Alchemist56 Web

In this issue

The European Central BankGold Agreement Part 3

by Matthew Keen

page 3

A Day in the Life of a Refinerby Grant Angwin

page 6

Electronic Weighing of Goldby Douglas Beadle

page 8

LBMA Conference Previewby Edel Tully

page 10

The Commitment of TradersReport and its Usefulness

by Matthew Turner

page 12

Jastram’s Golden Constantby Jill Leyland

page 17

The LBMA ExpandingHorizons

by Stewart Murray

page 20

LBMA Newsby Stewart Murray

page 21

Gold Stocks Still Recoveringby Paul Burton

page 22

The London Bullion Market Association ISSUE 56 October 2009

Fireworks over Edinburgh – Gold prices skyrocket as the bullion market heads to Edinburgh for the 10th Annual

LBMA Precious Metals Conference (page 10).

Alchemist 56 ruth:Alchemist34 23/10/2009 19:51 Page 1

Sydney

Level 46 Gateway

1 Macquarie Place

Sydney

NSW 2000

Tel: 61 2 9256 9442

Hong Kong

Suite 1306

Two Exchange Square

8 Connaught Place

Central, Hong Kong

Tel: 852 2899 2026

Tokyo

2-1 Ohtemachi

1-Chome

Chiyoda-Ku

Tokyo 100

Tel: 81 3 3258 3407

London

4th Floor

St Martins Court

10 Paternoster Row

Lodon EC4M

Tel: 44 20 7489 6761

New York

200 Park Avenue

New York

NY 10166 0130

Tel: 1 212 878 4122

all the metals – all the angles – for all the time


The European Central Bank Gold

Agreement Part 3The Washington Agreement TrilogyBy Matthew Keen, Director, Deutsche Bank

On 7th August 2009, the European

Central Bank (ECB) announced

the extension of the Central Bank

Gold Agreement (CBGA) for

another 5 years. The signatories

for the CBGA3 were the same as

the second agreement and they

along with the ECB agreed to cap

their combined annual sale at 400

tonnes per annum.No one will deny that the original EuropeanCentral Bank Gold Agreement (ECBGA)forged in Washington prior to the IMFmeetings in September 1999 was an inspiredstrategy and of significant importance to justabout all sectors of the gold market at thetime. Now, ten years on, I suppose thequestion being asked is what relevance (if any)does ECBGA have in today’s climate.

It is a question that has been askedby central banks, bullion dealers, and even theproducer community for some time now, andjudging by the very late announcement ofECBGA part 3, it may have been touch and goright up to the last minute. Bottom line ofcourse is that on August 7th 2009, a total of18 European countries have signed up to athird agreement to run until September 2014.However, it has not stopped marketparticipants questioning its relevance, evennow.

Looking at the rationale for ECBGAin the first place, the real overriding benefitwas the provision of a transparent mechanismfor wholesale official transactions to takeplace. Following 18 years of a bear market, itis fair to say that at the end of the last decade,central banks were making a fair amount ofnoise about the relevance of their everdepreciating asset. Whilst the actual tonnageof sales in the late 1990s was not overlyimportant, the tarnished reputation of goldwas weighing heavy on prices and there was a

feeling that central bankswere literally queuing upto get their sell ordersinto the market. As youcan see from the chartopposite, theestablishment of theagreement did allow for aflood of activity whichsaw almost 100 millionounces of gold come intothe market in the sevenyears that followed. Thisrate of selling had notbeen seen since the mid1960s when the USliquidated a couple of thousand tonnes.

The irony is that the period between 1999and 2005, which saw more official sector goldsales than at any other time in history, alsomarked the start of the bull run which is stillgoing strong ten years on. People close to thegold market will know that whilst the ECBGAwas a demonstration of “intervention” of asort, it had a knock-on effect that was to letthe industry know that a sea-change wasrequired for the long term health of themarket and the valuations of the gold portionof their reserve portfolios. UnfortunatelyGordon Brown did not get it and the UKTreasury offered up the majority of its gold atthe inception of the agreement. The chain ofevents that followed the signing of theagreement led to the major producerspledging to cease their hedging activity, a pactwhich was later“upgraded” to an activehedge reduction policythat is still being followedtoday.

Like most goodtrilogies, you have to waituntil the final episodebefore you can piecetogether some of thestrands from earlierepisodes. In this case theanswer to the question“why was the ECB GoldAgreement dubbed the“Washington Agreement”

in the first place”? Well, most people who havebeen around the market for a couple ofdecades (or more) will know that everysecond IMF gathering is held in Washingtonand that generally, way down the list of agendaitems was the subject of gold.

Without wanting to go off on too much ofa tangent, the main reason, as far as I amaware, for gold to be on the agenda at everyIMF gathering was that the IMF itself wantedto modernise gold’s role in monetary policy.And frankly, the only way to get traction onthe subject was to have the issue of golddiscussed amongst the major gold holdingmembers at one of its annual summits. TheIMF had attempted to write gold out of thesystem on several occasions during the last 50years, which led to two amendments to itsconstitution, in 1969 and again in 1978. Thefirst of which introduced the SDR (Special

Source: Deutsche Bank, CPM, World Gold Council* Years run from 26 September to 25 September. 2008 data runs to June 2009

Annual Central Bank Gold Sales under the Central bank Gold Agreement

0

100

200

300

400

500

600

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008*

Tonn

es

CBGA IQuota: 400 tonnes/annum

CBGA IIQuota: 500 tonnes/annum

page 3

A L C H E M I S T I S S U E F I F T Y S I X

Sydney

Level 46 Gateway

1 Macquarie Place

Sydney

NSW 2000

Tel: 61 2 9256 9442

Hong Kong

Suite 1306

Two Exchange Square

8 Connaught Place

Central, Hong Kong

Tel: 852 2899 2026

Tokyo

2-1 Ohtemachi

1-Chome

Chiyoda-Ku

Tokyo 100

Tel: 81 3 3258 3407

London

4th Floor

St Martins Court

10 Paternoster Row

Lodon EC4M

Tel: 44 20 7489 6761

New York

200 Park Avenue

New York

NY 10166 0130

Tel: 1 212 878 4122

all the metals – all the angles – for all the time


Drawing Right) with 1 SDR being equal to0.888671 gram of fine gold, which was thepar value of the US dollar of 1st July 1944.The second amendment was to make the SDRthe principle reserve asset in the internationalmonetary system, paving the way to removegold as the ultimate reserve asset. So in short,the IMF had been desperate to get the item ofgold on the table. Then, in 1999, a core ofgold holding countries from Europe actuallymet in Washington, prior to the official IMFmeetings to discuss what could be done aboutgold’s spiralling fortunes and the rest, as theysay, is history. The irony is that the IMF wascertainly not involved in the pact that wasformulated, hence the Washington Agreementwas purely a reference to location whereasmoving in to ECBGA part 3, we are looking atWashington having a very different role toplay.

ECBGA 1 will go down in history as acrucial agreement which lay the foundation forgold to end a 20-year bear market and start amassive bull run which has led to aquadrupling of the price. As I write thisarticle, the gold price is sitting comfortablyabove $1,000 per ounce. The secondagreement was important as a mechanism fortransparency, but here we are in Q4 2009asking the question, “who benefits fromECBGA part 3”?

Well there are no clear winners this timearound in the way there were ten years ago.Adding support to the gold price is clearly nota priority for the gold holding central banksaround the world today and lease rates, whichwere also linked to the rationale for trying tofix the market a decade ago, are also rather anon-event. This agreement in fact appears tobe rather looser than the first two in as muchas lendings are not referenced at all this timearound.

The amount of lending by the officialsector was flagged as part of the problem withthe first agreement, the rationale being that ifthe official sector stopped providing liquidityto the market, the cost of borrowing couldnaturally rise to a level that might makeforward selling less attractive to the hedgers.

Whilst that statement is perfectly logical, thecombination of de-hedging and a massiveincrease in investor long positionshave meant that supply farexceeds the demand at themoment and that is notabout to change anytime soon. For thatreason, allrestrictions on goldlendings have beenremoved fromECBGA 3.

Traditionallymost centralbank activity ingold is limited todeposit or swapbusiness andfollowing thecredit crunch of2007, it is fair tosay that this elementof a bullion bank’sbusiness is completelydead and buried deeperthan most South Africanprimary ore, and short of aresurgence of hedging from themajors, it’s difficult to see what willchange this current oversupply dynamic. Forthe first time in history, gold deposit rates areactually in negative territory. I do not justmean that the swap versus USD rates imply anegative gold deposit rate, I mean that withinsurance costs higher, credit charges higherand vault space becoming a real concern, thereis an argument to say that there are now realcosts associated with holding a gold positionand that cost has to be borne by the client.Traditionally, bullion banks have been happy topay a nominal fee to have client deposits ontheir books but not any more!

So back to the crux of what is left in theagreement and who it benefits.

The IMF benefit for starters. In their verythorough presentation to the senate, theyneeded to deliver not only their rationale, butalso their plan for execution and the ECBGA

structure does go a long way towards tickingthat box. The other thing that we would be

wise to remember is the issue of disruptiverhetoric that plagued the market in the

late 1990s. Without wanting toname names, gold has had a bit of

a role as a political football andit is not unusual for agovernment and its centralbank to have slightlyinconsistent strategieswhen it comes to utilisingthe asset in question. Ifthat country has signed upto the ECBGA then wecan take randomheadlines that appear onthe newswires from timeto time with a pinch ofsalt. The presence of theagreement nips most

harebrained ideas in thebud, but even in a case

where politicians do throw astrategy out involving their

country’s gold we can be slightlymore relaxed that if it does go

further than the concept stage, it willfall within the transparent structure of

ECBGA. Ten years ago, the four biggest gold

holding countries in Europe were Germany,France, Switzerland and Italy, collectivelyholding more than 11,500 tonnes betweenthem, being around a third of all official sectorgold. The consequence of any one of thosecountries unloading gold was simplyunthinkable ten years ago and yet, under theauspice of ECBGA part 1 and 2, the Swisswere able to unload almost two-thirds of theirgold and the French have sold almost a quarterof their stock without the market falling apart.Germany and Italy are two countries that haveadopted a passive stance yet hold a combinedtotal of almost 6,000 tonnes. Any policy shiftby either of those two countries could bringus back to the bad old days of the late 1990s.So, in conclusion, it is clear to see that severalEuropean countries who were active in the

CONTACT DETAILS Rand Refinery Limited

Tel: +27 (0) 11 418-9000 Fax: +27 (0) 11 388-2792

Email: [email protected] Box 565 • Germiston 1400 • Gauteng • South Africa

www.randrefinery.com

Gold...A fully integrated precious metal management company, Rand Refineryis the world’s largest single-site refining and smelting complex, with a reputation for quality, reliability and integrity built up over eightdecades. Based in Germiston – in Gauteng, South Africa – we areconveniently placed for access to Johannesburg’s OR TamboInternational Airport.

We are committed to the highest standards in all aspects of our business:

• LBMA accreditation• LBMA referee status• Dubai Metals and Commodities Centre accreditation• OHSAS18001 (health and safety) • ISO14001 (environmental)• ISO9001 (quality)

We offer:• The latest technology in both refining and smelting• a knowledgeable team, steeped in the business• analytical services• stringent security• a comprehensive vault, clearing and air

forwarding service• fabrication of a range of value-added productspage 4

T H E L O N D O N B U L L I O N M A R K E T A S S O C I A T I O N

ECBGA1

will go down in history as

a crucial agreement which lay the

foundation for gold to end a 20 year

bear market and start a massive bull run

which has led to a quadrupling of the price.

As I write this article, the gold price is sitting

comfortably above $1,000 per ounce. The

second agreement was important as a

mechanism for transparency, but here we

are in Q4 2009 asking the question,

“who benefits from ECBGA

part 3”?


past have simply reached a point where theydo not feel any urgency to sell. After all, sincethe birth of ECBGA ten years ago, gold willhave undoubtedly been the best performer in areserve portfolio, but it could be argued thatso much of the positives that ECBGA broughtto the market could be unwound if theagreement was simply mothballed at thispoint. I think that of all the “agreements” thathave been created over the decades, this one isquite an easy one to maintain with most of themember countries happy to.

Looking at the last five years, it is clear tosee that several countries who were active in

the past have simply reached a point wherethey don’t feel any urgency to sell. After all,since the birth of ECBGA ten years ago, goldwill have undoubtedly been the bestperformer in a reserve portfolio. So, inconclusion, the extension of the ECB GoldAgreement for a third term is helpful to themarket as a whole, but on the flip side, it doestake away any spontaneity that central banksmight have enjoyed in the past. Mind you,giving up the ability to make a “snap decision”is probably something that most central bankswill not miss.n

CONTACT DETAILS Rand Refinery Limited

Tel: +27 (0) 11 418-9000 Fax: +27 (0) 11 388-2792

Email: [email protected] Box 565 • Germiston 1400 • Gauteng • South Africa

www.randrefinery.com

Gold...A fully integrated precious metal management company, Rand Refineryis the world’s largest single-site refining and smelting complex, with a reputation for quality, reliability and integrity built up over eightdecades. Based in Germiston – in Gauteng, South Africa – we areconveniently placed for access to Johannesburg’s OR TamboInternational Airport.

We are committed to the highest standards in all aspects of our business:

• LBMA accreditation• LBMA referee status• Dubai Metals and Commodities Centre accreditation• OHSAS18001 (health and safety) • ISO14001 (environmental)• ISO9001 (quality)

We offer:• The latest technology in both refining and smelting• a knowledgeable team, steeped in the business• analytical services• stringent security• a comprehensive vault, clearing and air

forwarding service• fabrication of a range of value-added products page 5


Source: IMF Data (as of 2009)

The Long Term Decline in Central Bank Gold Holdings

28

30

32

34

36

38

40

1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007

Tonn

es (

00

0’s

)

World Central Bank Gold Holdings

Matthew Keen started

his career at Johnson

Matthey Bankers in

1982, moving to

Engelhard in 1987 where

he started specialising in

PGMs. He set up

JPMorgan's PGM

business in 1991, where he remained until

the Chase merger ten years later. He is

currently a director at Deutsche Bank with

global sales responsibility for Central Banks

and the official sector. He also has

responsibility for the bank's Platinum Group

Metal business and the develpoment of

various Rare Metals businesses.



page 6

A Day in the Life of a RefinerBy Grant Angwin, General Manager, Johnson Matthey

07:30

There are those that say the start of a day for arefiner is a round of golf! In my case, it is agood cup of tea. Everything for a refinerybegins with what comes in the front door. Sofor the first 30 to 45 minutes, I pore over myPC looking at reports that detail what wasdelivered yesterday and, as important, whatwas produced during the past 24 hours.

08:30

It is now time to get another cuppa, return tomy computer, and check the Bullion Desk forprices and news on the market. Whilst pricesare not so critical to a refiner in his day-to-daybusiness, they are obviously important to ourcustomers – both product and refining. So abrief review of what is happening in Londonand the world is necessary. Operating out inthe Western USA means that we have a seven-hour time difference with the UK, so the next30 minutes is spent on the phone with our UKhead office. Then, it is time to delete all theunwanted emails and respond to the few thatactually do require a reply.

09:30

Having cleared out the emails and checked themarket, the day starts in earnest with a 30-minute walk around the refinery. This is anideal time to talk to the guys, and see and hearwhat is going well, and hear about any issues.It also sets up the day, as much of the next fewhours will be spent with various managers.

10:00

Now that I am in the refinery and have clearedthe various security obstacles, my next port ofcall is with our Operations Manager. We spendthe next 30 to 45 minutes reviewing intakeand output numbers, staffing levels anddiscussing plans for the remainder of themonth. We are getting close to starting ourbudget process so this meeting runs on andtakes the best part of an hour. I leave him

feeling slightly dazed after we have discussedheadcount and operating costs – he wantsmore and I want less!

11:00

Next for a visit is our Employee Health &Safety Manager. Our refinery uses the Millerchlorine process to recover gold and variousside processes, which use acids and variousreactive chemicals. Whilst a refinery usesmany chemicals in its processes, the mostsensitive is chlorine. We review our chlorinesystem on a very regular basis – any escape ofchlorine is very dangerous. Today, we walkthrough the whole process from delivery touse. Molten metal is everywhere in a refineryand is another of the biggest safety issues arefinery faces. We discuss ways in which wecan reduce employee exposure to thesehazards.

12:00

After all these peregrinations around therefinery, it is time for a break. Another cup oftea and a spot of lunch consisting of a marmitesarnie! This is also another opportunity tocatch up on the news and read the FT.

12:30

Now, it is time to turn tothe two remainingfunctions. First up is thefinancial area. A refinerymay handle many millionsof ounces of gold, but atthe end of the day, it isthe actual ounces thatcount or have to becounted. We spend sometime discussing where themetal is within thevarious processes and

ensuring that it is in the right part of therefinery. The refining business is somewhatdifferent to most businesses in that we have toconcern ourselves with money and metal,which is also money but treated differently interms of accounting. In effect, our financialarea has to do its job twice – count the moneyand then the metal. Having left our financialchap in the same dazed state as the operationalone, it is time again to review some of thereports that indicate how the business isperforming.

14:30

Last but not least on daily review is ourBusiness Development area. We spend sometime discussing what the recent rally in pricesmeans for our business today and in thefuture; unfortunately, this time we don’t comeup with any conclusions!

15:30

The UK and the East coast of the US haveclosed for the day, and the remainder of theday is spent catching up on emails. One finalthing that has to be done is to return to therefinery and review the developments withour sustainability programme on woodrecycling.

16:30

By now, the steady stream of lorries arrivingon site has all but dried up. It is amazing tothink that so much of it starts in the Nevadadesert with a mine moving over 7,000 tons ofore, and after we have done our bit, that 7,000tons ends up producing one 400 oz (12.5kilos) London Good Delivery gold bar!Tomorrow will be another day, and it will be avery different one, but for now, we can go tothe golf course! n

Grant Angwin hasworked for JohnsonMatthey for over 25years. The first 20years he was based inthe UK and heldvarious positionswithin the refiningbusiness prior tobeing appointed

Head of Sales at the Royston refinery. Fiveyears ago, he relocated to Salt Lake City asSales and Marketing Director and shortlyafter that he took the position of GeneralManager.


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As regular readers of the Alchemist will be aware, the Physical Committeehas, for several years now, been looking at the possibility of permitting goldto be weighed on electronic scales in the London market, in addition to thetraditional beam balance weighing of gold.

The problem has been finding a scale that weighs to the exacting standards ofthe London market, with repeatability being a major problem with scales thatwere investigated previously. During the past year, the London vaults havebeen conducting extensive trials of a prototype scale produced by Sartoriusand the results have proved extremely encouraging. Some further testing bythe vaults in London still needs to be undertaken, but on the results obtainedthus far, it seems likely that the Sartorius scale will satisfy the requirements

of the London market. Meanwhile, Sartorius is in the process of seekingType Approval for the scale in Germany.

Subject to the successful completion of the further testing and the TypeApproval being obtained, it is hoped that within the first half of 2010, thePhysical Committee will be in a position to recommend to the LBMAManagement Committee that it should approve the weighing of gold onelectronic scales in the London market. At that time, the LBMA will make afurther announcement setting out its procedural recommendations and thetechnical specifications that will need to be complied with.n

Electronic Weighing of Gold in LondonBy Douglas Beadle, Consultant, LBMA


page 8

LBMA Certified Reference Materials

The London Bullion Market Association (LBMA) promotes quality and goodpractice in the area of gold and silver refining and trade. The production andsale of Gold and Silver Certified Reference Materials represent part of this

effort.The LBMA Gold Certified Reference Materials (CRMs) were produced

by Tanaka Kikinzoku Kogyo K.K. on behalf of the LBMA, are now available forpurchase. Silver CRMs, manufactured by Krastsvetment will be available by the end of

2009. The projectreflects aninternationalcollaboration tomeet therequirements oflaboratories involvedin the analysis ofhigh-purity gold andsilver. Figure 1. liststhe elements in thegold CRMs forwhich certifiedvalues have beenestablished. Thevalues shown inFigure 1 werecalculated on thebasis of the analysescarried out by ten laboratories in sevencountries. Forsilver, the list ofelements is slightlydifferent from thegold CRMs.Cadmium isincluded andcalcium andtitanium areexcluded. .

Homogeneity

For the gold CRMs, samples were cut from the rolled ingot according to a gridpattern. Fifteen pieces were selected systematically from the grid pattern, which encompassed three samples from each of five evenly spaced rows of cut pieces. Thesamples were chosen to cover the edges and the middle of the rolled ingot. Sampleswere analysed at the top, bottom, and at a 3mm depth for each of the elements in arandom order. Concentration data were obtained by twodifferent laboratories: using spark ablation ICP-OES and using spark opticalemission spectrometry. Results from these tests were evaluated using ANOVA andfound to be satisfactory. A similar approach was used for the silver CRMs.

Format of the CRMs

The Gold CRMs consist of a set of two rectangular blocks – 21 x 21 x 6mm andweighing approximately 51 grams each. The silver CRMs are slightly longer(26x26x7mm) and weigh 50g each.

Ordering LBMA Gold CRMs

The cost for these materials is in two parts: firstly, a fixed cost and secondly, avariable part which includes the cost of supply and, in the case of the goldCRMs, the value of the gold content (based on current gold price).

Fixed cost per set (one unit of each RM) LBMA Good Delivery Refiners.USD 3, 750. Other purchasers: USD 4, 450. Further details are available on ourwebsite.

Gold and Silver CRMs Available from the London Bullion Market Association

Figure 1.

Element Concentrations, mg/kg

AuRM1 AuRM2

Ag 20.0 ± 0.8 99.6 ± 5.6Al 9.6 ± 0.8 28.3 ± 1.8As 14.5 ± 1.0 47.1 ± 2.8Bi 30.4 ± 1.5 9.7 ± 0.8 Ca 9.6 ± 1.1 28.0 ± 2.6Cr 9.4 ± 0.6 27.7 ± 2.2Cu 13.5 ± 2.7 31.6 ± 2.4Fe 10.6 ± 1.1 30.1 ± 2.2Mg 30.1 ± 1.9 9.9 ± 0.9Mn 9.7 ± 0.4 28.2 ± 1.5Ni 9.8 ± 1.0 29.2 ± 2.6Pb 9.8 ± 1.8 28.9 ± 2.4Pd 9.7 ± 0.6 29.2 ± 1.3Pt 10.3 ± 1.1 30.2 ± 2.1Rh 7.3 ± 0.6 39.6 ± 2.4Sb 35.7 ± 1.6 11.3 ± 1.6Se 11.8 ± 2.9 37.4 ± 2.8Si 9.4 ± 1.6 28.0 ± 3.8Sn 9.7 ± 1.1 29.4 ± 1.8Te 40.7 ± 2.6 12.0 ± 3.2Ti 10.5 ± 0.9 31.6 ± 1.3Zn 10.3 ± 1.2 31.4 ± 2.3

METALS COMMODITIES \ INTEREST RATES \ EQUITIES \ FX \ ENERGY \ WEATHER

The total metals marketplace.

In today’s metals market, more opportunities are

available than ever before. CME Group’s broad product

suite offers the fi nancial safeguards of clearing, plus

fl exible trading solutions. Together, our precious, base

and ferrous products comprise the world’s most liquid

metals futures market. And now that COMEX and

NYMEX are part of CME Group, the world’s leading

metals marketplace is gaining new strength. Learn

more at www.cmegroup.com/metals.

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CME Group is a trademark of CME Group Inc. The Globe logo, CME, Chicago Mercantile Exchange and Globex are trademarks of Chicago Mercantile Exchange Inc. CBOT and Chicago Board of Trade are trademarks of the Board of Trade of the City of Chicago. NYMEX, New York Mercantile Exchange and ClearPort are trademarks of New York Mercantile Exchange Inc. COMEX is a trademark of Commodity Exchange Inc. These contracts are listed with, and subject to, the rules and regulations of NYMEX and COMEX. Copyright © 2009 CME Group. All rights reserved.

The London Market Bullion Association13-14 Basinghall Street

London EC2V 5BQwww.lbma.org.uk

[email protected]: +44 (0) 20 7796 3067

The London Bullion Market Association ISSUE 56 October 2009


As regular readers of the Alchemist will be aware, the Physical Committeehas, for several years now, been looking at the possibility of permitting goldto be weighed on electronic scales in the London market, in addition to thetraditional beam balance weighing of gold.

The problem has been finding a scale that weighs to the exacting standards ofthe London market, with repeatability being a major problem with scales thatwere investigated previously. During the past year, the London vaults havebeen conducting extensive trials of a prototype scale produced by Sartoriusand the results have proved extremely encouraging. Some further testing bythe vaults in London still needs to be undertaken, but on the results obtainedthus far, it seems likely that the Sartorius scale will satisfy the requirements

of the London market. Meanwhile, Sartorius is in the process of seekingType Approval for the scale in Germany.

Subject to the successful completion of the further testing and the TypeApproval being obtained, it is hoped that within the first half of 2010, thePhysical Committee will be in a position to recommend to the LBMAManagement Committee that it should approve the weighing of gold onelectronic scales in the London market. At that time, the LBMA will make afurther announcement setting out its procedural recommendations and thetechnical specifications that will need to be complied with.n

Electronic Weighing of Gold in LondonBy Douglas Beadle, Consultant, LBMA

LBMA Certified Reference Materials

The London Bullion Market Association (LBMA) promotes quality and goodpractice in the area of gold and silver refining and trade. The production andsale of Gold and Silver Certified Reference Materials represent part of this

effort.The LBMA Gold Certified Reference Materials (CRMs) were produced

by Tanaka Kikinzoku Kogyo K.K. on behalf of the LBMA, are now available forpurchase. Silver CRMs, manufactured by Krastsvetment will be available by the end of

2009. The projectreflects aninternationalcollaboration tomeet therequirements oflaboratories involvedin the analysis ofhigh-purity gold andsilver. Figure 1. liststhe elements in thegold CRMs forwhich certifiedvalues have beenestablished. Thevalues shown inFigure 1 werecalculated on thebasis of the analysescarried out by ten laboratories in sevencountries. Forsilver, the list ofelements is slightlydifferent from thegold CRMs.Cadmium isincluded andcalcium andtitanium areexcluded. .

Homogeneity

For the gold CRMs, samples were cut from the rolled ingot according to a gridpattern. Fifteen pieces were selected systematically from the grid pattern, which encompassed three samples from each of five evenly spaced rows of cut pieces. Thesamples were chosen to cover the edges and the middle of the rolled ingot. Sampleswere analysed at the top, bottom, and at a 3mm depth for each of the elements in arandom order. Concentration data were obtained by twodifferent laboratories: using spark ablation ICP-OES and using spark opticalemission spectrometry. Results from these tests were evaluated using ANOVA andfound to be satisfactory. A similar approach was used for the silver CRMs.

Format of the CRMs

The Gold CRMs consist of a set of two rectangular blocks – 21 x 21 x 6mm andweighing approximately 51 grams each. The silver CRMs are slightly longer(26x26x7mm) and weigh 50g each.

Ordering LBMA Gold CRMs

The cost for these materials is in two parts: firstly, a fixed cost and secondly, avariable part which includes the cost of supply and, in the case of the goldCRMs, the value of the gold content (based on current gold price).

Fixed cost per set (one unit of each RM) LBMA Good Delivery Refiners.USD 3, 750. Other purchasers: USD 4, 450. Further details are available on ourwebsite.

METALS COMMODITIES \ INTEREST RATES \ EQUITIES \ FX \ ENERGY \ WEATHER

The total metals marketplace.

In today’s metals market, more opportunities are

available than ever before. CME Group’s broad product

suite offers the fi nancial safeguards of clearing, plus

fl exible trading solutions. Together, our precious, base

and ferrous products comprise the world’s most liquid

metals futures market. And now that COMEX and

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CME Group is a trademark of CME Group Inc. The Globe logo, CME, Chicago Mercantile Exchange and Globex are trademarks of Chicago Mercantile Exchange Inc. CBOT and Chicago Board of Trade are trademarks of the Board of Trade of the City of Chicago. NYMEX, New York Mercantile Exchange and ClearPort are trademarks of New York Mercantile Exchange Inc. COMEX is a trademark of Commodity Exchange Inc. These contracts are listed with, and subject to, the rules and regulations of NYMEX and COMEX. Copyright © 2009 CME Group. All rights reserved.

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page 10

The LBMA Conference has arrived

and the time has come for the

bullion community to once again

make its annual pilgrimage. For

2009, the show takes place in

Edinburgh, Scotland. The historic

Balmoral Hotel provides the

impressive backdrop for this year’s

event from 1-3 November.

The Loch Ness monster is unlikely to revealitself in the City of Edinburgh, but ghosts andgoblins are liable to be out and about on the 31October amongst those keen delegates,particularly the London contingent, who travelover the weekend to experience HalloweenScottish style.

The 2009 LBMA Conference was anunwitting victim of global financialcircumstances and our initial conferencelocation of Peru was deemed by many marketmembers to be a stretch too far this year. Aftermuch consultation and debate, Edinburghbecame our home and we are delighted toreport that conference delegates have been assupportive of this annual event as in previousyears. Due to such strong demand, we wereforced to close registration on the 30September and a waiting list was opened.

Unlike venues for past conferences,Edinburgh is not a dominant location in theprecious metals industry map. Accepting thatScotland does not straight away stand out as alikely setting, it may surprise you to learn thatthe LBMA’s flock to Edinburgh will not be thefirst gold rush the region has experienced. No,that happened back in 1869. As an analyst, Ifully appreciate Google’s abilities to unearthmany interesting and largely unknown pieces ofinformation!

So the summer clothes that would havebeen packed for Peru should suitably bereplaced with umbrellas, raincoats, wellies and,in some cases, a hip flask. Yes, Edinburgh iscalling and the LBMA conference once againpromises to provide an apt forum for marketparticipants to network and discuss the front-line issues in our market.

The LBMA executive has been busyplanning and organising to ensure the 2009

event compares favourably with those ofprevious years. The Public Affairs Committeeis charged with the task of putting together theConference programme and many man-hourshave been invested to ensure a quality line up oftopics and speakers.

The World Gold Council-sponsoredWelcome Reception will signify the formalstart to the 2009 proceedings on the 1November.

The opening session on Monday marks thefirst formal address by the Association’s newChairman, Kevin Crisp of MitsubishiCorporation. The keynote speech this year willbe delivered by Paul Mercier of the EuropeanCentral Bank and will be followed by MichaelCross of the Bank of England in what will nodoubt prove to be an intense, but informativekick start to proceedings.

The impact of the financial crisis on theprecious metal’s industry takes centre stagethereafter and chairing of this session lies in thecapable hands of Steve Lowe, Bank of NovaScotia-Scotia Mocatta. From the producersector, to jewellery, to refineries andfabricators, the fallout across world marketsand its journey into our precious metals worldwill be analysed and dissected by the chosenspeakers from AngloGold Ashanti, the WGCand PAMP.

The topic of the afternoon session –Precious Metals Investment – will no doubtdraw a large crowd. With James Cross in theChair, David McWilliams, an Ireland-basedeconomist with an international perspective,will set the scene for this gathering, with amacroeconomic and financial outlook for worldeconomies and currencies. Stephen Mueller ofBank Julius Baer and Co. Ltd and LarryHathaway of UBS will focus the lens moreclosely on the metals market through theirrespective analyses of the ETF investmentvehicles and gold’s role as a portfolio diversifier– two topics that have dominated marketheadlines and commentary over the past year.

Session 4 after lunch on Monday brings thePGM complex under the spotlight. At lastyear’s conference in Kyoto, this session provedto be one of the most popular. Therefore, withEdel Tully (yes, that’s your author) in the Chairdirecting the discussion, the future use ofPGMs in the auto market from the view pointof Johnson Matthey, the overview of theChinese platinum market delivered by GFMS,and the perspective of the PGM investor arenaprovided by Redkite Capital Management LLPwill, I hope, ensure another successful sessionfor the PGM sector.

Ample networking opportunities will beavailable at the evening cocktail party,sponsored by the Silver Institute and LPPM,and of course, the Conference dinner. A piperwill welcome delegates to the dinner venue andenforce the Scottish theme.

Silver is the early morning topic onTuesday, led by Michael DiRienzo of the SilverInstitute. Jessica Cross, James Steel and RoqueBenavides will tackle the prospects for supplyand demand, London’s role in the silvermarket, and mining in Peru.

While the topical issues du jour will bedissected over the course of the two-day event,the real showdown will take place on Tuesdayafternoon as the panel discussion chaired byStephen Branton-Speak has the onerous task ofdebating the future of the London PreciousMetals Market. This is your opportunity to askthe difficult but relevant questions so do makefull use of the available technology and poseyour questions to the speakers. Good luck toPhil Clewes-Garner, Raymond Key, and KamalNaqvi!

John Reade, in his usual hot seat, willdeliver the Conference summary which is oneof the tougher jobs in the programme. Lunchwill wrap up the 2009 Conference beforedelegates bid each other goodbye for anotheryear.

As Chairperson of the Public AffairsCommittee, I am very proud of the hard workinvested by my fellow committee members andthe LBMA executive. In reality it is some timesince the LBMA staged a ‘winter’ extravaganza,but the weather in Scotland should not dampenspirits at the Conference. Go forth and enjoy,or as the Scots say, Ceud Mìle Fàilte – or “ahundred thousand welcomes”. n

Dr Edel Tully Head ofPrecious MetalsResearch at Mitsui andCo. Precious Metals Inchas been a member ofthe Public AffairsCommittee sinceFebruary 2008 andbecame its Chairpersonin June 2009. Edel has

global responsibility at Mitsui for marketanalysis and forecasting across gold, silverand the platinum group metals. Prior tojoining Mitsui, Edel was a researcher andlecturer from 2002 to 2006 whilst earning herdoctorate in gold calendar seasonalitydynamics at Trinity College, Dublin.

LBMA Conference PreviewBy Edel Tully, Chairperson, LBMA Public Affairs Committee


Nicholas Frappell to Triland Metals in London to head its precious metalsbusiness. Nicholas was born and raised in the Far East. After completing anEconomics degree at the City University, London, he joined the precious metalsdesk at Bank of Boston in London.

He then spent two years working in Tokyo for Sumitomo Corporation,working on TOCOM Arbitrage, and moved back to Sumitomo London, lookingafter Silver, Islamic financing and latterly Platinum Group metals.

He joined Triland as Head of Precious Metals in August 2009. Nick hasserved on the Management, the Finance, and the Membership Committees ofthe LBMA, and also the Market Advisory Committee of the NYMEX.

Tom Coghill toStandard Chartered

Bank. Tom has beenappointed as a Director inFinancial Markets where hewill head up CorporateMetals Sales in Europe. Tomjoins from Deutsche Bank in London, where he was previously responsible formetals sales in both Europe and North America. Prior to Deutsche Bank, Tomworked at Citigroup from 1997, as a salesperson in the Global Commoditiesgroup.

Market Moves


page 11

The LBMA Precious MetalsConference 2009 Programme

1-3 November 2009

The Balmoral Hotel, Edinburgh

Sunday, 1 November

Welcome Reception

Balmoral Hotel, Sir Walter Scott Suite

Sponsored by the World Gold Council

Day One – Monday, 2 November

Opening Session

Welcome – LBMA Chief Executive

Introductory Remarks – LBMA Chairman

Kevin Andrew Crisp, Mitsubishi CorporationUK plc

Keynote Speech

Paul Mercier, Deputy Director General ofMarket Operations, European Central Bank

The Role of the Bank of England

Michael Cross, Head of Foreign Exchange,Bank of England

Session 2: Impact of the Financial Crisison Precious Metals Industry

Chairman – Steven Lowe, Managing Director,Bank of Nova Scotia - ScotiaMocatta

Issues Facing Producers

Issues Facing Consumers

Aram Shishmanian, Chief Executive Officer,World Gold Council

Issues Facing Refiners & Fabricators

Mehdi Barkhordar, Managing Director, PAMP

Session 3: Investment – Gold and OtherPrecious Metals

Chairman – James Cross, Swiss Gold DMCC

David McWilliams, Economist

The ETF Market

Stephen Mueller, Executive Director, BankJulius Baer & Co. Ltd

James Steel, HSBC

Session 4: PGMs: Looking Forward

Chairman – Edel Tully, Research Analyst,Mitsui Global Precious Metals

The Auto-catalyst Market – The Next Decade

Heraeus Metallhandelgesellschaft GmbH

The Challenges Facing South AfricanProducers

PGMs - The Investor Arena

Michael Sheehen, President, Red Kite CapitalManagement LLP

Cocktail ReceptionCo-sponsored by the Silver Institute and theLondon Platinum and Paladium Market

Conference DinnerPrestonfield House

Day Two – Tuesday, 3 November

Session 5: Silver

Chairman – Michael DiRienzo, ExecutiveDirector, Silver Institute

Prospects for Silver Supply & Demand

Phillip Klapwijk, GFMS

London’s Role in the Silver Market

Mining in Peru

Roque Benavides, Buenaventura, SilverInstitute

Session 6: The Future of the LondonPrecious Metals Market

Chairman – Stephen Branton-Speak, Partner,Goldman Sachs

Panel: Philip Clewes-Garner, HSBC andLPPM Chairman

Raymond Key, Global Head of Metals Trading,Deutsche Bank

Kamal Naqvi, Director, Credit Suisse

Session 7: Delegate Feedback & ClosingSession

Chairman – Stewart Murray, Chief Executive,LBMA

Conference Summary

John Reade, Precious Metals Strategist, UBSInvestment Bank

Prizes Presentation: Best Speaker andFeedback Session Participant



page 12

The Commitment of Traders Report

and its usefulnessBy Matthew Turner, Commodity Analyst, VM Group

“Speculative fever grips the gold

and silver markets” has become a

ubiquitous headline, but keeping

track of what speculators are

doing would be far more difficult

than it already is without the

weekly Commitment of Traders

Report of the Commodities’

Futures Trading Commission

(CFTC). For decades, this has

helped analysts to make some

sense of trading dynamics on the

Comex futures markets, by

splitting the participants up by

their reason for trading futures.

As of September this year, the CFTC hasenhanced the report to further refine thesecategories. In theory, this should give us agreater understanding of the market – butdoes it really?

The Comex division of the Nymex futuresexchange remains the most liquid and widelyused exchange for trading gold and silverfutures. The exchange provides dailyinformation on the amount of futurescontracts outstanding, their strike price anddate of maturity. This is useful as far as itgoes, but as all futures contracts have twosides – a long and short – it tells us littleabout whether speculators are long or short.This is where the Commitment of Traders(CoT) report is useful because, as of the closeof business each Tuesday (although the reportitself is released on Friday), it records the longand short positions of three categories ofmarket-user: commercials, non-commercialsand non-reportables. Traditionally, as thecommercials are seen as entities using themarket for hedging business risks (the CFTC

describes them as “engaged in businessactivities hedged by the use of the futures oroption markets”), the non-commercials areassumed to represent speculative interest.Most analysts also add in the positions of the‘non-reportables’, (which are simply contractsheld by users that did not meet the minimumreporting size), as small users of futuresmarkets are more likely to be speculators thanhedgers. In gold and perhaps silver this isalmost certainly the case, but it is notnecessarily so for all commodities. As theseentities hold different amounts of long andshort positions, one can see whetherspeculators are collectively net long (ownmore long contracts than short contracts), andfollow the changes on a weekly basis.

The reform of the CoT report has comeabout because of political concern - largelyinspired from within the US - as to the rolespeculators may have played in pushing up theprices of some agricommodities and energyproducts, and whether the report wasaccurately measuring them. So the reform, ina way, has nothing to do with gold or silver;it’s more of an attempt to foster greatertransparency in those futures markets that areof daily concern to US legislators - crude oiland agricommodities - because last year’ssoaring prices in the market have attracted themost voter anger.

In particular, it has been argued that theCoT report was understating investment bynot accurately recording a relatively new andlarge user of futures markets, the commodityindex funds. This, it is alleged, is becausealthough some commodity index fund buyingwill be done directly, and so show up in thenon-commercial category, much of it is doneby swap dealers, who typically are categorisedas ‘commercials’, as they are ‘hedging’ theirexposure to investment funds. So, the theoryruns, not only might the report underestimateinvestment, but if the net long of commercialsis rising then, by definition, the net long ofnon-commercials, what we have called‘speculators’, will be falling, which could givea misleading picture of investment trends.

The new report aims to fix this by splittingthe two original categories, commercial andnon-commercial, into two further segments,making four new categories; commercials thusbecome the snappily titled “Producer/Merchant/ Processor/ User” and crucially

“swap dealer” categories, while non-commercials become “managed money” and“other reportables”. The non-reportablesremain the same. The CFTC explains the newcategories thus:

Producer/Merchant/Processor/User: A“Producer/Merchant/Processor/User” is anentity that predominantly engages in theproduction, processing, packing or handling ofa physical commodity and uses the futuresmarkets to manage or hedge risks associatedwith those activities. Swap Dealer: A “swap dealer” is an entity thatdeals primarily in swaps for a commodity anduses the futures markets to manage or hedgethe risk associated with those swapstransactions. The swap dealer’s counter-parties may be speculative traders, like hedgefunds, or traditional commercial clients thatare managing risk arising from their dealingsin the physical commodity. Money Manager: A “money manager,” for thepurpose of this report, is a registeredcommodity-trading advisor (CTA); aregistered commodity pool operator (CPO);or an unregistered fund identified by CFTC.These traders are engaged in managing andconducting organised futures’ trading onbehalf of clients. Other Reportables: This comprises everyother reportable trader that is not placed intoone of the other three categories.

The following tables show how the newreport compares to the old report for goldand silver as of 29 September, the date of thelatest release at time of writing. It isimportant to remember that the categories‘commercial’ and ‘non-commercial’ are onlybeing disaggregated – they still contain thesame number of contracts, and hence the samelongs and shorts as before.

So, taking gold, we begin with openinterest – the total number of outstandingcontracts on Comex – which was 454,585contracts.1 As futures have a long and shortside, this means that there were also 454,585longs, which in the old report were split into anon-commercial long of 252,994 contracts,non-commercial spreading (which is where anentity has both long and short contracts) of49,564 contracts, a commercial long of84,923 contracts and finally 43,848 of non-reportables. The new report splits the non-commercial long and the non-commercial




page 14

spreading into two further categories, makingfour in all – 198,175 contracts of managedmoney longs, 31,419 managed moneyspreading, 54,819 other reportable longs and18,145 ‘other reportable’ spreading. Notethat the longs and the spreading contracts stilleach total the same as in the old report, andtherefore collectively they equal the total ofthe old non-commercial category. This meansthe residual ‘non-reportable’ long categoryalso remains the same, at 43,848 contracts.

The disaggregation follows a similarpattern for the commercial category, withlongs of 84,923 contracts, but there is a slightdifference. Whereas, before, there was nospreading category for commercials and therestill isn’t one for the Producer/Merchant/Processor/User category (because thespreading category measures the extent ofarbitrage trading in the futures markets, andan arbitrage using the futures markets is not acommercial activity), there is one for theother new category, the swap dealer. Thus thecommercial long is split into three categories:Producer/Merchant/Processor/User long of40,629 contracts, a swap dealer long of34,250 contracts, and a swap dealer spreadingof 10,044 contracts. This new spreadingcategory, which by definition has acounterpart on the short side, means that theold report overstated the longs and shorts ofthe commercial category, although not the netposition.

For the short side, exactly the same analysisapplies as for the longs, with the same

disaggregated categories. The net position, which is the longs minus

the shorts, by definition has no spreadingcategory, as these cancel out, and therefore, itis rather simpler – clearly showing how thetwo reportable categories in the earlier reportare now split into two new categories, withthe non-reportables the same.

So have we learnt anything new? On thenon-commercial side, not a lot. Where wehad non-commercial, we now have ‘managedmoney’ and ‘other reportables’. Of those,managed money is clearly useful, beingobvious speculation/investment demand.Across all 22 commodities in the new report,gold and silver have the highest ‘managedmoney’ long, at 44% and 33% of open interestrespectively, which intuitively seems right. Butof course all of this was previously in the non-commercial category, and as we don’t see anyreason not to continue adding the category‘other reportables’, to get totalinvestment/speculative demand, we in factstill have the non-commercial category asbefore. In other words, the disaggregationisn’t very illuminating – and is unlikely tobecome so unless as we get more data both inthe past (the CFTC has promised to releasetwo years’ back data imminently at the time ofwriting) and, in the future, showing that thetwo categories reveal very different trends.

But reform of the non-commercialcategory wasn’t the real point of the newreport. Instead, it was concern thatspeculative investment in commodities was

being ‘hidden’ in the commercial category viaswap dealers’ hedging of index fundinvestment. The new report separates outswap dealers from those entities that arehedging more obviously commercial activity.Interpreting this category for gold and silver istricky, as rather than showing a hugeundiscovered investment position, in both goldand silver, the swap dealers are net short. Ingold, this net short was 92,287 lots as of 29September (made up of longs, includingspreading of 44,294 contracts, and shorts,including spreading of 136,581 contracts),equal to 20% of open interest. For silver, theeffect is less pronounced but still there – swapdealers were net short by 2,241 contracts(with longs and spreading of 19,594 contractsoffset by shorts and spreading of 21,835contracts) as of 29 September, about 2% ofopen interest.

This doesn’t tally with what we knowabout index fund investment in gold andsilver, which is that both are substantially netlong. The CFTC’s Quarterly InvestmentReport estimates that, at the end of June 2009(the nearest available date), index fundexposure in gold was 113,000 contracts longand 40,000 contracts short, while in silver itwas 38,000 contracts long to 11,000 contractsshort. While not all of these will translate intoactual futures contracts held on Comex(traders will net off positions held both longand short before using the futures market) webelieve most will be.2

The CFTC gives two reasons why the net



page 15

swap dealer position might not match theindex position:3 a) swap dealers also hedgerisks that are not index-fund related (whichwould mean the swap positions being higherthan the expected index positions); and b)there are index fund investors who directlybuy futures rather than use swap dealers, andso are in the managed money category (whichwould mean the swap dealer positions beinglower than the expected index position). Forgold, and to a lesser extent silver, for the longsit seems (b) must be particularly important.

We can use these figures to say what is themaximum amount of investment in bothmetals that might be hidden in the swap dealercategory. For gold as of 29 September therewere swap dealer longs of 44,294 contracts, ofwhich 10,044 were spreading, so also short.It is possible that all 44,294 longs werehedging long index fund positions (althoughswap dealers clearly have other risks that theyhedge), which as 10,044 of those werespreading contracts would also imply in thatcategory were 10,044 index short contracts,4

meaning a net long index position of about34,000 contracts. If this was the case, then tofully count investment in gold on Comex wecould add to our non-commercial net long of231,386 contracts and our non-reportable netlong of 43,848 contracts another 34,000 morenet longs for index investment that werehidden in the commercial category. For silver,doing the same calculations, i.e. assuming theentire swap dealer longs are index investment,

we could add another 18,000 longs to thenon-commercial net long of 47,410 contractsand non-reportable net long of 16,696contracts. Neither of these two additions ishuge, and not something that invalidates usingthe non-commercial category to gaugeinvestment trends, but they do represent aneighth more gold investment and 28% moresilver investment than we would estimate fromlooking at the non-commercial and non-reportable categories alone.

There is another consequence, if ournumbers are correct. If net 34,000 indexfund long contracts in gold and 18,000contracts in silver are hidden in the swapcategory, this still means that (using the datafrom the Quarterly Investment Report as aguide) 39,000 net long index fund contracts ingold, and 9,000 net long index fund contractsin silver are in the non-commercial category(and probably in the managed money sub-section). In many ways, these investments aredifferent to ‘traditional’ speculation, being lessvolatile and less directly linked to the specificfortunes of gold and silver (rather thancommodity and investment trends as a whole).It’s hard to be certain about the numbers, butif the non-commercial net long ever fallsbelow something like 34,000 contracts in goldor 9,000 contracts in silver, be aware that thenon-index speculative investor might alreadybe net short. n

1

This is the futures-only report – there is also a futures

and options report. Normally the wider report is

better, but as index funds typically invest in futures

only, we will use that report in this article. 2 Comparison of the 12 agricommodites where the

CFTC publishes a weekly index fund report to the

Quarterly Investment Report suggests that there are

fewer longs and shorts held on the exchanges than

notionally would be needed but the net (long/short)

position is much the same. 3 Although for the 12 agricommodities where the

CFTC publishes index fund data on a weekly basis the

two categories do normally match up reasonably well. 4 It is possible, because the CFTC classifies entities not

trades, that of the swap dealers’ 34,250 spreading

contracts all 34,250 held long were hedging index fund

exposure, but none of the 34,250 held short were not.

But it is rather unlikely.

Matthew Turner hasbeen with VM Groupsince 2001 and coversprecious metals,agricommodities andeconomic analysis andforecasting. Prior,Matthew was aneconomist at the WorldGold Council and a researcher at TheEconomist. He holds a BA Hons in PPE fromMagdalen College, Oxford University and anMSc in Economics and E-Commerce fromBirkbeck College, University of London.



page 17


In his foreword to the new edition

of Roy Jastram’s “The Golden

Constant” Pierre Lassonde1

wrote: “This book, more than any

other, has given me my lifelong

passion for understanding the role

of gold in our societies.”

The Golden Constant was the first statisticalproof of gold’s property as an inflation hedgeover the centuries. For this, and for itsmasterful examination of the behaviour of goldand its purchasing power against thebackground of political and economic events,it is rightly considered a seminal study.

However, when published in 1977, it wastoo soon to assess whether gold’s long-terminflation hedging characteristics would persistafter the gold price was freed in 1971. Thenew edition, to which I had the privilege ofadding two chapters to Jastram’s originalwork, was able to start doing this. This articlewill summarise the main findings of theupdated version and attempt to draw someconclusions for the present.

The approach adopted by Roy Jastram wasin essence very simple (although executing itwas certainly not): research (when necessary)and construct an historical index series of thegold price; research (when necessary) andconstruct an historical index of prices; divideone by the other to compute an index of thereal value of gold; and then examine thebehaviour of these three series over timeagainst the political and economic

developments. His main analysis goes back to1560 for England/UK and to 1800 for theUSA.

What did Jastram find and do his findingsstill hold after 1971? I suspect that two of hisconclusions will surprise some people sincethey are counter-intuitive and contrary tocurrent experience. He concluded from hisresearch that: Gold is a poor hedge againstmajor inflation and that gold appreciates inoperational wealth (purchasing power) intimes of deflation. Have a look at Figure 1,which shows the gold price, the price indexand the index of the purchasing power of goldfor England from 1560 to 1970. This showshow gold prices and wholesale prices broadlykept pace with each other but also how intimes of inflation – until 1650, the Napoleonicwars, around World War 1 and then from 1950onwards – the general price level moved upfaster than gold so the purchasing power ofgold fell; vice versa in times of deflation.

While at first sight it may seem strangefrom the perspective of the present day thatgold lost value in times of inflation in the past,there is in fact a simple explanation. Gold waseither money, or closely related to money,throughout this period. In times of inflationwhen prices rise the value of money falls.Hence it is entirely logical that gold’spurchasing power behaved that way in thepast.

But from 1971 the opposite is true and werevert to what we today consider the morenormal situation of gold acting as a hedgeagainst inflation, as in the 1970s, or the fear ofinflation, as in recent times.

In contrast, Jastram’s main conclusion -that despite often substantial fluctuations goldhas held its purchasing power over thecenturies – still applies. Figure 2, for example,

shows how gold and consumer prices havebroadly kept pace with one another in theUSA from 1800 to the present. Figure 3shows the purchasing power of gold from1560 in England/UK and from 1800 in theUS. Its purchasing power has fluctuated,sometimes sharply. But in both countries itfluctuates around a roughly horizontal line – astable level.

Perhaps even more remarkable is theexperience of some other countries we look atbriefly in the book. France and Germany,shown in Figure 4, suffered more severelyfrom the wars of the 20th century than eitherthe UK or the US. France was defeated andoccupied during the course of World War 2while Germany was defeated and sufferedcomplete economic and political breakdown atits end. Germany also experienced thehyperinflation of the early 1920s. Yet again,while gold’s purchasing power fluctuated, andwhile at times the lack of market exchangerates or the statistical problems associatedwith hyperinflation impose breaks in theseries, the same conclusion holds. A Germanfamily owning a certain quantity of gold at theend of the nineteenth century would find, if itstill owned it today, that it would still buyapproximately the same quantity of goods andservices. In contrast any quantity of Germancurrency held at the end of the nineteenthcentury would today be worthless.

For an economist it is not entirelysurprising that if the long-run stability ofgold’s purchasing power holds in one countryit holds in all since in theory exchange ratesshould over the long term adapt to changes ininflation differentials. Nevertheless the 20thcentury is an extremely severe test of this.

Jastram’s Golden ConstantHow is it relevant today?By Jill Leyland, Economics Consultant


Why does gold have this power of broadlyholding its purchasing power over thecenturies and what lessons can, or cannot, bedrawn for present times?

Clearly the conclusion applicable to thepre-1971 period, that gold’s purchasing powerfell, almost automatically, in times of inflationand rose, again almost automatically, in timesof deflation no longer applies in currentcircumstances. There are also argumentswhich can largely explain why during much ofthe time up to the World War 1 gold held itsreal value; for example the classical goldstandard with a fixed gold/currency parityacted to keep prices stable over the long termthus making gold’s long-term purchasingpower also stable (the book had more detailson this).

But the longer-term constancy of gold’spurchasing power and the fact that this stillpersisted after World War 1 and in particularafter 1971 is a different matter. Its constancyover the centuries, through a huge range ofeconomic and political circumstances, throughcalm and crisis, peace and war, and throughimmense changes in the gold industry itself, isremarkable.

Two factors are worth mentioning as towhy gold’s purchasing power has remainedbroadly constant. First gold’s appeal tohumans, apart from its relatively limitedindustrial use, lies in two elements: the humanneed for security and the desire to ownsomething of beauty. These are human needsthat do not change over time. The desire forgold as an object of beauty or adornment goesback for millennia. The book, and the historyof the 20th century, amply demonstrates itsuse in a crisis and thus how it responds to theneed for security. Hence there is a constancyof demand for the metal to match the better-known constancy of supply, in that above-ground stocks of the metal change only slowlyover time.

The second key point is perhaps thealternating fluctuations shown in the chart and

the fact that for thelast hundred yearsgold’s purchasingpower will rise fora period and thenfall back by acomparable, if notalways exactlysimilar, amount.Gold, no one’sliability, can beviewed as thealternative to fiatmoney. Investorsturn to it whenconfidence in fiatmoney, and

particularly in the US dollar as the world’sleading fiat money, falls: that is when theyperceive that its value is diminishing or mightbe about to diminish. A fall in the value ofcurrency can come around for two reasons:either due to inflation, which is why gold isseen as an inflation hedge, or throughdepreciation against other currencies, which iswhy gold often acts as a dollar hedge. Lack ofconfidence in the system can also developthrough either political or economic concerns,which is why gold is seen as a safe haven.

It seems to be part of human nature thatgood times and bad times alternate. For awhile all is well with the global economy,confidence grows but then can turn to overconfidence and problems arise. This canhappen to a relatively minor extent, as in theearly 1990s, to a serious but geographicallylimited extent, as in the Asian crisis, to a moreserious extent as in the current crisis, or to areally serious and prolonged extent as in the1930s. And occasionally it happens to acatastrophic extent as in times of war. Whenpeople are confident many people do not seethe need for a “safe haven”. When problemsoccur, or are foreshadowed, the need becomesmore obvious. This alternation contributes tolonger-term constancy.

There are two conclusions from the book,therefore, that I thinkare particularlyrelevant to today:the fact that gold,despite sometimessevere fluctuations,does hold its realvalue over thecenturies and the factthat it has repeatedlyshown its ability tosafeguard wealththrough crises.Jastram’s work,however, providesmuch more than that

to anyone working in the gold market today.Gold has a strong and deep emotional pull onhuman sentiment. But deep emotion does notalways lend itself to rigorous thought. Therichness, depth and complexity of gold’s longhistory can make a long and difficult study buthistorical perspective can be a major influencein individuals’ attitudes towards the yellowmetal. So the combination of intellectualrigour in Jastram’s approach, his historicalanalysis and the way he wrote in both ascholarly and entertaining fashion (this is not adry academic tome) is what makes his work soimportant for the gold industry. n

1Chairman, Franco-Nevada. FormerlyPresident Newmont Mining Corporation2002-2006 and Chairman, World GoldCouncil, 2005-2008.

The Golden Constant: TheEnglish and AmericanExperience 1560-2007 by Roy WJastram with updated materialby Jill Leyland. Published 2009by Edward Elgar PublishingLtd (www.e-elgar.com)


page 18




page 20

Just over ten years ago, the LBMA

Management Committee decided

that it was time to expand the

Association’s horizons and look

beyond the shores of the UK for

its future development. So a

decade later, how has that

decision affected the growth,

membership and activities of the

LBMA?

During the first decade of its existence,membership had been confined to UKcompanies, albeit that many of them werethe UK branches of banks and tradinghouses whose head offices were located inNorth America, Asia or elsewhere inEurope. The most fundamental aspect ofthe changes introduced in 1999 was thedecision to allow companies locatedoutside the UK to join the LBMA asAssociates, at the same time allowingcompanies whose activities were relevantto the London gold and silver markets tojoin. This is in contrast to the basicrequirement for Membership (that acompany must be actively involved in theloco-London market). Ten years on theresult is that the number of Associates isgreater than that of the ordinary Membersand that the membership nowencompasses 20 countries. Totalmembership now stands at 120companies.

Another innovation in 1999 whichaffected me personally was the decision toappoint a full-time Chief Executive whowould ex-officio be a member of theManagement Committee. That was how Icame to present myself for duty in theLBMA’s tiny office in Frederick’s Place on

1st October 1999.

Looking back at the development ofthe Association over the next ten years, itseems to me that it has grown from aboisterous teenager, full of energy, into areasonably mature adult with lots ofexperience (both good and bad) gained

along the way.The workload hasincreasedenormously. Ouroffice space iscomfortablewithout beingshowy while oursystems andmethods haveimprovedimmeasurably.Although our

staff numbers have in effect doubled since1999, I still find it almost embarrassing toadmit to visiting delegations how few weare.

The biggest challenge in 1999 wasundoubtedly to organise the LBMA’s firstconference which, it had been announcedshortly before my arrival, would takeplace in Dubai in February 2000. Wewere in effect taking on the Financial Timeswhose Conference Division had beenrunning an immensely successful goldconference for the previous twenty years.And the nearest we had to conferenceorganising experience was the GreatHedging Debate – staged in Johannesburg– in 1997. But we had some realadvantages: an enthusiastic Public AffairsCommittee (which justified our slogan –“The Conference for the Industry, by theIndustry”) and a wonderful conferenceorganiser (Maggie Nash, fresh from theevents department at JP Morgan). If thatfirst conference had not been a success, itis quite possible that there wouldn’t havebeen a second. But it was and we arenow eagerly anticipating our tenth inEdinburgh next month. With oneexception, every conference has morethan covered the external costs of holdingthe events and thus offset the considerableoffice overheads attributable to them.

Another area which has seen hugechange over the past decade is ourstewardship of the Good Delivery List. In1999, the involvement of the Executive inthe processing of applications for GoodDelivery accreditation was minimal.There were only two referees, both UKcompanies, who bore the brunt of testingof applicants, both in relation to the assaytest and the testing of sample bars andwho therefore knew the identities of theapplicants. The logistics of the applicationprocess were managed by the “Vaults”, in

other words the members of the PhysicalCommittee, who took it in turn toprocess the applications through the stagesof the technical assessment. Today bycontrast, we have five referees (located inJapan, South Africa and Switzerland) whocarry out their work on a double blindbasis (ie, the referee is not aware of whois being tested and the applicant does notknow which referee is testing its bars).The management of the process is nowcompletely in the hands of the Executive.And finally proactive monitoring of GoodDelivery refiners was introduced in 2004(involving the regular re-testing of allrefiners, including referees, on a threeyear cycle).

Although not actually part of the GoodDelivery system, another activity inrecent years has proved very popular withthe refiners: the Biennial Assaying andRefining Seminar, first held in June, 2005.A by-product of these meetings was theReference Materials Project which regularreaders of the Alchemist have seenbuilding up to its successful conclusionover the past two years. The success, bothtechnical and financial of the project owesmuch to the commitment of the projectSteering Committee and the expertise ofthe two manufacturers, Tanaka andKrastsvetmet.

The most recent development and onewhich is at a very early stage is the idea ofcommercialising the data on preciousmetals generated within the market. Thegenesis of this idea was the need forproviders of cleared forwards to have areliable forward curve, representingactual market conditions at the end ofeach trading day for the calculation ofvariation margins.

It is by no means clear where theconcept of data commercialisation willlead. Together with some of the projectsmentioned above, it does appear that theLBMA is becoming more of a businessthan the simple trade association of adecade ago. But it seems to me thatregardless of the business model, onething will remain true. The LBMA’s mainobject will be to work for the good of thecompanies which together constitute theLondon bullion market and theircustomers around the globe.n

The LBMA - Expanding HorizonsEditorial Comment by Stewart Murray, Chief Executive, LBMA



page 21

LBMA News

MEMBERSHIP

Members

Landesbank Baden Württemberg(“LBBW”) was admitted as anordinary Member on1 September 2009.

The Royal Bank of Canada ceasedmaking markets in forwards on3 September 2009. It willcontinue as a spot Market Maker.

Associates

The Associateship of Baden-Württembergische Bank wasterminated at the end of August,2009 due to it having beenmerged into LBBW (see above).

GOOD DELIVERY LIST

There have been no changes inthe companies on the GoodDelivery List during the pastquarter.

The LBMA has introduced onesignificant change to the GoodDelivery Rules this year (inAugust, 2009). This relates to thesituation which occurs from timeto time where a Good Deliveryrefiner produces bars in the formof its registered Good Deliverybars that are intended forfabrication by a local customerand which do not meet therequirements of the LBMA (forinstance having inferiorappearance or in not having thespecified bar marks). Such barsmust be marked “NGD”. The textof the new paragraph in section 7of the Rules is shown below.

“If bars are produced in thegeneral form of Good Deliverybars, but due to their intendeduse (for example bars producedfor and delivered directly to anindustrial customer for use as a

raw material) they do not meetthe Good Delivery specifications(for example, inferior appearanceor sub-standard bar marks) thenthe Good Delivery refiner muststamp the bars NGD (meaningNon Good Delivery) in closeproximity to the LBMA-approvedmanufacturer’s mark.”

COMMITTEES

Management

Gerry Schubert resigned from theCommittee in early October as aresult of his departure fromINTL. We send him our thanksfor his lively and positiveparticipation in the work of theCommittee over the last threeyears.

Usually, the ManagementCommittee has a break in thesummer but this year it met eachmonth between August andOctober. The first of thesemeetings focused particularly onthe question of the possiblecommercialisation of the dataproduced in the precious metalsmarket. As a result, a new sub-committee, the Precious MetalsData Committee was set upunder the chairmanship of SteveBranton-Speak. The first taskidentified by the sub-committeewas the production of a forwardcurve, based on contributionsfrom Market Makers andrepresenting the actual situationin the market at the end of eachtrading day.

Physical

The Physical Committee met inlate August and early October.The Committee was pleased tonote that the long-runninginvestigation into the electronic

weighing of gold has finallyproduced a successful conclusion,namely an electronic scale thatappears to be able to match theaccuracy and reproducibility ofthe beam balance. See the briefarticle on this page by DouglasBeadle.

The main activity of thePhysical Committee is of coursemonitoring (and eventuallyapproving) applications for GoodDelivery accreditation. Atpresent, six refiners (from fourcountries) are actively goingthrough the technical assessmentprocedure. This may be a recordand it certainly places a heavydemand on the LBMA Executive.Five out of the six applications arefor gold, which is a very differentratio from that of recent years,when most applications have beenfor silver. In addition, a furtherten companies have indicated thatthey may submit applications inthe coming year.

Proactive monitoring isanother activity which placessignificant demands on theExecutive’s resources, especiallywhen as at present, many of thecompanies being monitored are inRussia and China. Satisfying theimport and export conditions inrelation to the despatch ofreference samples to thesecountries might best be describedas a “challenge”!

The Physical Committee hasalways been responsible for theissue of VAT in the bullionmarket. The Committee hasformed a VAT sub-committee toformulate proposals to put beforeHM Revenue and Customs(“HMRC”) with a view toagreeing a uniform and simplifiedapproach to the application ofVAT to storage, transfer, handling

and similar fees levied in respectof precious metals. It is hopedthat it will be possible to reachagreement with HMRC by1 January 2010, to coincide withthe introduction of new EU VATregulations concerning servicesand their place of supply.

Reference Materials Project

Following the successfulconclusion with the gold part ofthe project in the summer, it ispleasing to report that greatprogress has been made with thesilver materials. The projectSteering Committee hasconcluded that the materials arehomogeneous and essentially, itonly remains to determine theconcentration levels of the 21contained elements (by means ofa round robin analysis involving13 assayers). It is hoped that thematerials will be ready forshipment before the end of theyear.

Public Affairs

There has been one change in themake-up of the PAC, as a result ofDavid Holmes’ resignation fromthe Committee, due to a changein his responsibilities atCommerzbank in the wake of themerger with Dresdner Bank. Theresulting vacancy has been filledby Suki Cooper of Barclays.Many thanks to David for his fouryears of service on the PAC andin particular, for his manyinsightful and thoughtfulsuggestions.

The PAC has had something ofa fallow period during the pastfew months following the mostintensive period of work in thesecond quarter when theprogramme for the Edinburghconference was developed. The

By Stewart Murray, Chief Executive, LBMA

The London Gold Marking Fixing Limited has announcedthat there will be no afternoon gold Fixings on Christmas Eve, Thursday 24th December, 2009,

nor New Year’s Eve Thursday 31st December, 2009.



page 22

facingfactsPaul Burton

Managing Director

GFMS World Gold Ltd

Gold StocksStillRecovering

Just over a year ago, the

gold equity markets were

hit by the staggering

news that Lehman

Brothers had collapsed

and that Merrill Lynch

had been acquired. The

news broke just as the

annual gathering of the

world’s top gold

companies and the most

influential institutional

investors was convening

in Denver.

Fund managers and miningexecutives alike at the DenverGold Group forum were shell-shocked by the extent and depthof the massive sell-off in goldequities. The scramble on thepart of investors to be liquid andthe need of many hedge funds to

Committee’s meeting in late October representedthe first step in planning the programme for theconference to be held in Berlin during the period26 - 28 September, 2010. Check the website formore details as our plans evolve. And if you have asuggestion for a topic or a speaker, do please let theexecutive know.

Membership

Following Nick Frappell’s resignation from theCommittee in June as a result of his departurefrom Sempra, the vacancy has been filled by DavideCollini of Merrill Lynch. Thanks to Nick for hiswork on the Committee and best wishes to him inhis new position at Triland.

The Committee met in September to reviewprogress with a number of applications formembership and associateship. The Committee hasalso been asked by the Management Committee tocarry out a review of the structure of the LBMA’smembership and the requirements that applicantshave to meet to be admitted.

REACH

The LBMA has been working to produce a positionpaper arguing that the large gold bars held in the

vaults of the London bullion market should beregarded as articles for the purposes of REACHand that the corresponding imports should beexcluded from an importer’s REACH registration.The Brussels-based Precious Metals Consortiumhas assisted in the development of this paper.When completed, the paper will be submitted tothe UK Competent Authority (probably in lateNovember). The final phase in the work (at leastfor the moment) will be the organisation of aseminar, probably in early December, to allowLBMA members to evaluate whether they shouldjoin the Consortium or else obtain the necessaryregistration dossiers by means of a letter of access.

LBMA Staffing

Amy Berman has taken over the role of PR andMedia Assistant from Rionne Preuveneers(primarily the editing of the Alchemist and managingthe website).

Varsha Peiris has been appointed as OfficeAdministrator to support the work of theExecutive in a number of areas including officemanagement, membership applications, associatereviews and meetings. n

NOVEMBER

6-7International Precious Metals &

Commodities Show 2009

Munich

www.edelmetallmesse.com

10-12Russia & CIS Mining Congress 2009

Moscow

T: +971 (0) 4 709 4500

F: +971 (0) 4 347 3889

www.terrapinn.com

20-22China Mining Congress and Expo 2009

Tianjin Binhai International Convention

and Exhibition Center

T: +86 10 5822 1790

www.chinamining.org

21-22Hard Assets Investment Conference

San Francisco

T: +1 314 824 5515

www.hardassetssf.com

21-232009 China International Silver

Conference

Chenzhou, China

T: +86-10-85692818

www.silver2009.antaike.com

DECEMBER

3-4China Gold & Precious Metals Summit

Shanghai

T: +86 21 5181 5373

www.chinagoldsummit.com

JANUARY

20Minesite Forum

London

T: +44 207 562 3381

www.minesite.com

FEBRUARY

9-12Mining Indaba

Cape Town

T: +1 314 824 5515

www.iiconf.com

11-13CIS Precious Metals Summit

Moscow

T: +44 20 7017 7342

www.adamsmithconferences.com

26LBMA Annual Party

London

T: +44 20 7796 3067

www.lbma.org.uk

MARCH

23-27Asian Mining Congress

Singapore

www.terrapin.com

T: +65 6322 2700

MAY

18-20International Gold Symposium

Peru

[email protected]

T: +51-1 460 1600

F: +51-1 460 1616

JUNE

12-15IPMI Precious Metals Conference

Arizona

www.ipma.org

DIARY OF EVENTS



page 23

cover redemptions caused thePhiladelphia Gold/Silver Index(“XAU”) to plunge from 150 to64, a fall of 57% in less than amonth.

This year, however, we haveseen a gradual recovery in themarket with an initial peak at 161in June, when the gold price roseto US$980/oz, and then a newyear high of 174 as the gold pricemarched its way to theUS$1,000/oz mark in the sharpSeptember rally.

Since the October 2008 low,the XAU has grown by 172%against a 35% increase in the goldprice. This impressiveperformance probably says moreabout how oversold gold stockswere a year ago than it doesabout a return of the historicalleverage to the gold price thatgold stocks displayed in the past.Nonetheless, the mood at thisyear’s Denver Gold forum wasbuoyant despite the trials of thepast year, and interest in goldshares was high, with a record attendance.

One of the most significantand well-attended presentationsin Denver was that given byBarrick Gold Corp, the world’sbiggest gold producer. CEOAaron Regent’s presentationfocused on the company’sdecision to abandon its long-heldstrategy of hedging its goldproduction. Mr Regentexplained the rationale behindthe decision and outlined themechanics of how this will beachieved in response to someprobing questions from investors. Barrick Gold is eliminating all itshedging contracts by neutralisingits fixed forwards and buyingback a portion of its floatingcontracts. To finance the move,Barrick has raised a staggeringUS$4.0 billion through anoffering of 109 million shares.

Barrick intends applyingUS$1.9 billion of the proceeds toeliminate all of its fixed-pricedgold contracts (3.0 Moz) withinthe next 12 months. Thecompany will either purchasegold in the open market, whichwill add to the demand side, ordeliver its own production tosettle the hedge contracts. Sincethe end of June, Barrick hasalready bought back 2.4 Moz of

its gold hedges.The company will apply some ofthe remainder of the funds raisedto reducing its ‘floating contracts’on 6.5 Moz of gold.

There has been a trendamongst producers over the pastfew years to unwind anyhedgebooks as the gold price hasincreased in order to take fulladvantage of the rise, but Barrickis one the biggest and last torenounce the strategy.

Barrick has given its reasonsfor the about face as acombination of an increasinglypositive outlook on the goldprice, continuing robust goldsupply/demand fundamentals,and the adverse impact itscontinuance of a hedging strategywas having on its appeal to thebroader investment community.On this last point, figures fromWorld Gold Analyst certainlyshow that Barrick hasunderperformed itscontemporaries in the marketsince last year’s downturn.

The table below shows howthe top gold producers have faredsince the October 2008 lows(figures to September 14th).

Meanwhile, in Denver, the gold-producing industry presented apositive picture of organic growthfrom a well-stocked portfolio ofprojects. Investors seemed to beencouraged by recentperformances and appearedconfident that growth plans arerealistic.

Certainly, there areindications that the gold industryhas reversed, although perhapsonly temporarily, a four-year, 2%

per annum declining trend, withnews from GFMS in its latestassessment pointing to outputhaving expanded by 7% in thefirst half of 2009. The dramaticimprovement in production atone of the largest copper/goldmines in the world, FreeportMcMoRan’s Grasberg inIndonesia, was responsible alonefor almost 1 Moz of the boost.This increase was not due toexpansion, but a function of themine sequencing at Grasberg,which resulted in activities beingfocused in higher grade pit areasthis year.

Thus, the increase in Januaryto July 2009 may be just a blip inthe overall declining trend unlessrecord exploration spending overthe past few years can produce afew more success stories.However, that likelihood seemsremote, because the flight fromrisk last year that severely hit themajor gold producers was evenharder on the junior explorationstocks.

The TSX Venture index (usedhere as a proxy for theexploration sector) more thanhalved (from 1,608 to 684) frompost-Lehman to its nadir on

December 5.Highlighting the particularproblems of a sector that relieson equity risk capital, therecovery of the index has beenmuch more muted than that forthe companies that actuallyproduce gold (and are thusreceiving high prices for theirproduct). The index has risen88%, against a gold price rise of33% since December 5.

As another illustration of howthe junior market has changedsince the financial crisis of lastyear are the, comparativestatistics issued by the TSXVenture exchange on tradingactivity. In the eight months tothe end August 2009, the value ofdeals on the exchange fell by64% compared with thecorresponding period of 2008.The total market value of thecompanies on the exchangedeclined by 33%. Furthermore,transactions were down 41% andthe number of new listings fell by68% to just 59. Perhaps mosttelling, however, is the statisticthat new equity financing more

than halved to C$2.1 billion.The junior sector has yet to

fully recover, with only the mostpromising projects findingadequate support in the market.Many companies are still cash-strapped and in survival mode.The impact on an industry shortof exploration success will beprofound, as at least one fullseason of drilling has been lost inmany cases. n

Given the freedom of expression offered to contributors

and whilst great care has been taken

to ensure that the information contained in the

Alchemist is accurate, the LBMA can accept no

responsibility for any mistakes, errors or omissions or

for any action taken in reliance thereon.

The Alchemist is published

quarterly by the LBMA.

For further information please

contact Amy Berman,

LBMA PR and Media Assistant

13-14 Basinghall Street

London EC2V 5BQ

Telephone: 020 7796 3067

Fax: 020 7796 2112

Email: [email protected]

www.lbma.org.uk

Paul

Burton

isManagingDirector ofGFMS WorldGold, acompanywhich

undertakes equity researchand publishes World GoldAnalyst, a leadingindependent gold mininginvestment publication.

Paul holds an MSc inMining Engineering and anMBA from the University of theWitwatersrand, South Africa. [email protected]

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