Filed Pursuant To Rule 433
Registration No. 333-158105
August 19, 2009
Gold demand slides from start of year as optimism perks up
August 19, 2009
Investment demand for gold has increased since a year ago but tapered off from the start of the
year, pointing to healthier times for the overall economy, said the World Gold Council Wednesday in
a report on second-quarter gold trends.
Investment demand rose 46%, to 242 metric tons in the second quarter of 2009 from 152 metric tons
in the year-ago period, according to the report. But demand fell 63% from 600 metric tons in the
first quarter of this year.
That decline in gold purchases coincided with investors perceptions that the financial system was
stabilizing, reducing the attraction of the precious metal that frequently acts as a safe place to
park cash in turbulent times. .
As volatile economic conditions begin to calm, gold may keep current investors but have a hard time
attracting new ones as appetites for risk increase, said George Milling-Stanley, the World Gold
Councils managing director.
There are some signs, theyre a little patchy and not in every country, that the beginning of a
recovery in the world economy is coming, he said. Those signs have hurt investment demand.
Still, Stanley says: That will be good for jewelry demand, which has been very depressed in the
last three quarters.
Total demand for gold dropped 9% or $1.4 million in the three months ending in June from a
year ago, dragged down by a 22% retreat in jewelry consumption. This is the first time in more than
two decades that investment demand has outpaced jewelry demand, Milling-Stanley said.
In times of good economic health, people tend to buy jewelry. In volatile times, people tend to buy
gold as an investment.
The report shows investors are turning away from exchange-traded funds, which track day-to-day
prices of gold. Demand for ETFs rose sharply in the first quarter of this fiscal year compared to
the same quarter last year as questions over the strength of some of the biggest U.S. banks sparked
a flight out of U.S. stocks and a move into gold, the U.S. dollar, and other safe-haven assets.
Since the end of March, however, investment in gold has retreated as confidence in a recovery
I would not be surprised to see investors pull away from ETFs, said Mark Hansen, director of
price risk management at CPM Group, a precious metals consulting firm. Its probably unlikely to
see the pace of accumulation of precious metals we saw earlier this year. The reasons to own gold
are becoming less clear.
The high volume of ETF investments were driven by the downfall of financial firms such as Lehman
Brothers Holdings Inc. (LEHMQ, US) in 2008, Hansen said.
Second-quarter ETF investment increased 56% compared to the year-ago period, but has dropped 86%
since the first quarter. ETF demand rose 84% in the first quarter of 2009 compared to the year-ago
Milling-Stanley said he doesnt think the drop in ETF investment will encourage investors to sell
gold which would drive prices down unless they used gold as a parking lot for investment
funds during earlier financial volatility.
If that was the case, they might consider selling. But most of the investment weve seen is
long-term investment. Its investors looking for that extra level of diversification in their
portfolio, he said.
But Hansen from CPM group said he foresees ETF investment and overall gold demand dropping off even
more because there hasnt been a lot of adverse news lately.
Holdings in SPDR Gold Trust (GLD, US), the biggest gold ETF, have been decreasing lately. Last
Friday they stood at 1,065.49 metric tons, down nearly 70 metric tons from the record 1,134 metric
tons hit in early June.
The Commodity Futures Trading Commission recently announced it is considering tighter regulation on
ETFs because of the suspicion that their popularity has led to wild swings in the prices of
commodities such as oil.
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