Approved for one hour of Continuing Education credit through the CFP board.
usfunds.com Today’s Speakers Moderator Lisa Aston Frank Holmes Aram Shishmanian U.S. Global Investors U.S. Global Investors World Gold Council Marketing Leader CEO and CIO Chief Executive Officer usfunds.com 2 June 2016 | 16-196
usfunds.com Be Sure to Participate in Our Polls You Could Be a Winner! 24 Carat Gold Plated Horseshoe Three opportunities to win: We’ll select one person at random from each poll question. usfunds.com 3 June 2016 | 16-196
usfunds.com Poll Question #1 How is gold included in your portfolio? usfunds.com 4 June 2016 | 16-196
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usfunds.com Gold Just Had Its Best Quarter in 30 Years usfunds.com 6 June 2016 | 16-196
usfunds.com We’ll Address These Questions in Our Webcast Today • Why does gold have timeless appeal to investors? • What are the “Fear Trade” and the “Love Trade” and how do they drive gold demand? • How do historical and seasonal patterns affect gold? • Is the gold rally we have seen this year sustainable? • How can gold and gold equities be an integral part of your portfolio? usfunds.com 7 June 2016 | 16-196
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usfunds.com Driver: The Fear Trade Janet Yellen, Chairman President Barack Obama of the Federal Reserve usfunds.com 10 June 2016 | 16-196
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Nominal Interest Rates Real Interest Rates Real Interest Rate = Nominal Interest Rate - Inflation 12
usfunds.com Gold Rebound Has Been Linked to Fall in Interest Rates usfunds.com 13 June 2016 | 16-196
usfunds.com The Inverse Relation Between Real Interest Rates and the Price of Gold usfunds.com 14 June 2016 | 16-196
usfunds.com The Great Tectonic Shift of Physical Gold From West to East usfunds.com 15 June 2016 | 16-196
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usfunds.com Mainland China Official Gold Bullion Imports A price maker is an entity that holds a large amount of power over the price of the goods it buys or sells. A price taker is an entity that must accept prevailing prices in a market, lacking market share to influence price on its own. usfunds.com 17 June 2016 | 16-196
usfunds.com Central Bank Gold Buying: Deficit to Surplus usfunds.com 18 June 2016 | 16-196
usfunds.com Driver: The Love Trade usfunds.com 19 June 2016 | 16-196
usfunds.com Gold Historically Follows a Seasonal Pattern The seasonal pattern shows historical tendency of when the highest and lowest prices occurred, based on analysis of daily prices collected over the last 5, 15 and 30 years by Moore Research Center, Inc. usfunds.com 20 June 2016 | 16-196
usfunds.com Gold’s Love Trade usfunds.com 21 June 2016 | 16-196
usfunds.com 2016 Chinese New Year: Year of the Monkey usfunds.com 22 June 2016 | 16-196
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usfunds.com Emerging World Holds 49% of the Global Population, Just 24% of GDP Past performance is no guarantee of future results. usfunds.com 25 June 2016 | 16-196
usfunds.com China Surpasses U.S. — Compare GDP in Absolute Terms vs. GDP on Purchasing Power Parity Valuation usfunds.com 26 June 2016 | 16-196
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usfunds.com Gold vs. Gold Miners usfunds.com 30 June 2016 | 16-196
usfunds.com Near-Record Gold ETF Inflows in First Quarter The price of gold is subject to substantial price fluctuations over short periods of time and may be affected by unpredicted international monetary and political policies. usfunds.com 31 June 2016 | 16-196
usfunds.com Physically-Backed Gold ETF AuM by Region in Tonnes Q1’16 vs Q1’16 vs Q1’15 Q1’15 Q2’15 Q3’15 Q4’15 Q1’16 Q1’15 % Tonnage Change Change North 1,068.6 1,044.8 1,012.3 955.9 1,186.9 118.3 11 America Europe 612.0 618.6 583.9 570.2 690.5 78.5 13 Asia 43.3 41.0 42.9 46.0 54.1 10.8 25 Other 40.6 37.0 39.1 38.4 42.8 2.2 5 Global 1,764.5 1,741.5 1,678.1 1,610.6 1,974.3 209.7 12 Total Source: World Gold Council. First Quarter 2016 32 usfunds.com June 2016 | 16-196
usfunds.com Top 10 Physically-Backed Gold ETFs by AuM in Tonnes Q1’16 vs Q1’15 Holdings as of Fund Country End of March % Change 1 SPDR Gold Shares United States 819.3 11 2 iShares Gold Trust United States 186.3 13 3 ZKB Gold ETF Switzerland 137.7 -1 4 ETFS Physical Gold United Kingdom 113.9 2 5 Gold Bullion Securities United Kingdom 92.3 8 6 Source Physical Gold United Kingdom 73.7 51 7 Xetra-Gold Germany 70.7 28 8 Sprott Physical Gold Trust United States 54.8 39 9 Central Fund of Canada Ltd Canada 52.7 0 10 Julius Baer Physical Gold Fund Switzerland 44.2 -10 Global Total 1,974.3 12 Source: World Gold Council. First Quarter 2016 See Disclosures Pages for any holdings in the Gold and Precious Metals Fund or World Precious Minerals Fund. 33 usfunds.com June 2016 | 16-196
usfunds.com Indian Gold Bar and Coin Investment usfunds.com 34 June 2016 | 16-196
usfunds.com Gold Jump and Market Disruption Push India into Steep Discount usfunds.com 35 June 2016 | 16-196
usfunds.com Around a Third of Global Government Debt Has Negative Yield Source: World Gold Council usfunds.com 36 June 2016 | 16-196
usfunds.com Top 10 Reported Official Gold Holdings Country Tonnes % of Reserves United States 8,133.5 75% 1 2 Germany 3,381.0 69% International Monetary Fund 2,814.0 - 3 4 Italy 2,451.8 68% 5 France 2,435.7 63% 6 China 1,797.5 2% 7 Russia 1,460.4 15% 8 Switzerland 1,040.4 7% 9 Japan 765.2 2% 10 Netherlands 612.5 61% As of March 2016. Source: World Gold Council. First Quarter 2016 37 usfunds.com June 2016 | 16-196
usfunds.com The Wealth Effect The wealth effect is the premise that when the value of stock portfolios rises due to escalating stock or gold prices, investors feel more comfortable and secure about their wealth, causing them to spend more. Source: Investopedia usfunds.com 38 June 2016 | 16-196
usfunds.com Wealth Effect: Chinese and Indian Markets Have Lagged the U.S. usfunds.com 39 June 2016 | 16-196
usfunds.com Gold’s Love Trade Has Declined usfunds.com 40 June 2016 | 16-196
usfunds.com Sharp Slowdown in New Mine Start-Ups usfunds.com 41 June 2016 | 16-196
usfunds.com Increased Hedging Coupled with a Slight Uptick in Mine Production Outweighed a Marginal Decline in Recycling Year-on-year- Quarter-on- Q1’15 Q1’16 Tonnes change quarter change Total Supply 1,081.0 1,134.9 5% 4% Total Mine 717.7 774.0 8% -10% Supply Recycled Gold 363.2 360.9 -1% 53% Source: World Gold Council. First Quarter 2016 42 usfunds.com June 2016 | 16-196
usfunds.com Gold’s Rise in the First Quarter Viewed by Some Mining Companies as an Opportunity to Hedge for Tactical Purposes usfunds.com 43 June 2016 | 16-196
usfunds.com 7 Reasons Gold is Rising • Unprecedented nominal negative interest rate • Real negative interest rates • Investors losing faith in central bank policy • Central banks are now net buyers of gold • Weakening U.S. dollar • Greater scarcity: Gold production is rolling over • China consuming huge amounts usfunds.com 44 June 2016 | 16-196
usfunds.com Will Gold Follow the Same Pattern This Year As 2002-2003? usfunds.com 45 June 2016 | 16-196
usfunds.com Up-Cycles in Gold Price Strength of Up- Super Ordinary Ordinary Weak Super ??? Cycle Sept. 1976 – June 1982 – Mar 1985 – Mar 1993 – Timing of Aug 2001- Dec 2015 - Present Down Cycle Nov 1980 Feb 1983 Mar 1988 Feb 1996 Sept 2011 Increase from 666% 70% 71% 27% 606% 22% Trough to Peak Less Central Commodities Negative Interest Weaker US$, Banks Sales, Less Super Cycle, Rates, Economic Main Drivers Interest Rates Inflation Spiral Declining Real Hedging, but Weakling US$, Uncertainty, Central for up-Cycles Drop Sharply Interest Rates increasing Real No Producer Bank Buying, Interest Rates Hedging Scarcity? Source: Paradigm Capital Research usfunds.com 46 June 2016 | 16-196
usfunds.com Down-Cycles in Gold Price That Followed Strength of Super Average Moderate Moderate Average Down-Cycle Dec 1980 – Mar 1983 – Apr 1988 – Mar 1996 – Sep 2011 – Timing of Down Cycle May 1982 Feb 1985 Apr 1992 July 2001 Dec 2015 Decrease from -65% -43% -33% -35% -44% Peak to Trough Central Bank Sales, High Real Interest Rates, Strong US$, Main Drivers for Rising Interest High Real Hedging, Growing Producer Hedging, Central Commodities Down-Cycle Rates Interest Rates Mine Supply Bank Sales Collapse Source: Paradigm Capital Research usfunds.com 47 June 2016 | 16-196
usfunds.com Amplitude of Up-Cycles in Gold Price Aug 2001 – Sep 1976 – Jun 1982 – Mar 1985 – Mar 1993 – Dec 2015 - Sep 2011 Nov 1980 Feb 1983 Mar 1988 Feb 1996 Present Low Price (At $111 $297 $288 $328 $268 $1,050 Close of Day) High Price (At $850 $504 $492 $415 $1,892 $1,285 Close of Day) Average Price $292 $416 $392 $381 $701 Increase % from 666% 70% 71% 27% 606% 22% Low to High Source: Paradigm Capital Research usfunds.com 48 June 2016 | 16-196
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