"Gold's qualities as an indestructible asset are in some respects an Achilles heel - every ounce of it ever mined is potentially for sale...In my view, therefore, supply is not the issue, demand is the issue, or more importantly the consistency of demand at higher prices." Martin Stokes, LBMA Chairman
Demand was by no means the sole issue at the LBMA's Precious Metals Conference 2000, but it was the common thread underlying many of the speeches. A keynote speech by Tim Green, Launching Gold into the 21st century, provided an overview of gold as it entered the new millennium - which paralleled silver's condition a hundred years ago as a metal unsure of its future. But as silver had found a new role in photography and industry, perhaps gold could find its future in fabrication - with some help.
In all there were five formal sessions - covering the bullion market, the official sector, mine production; demand and marketing - followed by parallel workshop session in the afternoon of the second day. Each session had a chairman experienced in that sector who opened the session by providing their own insights.
Topics ranged from the management of reserves by central banks to the impact of new accounting procedures on the miners' hedge books. Some speakers concentrated on developments in a particular sector of the market. Bullion banks, for instance, must weigh credit considerations and the cost of capital in providing bullion transactions. Producers are re-examining hedging procedures. Central banks are reconsidering their management of reserves.
Demand was discussed from many different angles. What is the likely evolution of the Indian market - and how long will demand there be sustained? What impact will digital photography have on silver demand? Can the Internet increase consumer demand for precious metals?
The importance of marketing was discussed by speakers from both inside and outside the gold industry, in particular from diamond and platinum industries. Interestingly, even the diamond industry's spending on marketing lags far behind many luxury brands. Whereas companies like Hilfiger and Gucci spend as much as 20% of revenues on advertising, the diamond industry spends less than I%. In gold, the pervasive lack of co-ordinated marketing efforts was mentioned repeatedly - as a warning. Even more than the diamond industry, it can no longer take demand for granted.
Speakers' thoughts on a variety of topics:
"Remarkably, an ounce in the ground is worth more than an ounce in the vault. In time s of declining prices and increasingly controllable costs, it seemed the logical thing to do to hedge a proportion of your output for as far into the future as you could get the credit lines." - Martin Stokes
"... hedging will remain a significant factor in the gold market."- Robert Guy
". . . the limited usage of some perhaps ill-advised products has tended to give hedging in general a bad name. This is not fair and we should collectively try and avoid the mistake of making sweeping generalisations." - Jessica Cross
". . .Shareholders have been pressuring companies to cut back on their hedge positions and several companies have responded. This is encouraging, as it improves the supply/ demand balance for gold and provides much better upside potential for the metal." - Wayne Murdy
"We should never forget that central banks have bee n net sellers over the last 35 years and, through this new century, that trend will continue, like it or not."- Tim Green
"This is a product world in which to stop running is to fall behind, and in m any ways, gold producers should take care. Their product is in danger of not running fast enough ." - Kelvin Williams
"The industry also has to create an aura about gold for the younger generation, so that they buy it as readily as any new fashion item of clothing or shoes." - Tim Green
". . . the goods largely sold themselves. So, design, product development, compelling advertising and inspired merchandising were never integral or vital parts of the overall diamond industry. Until now, that is." - Marcel Pruwer
On Good Delivery:
"I would like to ask the LBMA to consider a review of its rules and allow the specification of London Good Delivery to be changed to include the two most popular bullion bars - kilo and ten tola."
- Jeffrey Rhodes