Gold Wars a Golden Renaissance Presentation September 2010

8/8/2019 Gold Wars a Golden Renaissance Presentation September 2010

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A Tribute to Ferdinand Lips (1931 2005)

A Golden Renaissance


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All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed.The presentation is for information purposes only and is not a solicitation to invest.Unauthorized reproduction or distribution is strictly prohibited.

The Mining Journal Investor SeminarsDate: 07/09/10

What are Gold Wars?

Gold Wars are between governments and gold. This ultimately

restricts the constitutional rights of the people.

Gold is the vital barometer of the health of a nations currency.The suppression of gold by government allows them to maskthe mismanagement of their currency.


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DOLLAR PURCHASING POWER PARITY BASIS

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

Jan-50

Jan-53

Jan-56

Jan-59

Jan-62

Jan-65

Jan-68

Jan-71

Jan-74

Jan-77

Jan-80

Jan-83

Jan-86

Jan-89

Jan-92

Jan-95

Jan-98

Jan-01

Jan-04

Jan-07

Jan-10



Monetary PollutionThe dollars purchasing power has been trashed in the post-war period. One dollar can buyyou less than one ninth of what it could have in 1950.


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0%

-200%

-400%

-600%

-800%

-1000%

-1200%

-1400%

-1600%

-1800%

Sources: EU Commission, Eurostat, CBO, IMF, Morgan Stanley Research

Ita

ly

Germa

ny

France

Portug

al

US

A

U

K

Spa

in

Ireland

Gree

ce

400%

200%

Cost of ageing

Structural deficit

Initial debt level

TOTAL DEBT & LIABILITIES AS % OF GDP



Global debt MountainTodays system of paper money is still very young. It depends solely on the belief that thedebts upon which it is based will be repaid someday.


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Ferdinand liPs (1931 - 2005)

Gold Ferdi, the Pope of Gold, Karl Otto Pohl, former Head of the Bundesbank

Hes back but arguably he never left us as his lifes work lives on through the Lips Institutewww.lips-institute.ch


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Gold Wars

Gold Wars are between governments and gold.

This ultimately restricts the constitutional rights of the people.


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Gold Wars oF the 20th& 21st Centuries

1.The Classical Gold Standard is abandoned in 1914

2.The Genoa Gold Standard 1922

3.Great Depression of 1930s Exchange Stabilization Fund, Gold Reserve Act 1934

4.Bretton Woods 1944 Gold Exchange Standard

5.Collapse of the London Gold Pool 1960s and 70s

6.Stagation of 1970s and US Treasury and IMF Gold Sales

7.The Failure of the Second London Gold Pool of 1990s and 2000s?


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the london Gold Pool 1960 68

$35.50

$36

$35.25

$35.20

$35.15

$35.10

$35.05

$35.00

$34.95

$34.90

$34.85

21,000

Source: Financial Graph & Art

19,000

17,000

15,000

13,000

11,000

9,000

1968

1966

1964

1962

1960

1958

1956

1954

The Gold Price was fixed at $35 a troy ounce

$37

$38

London Goldmarket reopened

London Gold Pool established

Berlin Crisis

The London Gold Pool is dismantled

Cuban Missile Crisis

Six day war

Gulf of Tonkin Incident

De Gaulles gold speech

First official US combat troopsarrive in Vietnam

France leaves the Gold Pool

British pound devalued 14%

Tet Offensive

October 1960 gold crisis begins

as gold breaks $35.20

Suez Canal nationalised

Suez Crisis France,Israel and Britain invade Egypt

1954 1968 Morning Fix, Left Axis,London Gold Market

US Gold Reserves

Yearly Tonnes, Right Axis


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the tWo-tier Gold Market 1968

$34

1968

$36

$38Gold Pool dismantled,

price spikes up

1967-1971 Morning Fix - London Gold Market

South African goldboycott begins

South Africa sells goldfor foreign currency

Nixon endsgold convertability

Run on US dollar,deutche markallowed to float

$40

$42

$44

$46

1969 1970 1971

When the Gold Price was fixed at $35

1

4

3

5

6

2

South Africa acceptsUS compromise. London goldhits lowest level in history.

Source: Financial Graph & Art


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Gold is undervalued

Price is the level at which one exchanges; value is whether

it is worth it. Nominal new price highs in gold do not signalan overvalued market.


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GOLD IN CURRENT DOLLARS

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Mar-70

Mar-72

Mar-74

Mar-76

Mar-78

Mar-80

Mar-82

Mar-84

Mar-86

Mar-88

Mar-90

Mar-92

Mar-94

Mar-96

Mar-98

Mar-00

Mar-02

Mar-04

Mar-06

Mar-08

Mar-10



Gold in real dollars is stillvery undervalued

Gold in current dollar terms is still 30% off the high it reached in 1980. Re-basing,hedonistic adjustments, etc have lowered the CPI levels and with it the true value of goldadjusted for ination.


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Gold is undervaluedin CurrenCy terMs

The ofcial gold reserve in banks throughout 1930s to 1950s was 40% but in reality was muchhigher. Even to achieve this backing, assuming current gold supply, the price of gold will haveto rise by three to four times.

191

5

192

0

192

5

193

0

193

5

194

0

194

5

195

0

195

5

196

0

196

5

197

0

197

5

198

0

198

5

199

0

199

5

200

0

200

5

201

0

150%

125%

100%100% Gold-Backed

75%

50%

25%

0%

Sources: U.S. Federal Reserve / World Gold Coun cil

GOLD BACKING OF THE U.S. MONETARY BASE

(CURRENCY IN CIRCULATION + BANK RESERVE CASH)


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CRB/S&P RATIO

0

0.5

1

1.5

2

2.5

3

3.5

4

Oct-57

Oct-60

Oct-63

Oct-66

Oct-69

Oct-72

Oct-75

Oct-78

Oct-81

Oct-84

Oct-87

Oct-90

Oct-93

Oct-96

Oct-99

Oct-02

Oct-05

Oct-08



CoMModities are undervaluedrelative to us equities

Commodities as a whole are very cheap compared to equities. At Hinde we believe commoditieswill rise as currency creation competes with supply constraints. This will be gold positive.


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GOLD RELATIVE TO S&P 500

0

100

200

300

400

500

600

Oct-70

Oct-72

Oct-74

Oct-76

Oct-78

Oct-80

Oct-82

Oct-84

Oct-86

Oct-88

Oct-90

Oct-92

Oct-94

Oct-96

Oct-98

Oct-00

Oct-02

Oct-04

Oct-06

Oct-08

Gold/S&P



Gold is undervalued versusus equities

Gold vs S&P would have go up six times to match the 1980 highs.


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GOLD RELATIVE TO S&P 500

0

100

200

300

400

500

600

Oct-7

0

Oct-7

2

Oct-7

4

Oct-7

6

Oct-7

8

Oct-8

0

Oct-8

2

Oct-8

4

Oct-8

6

Oct-8

8

Oct-9

0

Oct-9

2

Oct-9

4

Oct-9

6

Oct-9

8

Oct-0

0

Oct-0

2

Oct-0

4

Oct-0

6

Oct-0

8

0

100

200

300

400

500

600

Gold/S&P

Gold/Total Return S&P



Gold is undervalued versusus equities

Even more so on a total return basis:

The Gold v S&P ratio is currently one fth

of the high it reached in the early 1980s.Gold v Total Return S&P, however,is standing at only one twelfth the peak

it reached in 1980.


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Gold undervalued butoutPerForMinG all asset Classes

Over the last twenty years, gold has outperformed all major asset classes on many time horizons.

GOLD V MAJOR ASSETS

-50%

0%

50%

100%

150%

200%

250%

300%

350%

1y Return 5yr Return 10y Return 15y Return 20y Return

10y US Treasury (total return*) (*from 1994)

S&P 500

MSCI World

CRB Index

Gold (USD)


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Gold is underoWned


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PERCENTAGE OF RESERVE ASSETS IN GOLD

87.9%

78.5% 78.4%75.2%

12.6%

8.1%

3.0% 1.7% 0.5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

US

France

Germany

Netherlands

World

India

SaudiArabia

China

Brazil



Most Central bankshold little Gold

Emerging market central banks hold very little gold. Their primary holdings are in USTreasuries. The scope for gold allocation in emerging markets is huge.

Source: IMF


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2009

2007

2005

2003

2001

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

1979

1977

1975

1973

1971

1969

1967

1965

1963

1961

1959

1957

1955

1953

1951

-40

-30

-20

-10

0

10

20

MILLION

OUNCES

NET CENTRAL BANK SALES



Most Central banksnoW love Gold

For the rst time in forty years, central banks are beginning to buy more gold. China, Russia,India and Sri Lanka and others are now buyers on any weakness in the gold price.

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

70

60

50

40

30

20

10

%

CENTRAL BANK % RESERVES IN GOLD SINCE 1970

Source: IMF Source: IMF


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CENTRAL BANK HOLDINGS OF GOLD IN MM TROY OUNCES

950

1,000

1,050

1,100

1,150

1,200

Oct-70

Oct-72

Oct-74

Oct-76

Oct-78

Oct-80

Oct-82

Oct-84

Oct-86

Oct-88

Oct-90

Oct-92

Oct-94

Oct-96

Oct-98

Oct-00

Oct-02

Oct-04

Oct-06

Oct-08



PaPer CurrenCy dWarFsGold aCCuMulation

Central banks are net buyers. But as fast as they might buy their paper currency reserveskeep growing faster. Russia has bought over 220 tonnes of gold between 2000 to 2010.In 2000 the ratio of Russian gold holdings to their currency was 24.6%; now it is 5.1%.

BILLION $

8000

7000

6000

5000

4000

3000

2000

1000

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

CENTRAL BANK TOTAL INTERNATIONAL RESERVES $ VALUE

Source: IMF Source: IMF


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buy What China is buyinG: ChinaGold & silver liberalisation

The dening moment for the War on Gold? August 2010 will be the time we look back and saythat was when the war was potentially won. Chinas PBoC announced to further develop thegold market. This country has a serious afnity for gold.


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CurrenCy reForM yuan liberalisation

China has so far been accumulating mainly dollar assets rather than gold as its reservesballoon. The potential free oat of the Yuan paves the way towards currency reform withRussia et al.

CHINA: FX RESERVES AND GOLD AS A % OF RESERVES

0

500

1,000

1,500

2,000

2,500

3,000

Oct-96

Oct-97

Oct-98

Oct-99

Oct-00

Oct-01

Oct-02

Oct-03

Oct-04

Oct-05

Oct-06

Oct-07

Oct-08

Oct-09

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

Gold as a %

FX Reserves, $ mns


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briCs advoCate CurrenCy reForM

January 2009 Russian leader Mr Putin said the leading powers should ensure an irreversiblemove toward a system of multiple reserve currencies, questioning the reliability of the US dollaras a safe store of value. The pride of Wall Street investment banks doesnt exist anymore,

March 2009 PBoC Governor Zhou calls for new reserve currency that is disconnectedfrom individual nations and is able to remain stable in the long run, thus removing the inherentdeciencies caused by using credit-based national currencies.


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Golden deMoGraPhiCs: eMerGinGMarket oWnershiP is loW

Its not just emerging central banks that are underinvested. On a per capita basis,China and India own much less than many other countries, as well as below the world average.This is noteworthy for two gold loving countries.

GOLD DEMAND (GRAMS PER CAPITA)

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

SaudiArabia

Turkey

HongKong

Germany

Vietnam

Egypt

US

Italy

Thailand

Russia

UK

India

SouthKorea

World

Taiwan

China

Indonesia

Japan

France

China still hugely underowns gold.It owns much less on a per capita

basis than several other countries,and also owns less than theworld average.

Source: UN, WGC


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Gold investMentis inFinitesiMal

Imagine the impact of a shift out of bond markets into Gold

INVESTM

ENT

G

OLD

MARKETVA

LUE

OFALLG

OLD

GLOBALMO

NEY

SUPPLY

(M3)

FINANCIAL

ASS

ETS

50

100

150

TRILLION $

0.8 5.0

60.2

200.0


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Gold investMenthistoriCally Minute

In 1932 the allocation of gold relative to global nancial investments was 20%. Today it standsat 0.8%. To rise to 2% would require 85,000 tonnes, approximately 34 years mine supplyat existing rates.

GOLD + GOLD MINING EQUITIES AS A % OF GLOBAL ASSETS

0%

5%

10%

15%

20%

25%

30%

35%

1921 1932 1948 1981 2009

Source: Erste Bank


27/41



Gold underoWned and FallinGsuPPly, reserve Grade

So much demand but not so much supply. There have been less than 5 gold discoveries over10mm troy oz. this past decade. Barrick needs to replace 9mm troy oz. of production a year.

12%

9%

6%

3%

0%

-3%

-6% 1000

1500

2000

2500

Tonnes

1987

Mine Supply Mine Supply

Source: World Gold Council, UBS

GOLD MINE SUPPLY HEADING DOWN

1990 1993 1996 1999 2002 2005 2008 2011E Cash cost

Total costs

Reserve grade

750 1.8

1.7

1.6

1.5

1.4

1.3

1.2

1.1

1

650

550

450

350

250

150

GLOBAL MINE COSTS AND RESERVE GRADE g/t

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

CostsUS$/o

z

ReserveGrade

g/t


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the Final battle?

In order to improve your game, you must study the endgame

before everything else, for whereas the endings can bestudied and mastered by themselves, the middle game andthe opening must be studied in relation to the endgame

Jose Raul Capablanca


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Gold shorts under PressureA series of actions have perhaps uncovered the distressed nature of the short perpetratorsin the precious metals market.

Mysterious BIS Gold Swaps July 2010 380 tonnes of gold is swapped between BIS and unnamed commercial bank FT and WSJ post conicting commentary from BIS themselves on counterparties involved

CFTC Hearings March 2010 Precious Metals trader blows whistle on manipulation of Comex market Comex commercial bank short positions have been reducing as investigation mounts

IMF Quietly Selling Gold 15 tonnes a month for rst half of 2010


30/41

Cum.

OvernightChange$/

oz

Cum.

IntradayChange$/o

z

1600

1400

1200

1000

800

600

400

200

0

100

0

-100

-200

-300

-400

-500

-600

1/1/2001

Overnight

Intraday

9/28/2003 6/24/2006 3/20/2009 12/15/2011

Source: Adrian Douglas, www.marketforceanalysis.com

CUMULATIVE INTRADAY CHANGE AND CUMULATIVE

OVERNIGHT CHANGE IN GOLD 2 001-2010



Failure oF the seCond londonGold Pool 2000 to ?

Physical Gold dumped into the PM Fix to contain its price in a covert version of the 1960sLondon Gold Pool. Selling at PM x and purchasing at the AM x for last nine yrs returnsUS$1,400 per troy ounce.


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JULY

70

2X

4X

6X

8X

10X

12X

14X

16X

JAN7

1

JULY

71

JAN7

2

JULY

72

JAN7

3

JULY

73

JAN7

4

JULY

74

JAN7

5

JULY

75

JAN7

6

JULY

76

JAN7

7

JULY

77

JAN7

8

JULY

78

JAN7

9

JULY

79

JAN8

0

JULY

80

JAN8

1

JULY

81

1971 Nixon closes

Gold Window Are we here?

1999-PRESENT1970-1980

GOLD REBASED FOR COMPARISON 1970-1980 AN D 1999 TO PRESENT GOLD IN NOMINAL $S FROM 1970-1980AND FROM 1999 TO PRESENT

1201141081029690847872666054484236302418126

Months from Jan 1970, Jan 1999 resp.

-100

100

300

500

700

900

1100

1300

1500

1700

1900

1970-1980

1999-Present



Gold Where are We noW?Gold went up considerably more in the 70s compared to the last decade.


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hinde CaPital


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hinde Gold Fund:a unique investMent

A long bias gold bullion fund with close adherence to USD spot gold price

A managed gold investment in three share classes EUR, GBP or USD

A potential return in excess of the spot gold price

A cheap method of owning physical allocated gold

A secure method of owning physical allocated gold

An investment in growing gold ounces vis a vis up to 25 % small cap mining holding

A liquid investment, no subscription or redemption fees, and same month dealing


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Allocated Gold Bullion (stored at secure vaults in viable jurisdiction)

Unallocated Gold Bullion

Comex & Tocom Futures

(warning potential hotspot)

Physical Bullion ETFs

(warning hotspot)

Swaps & Derivatives

Other

Wealth Store

Default Risk

Safer

Increased Risk

hinde Gold Fund: a hiGhly seCureinvestMent

ETFs and other vehicles for gold investment have inherent risk investors may be unaware of.An investment should hedge out all possible credit risk. Hinde Gold Fund achieves this byinvesting in allocated gold held in a reputable Swiss Private Bank.

Default Risk

Wealth Store

Increased Risk

Safer


35/41



hinde CaPitalHinde Capitals structure ensures the rms operations are thoroughly audited and transparent.


36/41



hinde Gold FundHinde Gold Fund is a managed gold investment. It aims to outperform the gold price,while smoothing any downside volatility.

HGF RELATIVE PERFORMANCE: GOLD (LAST 12 MONTHS)

-7%

-2%

3%

8%

13%

18%

23%

28%

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

Mar-10

Apr-10

May-10

Jun-10

Jul-10

Aug-10

Monthly Relative Performance

Cumulative Relative Performance (RHS)


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hinde Gold FundHinde Gold Fund has performed well against other assets since its inception.

HGF COMPARATIVE PERFORMANCE SINCE INCEPTION

40

60

80

100

120

140

160

Sep-07

Nov-07

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Hinde Gold Fund

MSCI World

GDM


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our Golden seCret to suCCess:a brilliant Ceo, CFo?


39/41



hinde CaPital:investMent ManaGers

Ben Davies, CeOBen Davies ran trading for RBS Greenwich Capital in London where he managed a macroportfolio. He started his career in 1995, trading in the Credit xed income market at CreditLyonnais, moving to IBJI as a xed income specialist and nally to Greenwich Capital in 1999.He graduated with a BSc in Management from Loughborough University. Ben Davies and MarkMahaffey, former colleagues from RBS Greenwich Capital, established Hinde Capital in early2007, primarily to focus on the precious metals and commodity sector.

Mark Mahaffey, CfO

Mark Mahaffey has 24 years experience in the international markets, having held seniorposts at several leading investment banks. He trained as a xed income specialist at DaiwaSecurities before joining Midland Montagu as Director of the US government trading desk.In 1990 he jointly set up the Greenwich Capital ofce in London where he managed a portfoliofocusing on global macro themes, before joining IBJI in 2001. His most recent appointment

from 2005 was Managing Director of Bank of America London Proprietary desk.


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hinde CaPital:ContaCt inForMation

Hinde Capital10 New StreetLondon EC2M 4TPUnited Kingdom

Email Ben Davies, CEO: [email protected]

Email Mark Mahaffey, CFO: [email protected]

Phone +44 (0)20 7648 4600

www.hindecapital.com


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All material is compiled from sources believed to be accurate, but no accuracy can be guaranteed.

The Mining Journal Investor Seminars

hinde CaPital: disClaiMerHinde Gold Fund Ltd is an open-ended multi-class investment company incorporated in the British Virgin Islands.

This document is issued by Hinde Capital Limited, 10 New Street, London EC2M 4TP, which is authorised and regulated by the FinancialServices Authority. This document is for information purposes only. In no circumstances should it be used or considered as an offer to sell

or a solicitation of any offers to buy the securities mentioned in it. The information in this document has been obtained from sources believedto be reliable, but we do not represent that it is accurate or complete. The information concerning the performance track record is givenpurely as a matter of information and without legal liability on the part of Hinde Capital. Any decision by an investor to offer to buy any of thesecurities herein should be made only on the basis of the information contained in the relevant Offering Memorandum. Opinions expressedherein may not necessarily be shared by all employees and are subject to change without notice. The securities mentioned in this documentmay not be eligible for sale in some states or countries and will not necessarily be suitable for all types of investor. Questions concerningsuitability should be referred to a nancial adviser. The nancial products mentioned in this document can uctuate in value and may besubject to sudden and large falls that could equal the amount invested. Changes in the rate of exchange may also cause the value of yourinvestment to go up and down. Past performance may not necessarily be repeated and is not a guarantee or projection of future results.The Fund is categorised in the United Kingdom as an unregulated collective investment scheme for the purposes of the Financial Services

and Markets Act 2000 and their Shares cannot be marketed in the UK to general public other than in accordance with the provisions ofthe Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, the Financial Services and Markets Act 2000 (Promotionof Collective Investment Schemes) (Exemption) Order 2001, as amended, or in compliance with the rules of the Financial Services Authoritymade pursuant to the FSMA. Participants in this investment are not covered by the rules and regulations made for the protection of investorsin the UK. Participants will not have the benet of the rights designed to protect investors under the Financial Services and Markets Act2000. In particular, participants will lose the right to claim through the Financial Services Compensation Scheme. The securities referencedin this document have not been registered under the Securities Act of 1933 (the 1933 Act) or any other securities laws of any other U.S.

jurisdiction. Such securities may not be sold or transferred to U.S. persons unless such sale or transfer is registered under the 1933 Act oris exempt from such registration. This information does not constitute tax advice. Investors should consult their own tax advisor or attorneywith regard to their tax situation.

Documents

Gold Wars a Golden Renaissance Presentation September 2010