the advisability of buying, selling or holding units/shares in such products. Further limitations that could affect investors’ rights may be found in GLD’s prospectus.
For more information: State Street Global Markets, LLC, One Lincoln Street, Boston, MA, 02111866.320.4053 www.spdrgoldshares.com
p. 33
Staley Capital International
SPDR® GOLD TRUST has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents the issuer has filed with the SEC for more complete information about the Trust and this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, the Trust or any Authorized Participant will arrange to send you the prospectus if you request it by calling toll free at 1-866-320-4053 or contacting State Street Global Markets, LLC, One Lincoln Street, Attn: SPDR® Gold Shares, 30th Floor, Boston, MA 02111.