I do not want to pursue a career in the gold industry. An industry that employs so many, bright, nice and intelligent people ought to be facing a bright future. I am not so sure.

Brands require continual refreshment – yet your brand concept was written in the bible.

I am going to concentrate on gold because, long ago, PGMs and silver did many of the things gold producers ought to have done. Also, For PGMs and silver, there has long been development of market sectors, wide diversification of end-use of products, no vast overhang of supply against demand and we have seen none of the same fragmentation.

Businesses should respond in a particular way to the laws of supply and demand and the availability of finance. There are two separate businesses in respect to gold, which are not linked as intimately as would expect :

One is an extremely sophisticated, developed, innovative and aggressive financial and support service business, which has clone well so far.

The second is a classical physical business, which has not behaved in a business-like fashion and is running out of time. This gold business has not moved through the maturing stages of normal businesses.

Increasingly, the real gold business faces the necessity for return on capital being high enough to attract funding. It must begin to make the price rather than react to it, manage supply and demand, manage capacity and create wealth. Mining and production of gold have not created wealth in real terms for many years.

Basic Economics

Although almost everyone in the business knows what has to happen, I see no willingness to take action. Businesses must be changed by those inside them, but external factors can force changes on us if we do not face the inevitable.

There is nothing so unique about gold that we should suspend all standard economic ideas with reference to it. Economic forces are inexorable. You can forecast them and take actions to minimise their effects but if you ignore them, they will change you.

Gold has been around a very long time, but the business has changed less than any other I have looked at. Owing to the history and relative scarcity or old gold, you have had lavish and inefficient structures for a long time. You are fragmented vertically and horizontally, with more steps in the chain than any normal business.

Everyone seems to accept that any gold discovered must be mined regardless of supply/demand and price. Even though you have double the refining capacity you use, new refineries are being produced and no one shuts one down. The whole industry operates for cash.

Consolidation - the First Priority

The art of troubleshooting concerns focus and persistence, sorting out the priorities or actions and following them through, whatever happens.

Businesses as old as yours should be structured so that 80 per cent of production is controlled by five large businesses, with a clear leader. There should be industry consensus on the state of the market. The other 20 per cent leaves room for innovation. In contrast, 30 per cent of your business comprises the eight largest producers. You may not believe consolidation is possible - but if I were to attend this meeting 40 years from now, you would be consolidated. The sophisticated financial superstructure sitting on the gold business may have helped defer inevitable actions.

But sooner or later, fragmentation must be addressed. Whether it concerns takeovers, the formation of larger groups or co­operative groups, at a minimum, there must be far more central focus on business direction.

Take a Long-Term View

The real supply and demand situation in gold, the non-diversity of outlets, the sheer size of the overhang, with central banks wishing to reduce holdings, does not seem to scare you. You believe that someone will keep the industry afloat while you make money out of short-term fluctuations in price. But you do not need to grasp at straws; you need a lifeboat. You require persistent and consistent leadership of the type the LBMA and the financial business provide.

The financial arm is dedicated to supporting the physical business. Central banks believe they can disinvest and that the industry will be able to recycle all of the gold. Yet we have already seen why expenditure patterns will change. Moreover, there has been no historic attempt to market gold. The financial business allows you to rearrange the deck chairs on the Titanic.

There is nothing so unique about gold that we should suspend all standard economic ideas with reference to it. Economic forces are inexorable. You can forecast them and take actions to minimise their effects but if you ignore them, they will change you.

Too Little Done to Stimulate Demand

In this area, your actions are inadequate and too late. Jewellery provides 85 per cent of your demand. Thus, not only should you back-sell into that business, you must help them rationalise themselves. Economic forces are beginning to work on the jewellery business, but years out of date. Nevertheless, other factors contribute to why rationalising the jewellery business is vital. Demographics illustrate major changes in culture. We cannot assume that, without intervention, demand for investment gold jewellery will continue forever. Brands require continual refreshment yet your brand concept was written in the bible.

We have all seen heavy blows dealt to gold's image in our lifetimes. It is no longer required as a safe haven against inflation. In a world of greater exchange rate fluctuation, a gold-backed currency may be of benefit. When the World Gold Council announced their marketing plans, they omitted to mention action in the East. Worse, the stated marketing strategy would not work over there. Moreover, the competition for discretionary spending in that part of the world is far wider than we imagine. At least, there should be a universal logo, which promotes the virtues of gold.

Develop Industrial Uses

There has been great development in potential industrial uses for gold with relatively little effort over relatively little time. If some of these new outlets were developed, there is a chance you can create better, sounder and more diverse demand, including electronics, nanotechnology, catalysts, new materials and fuel cells, each of which will sell in the millions.

Move Away From Jewellery

There is plenty of room for better growth and more diversity in more secure areas than jewellery. It scares me to put a vast amount of effort and ingenuity into discretionary items.


If the supply side were genuinely concerned about cost structure, they could genuinely reduce it. However, this requires operating for return and not cash.

You seem to believe that the market can absorb any amount of gold. It is good news that most new prospects are in high- risk areas and even the supportive financial institutions you employ will baulk at such political risks.

Nonetheless, one cannot forecast any foreseeable shortage of gold. You must reduce the physical surplus, but you will not bring the business into equilibrium by kerbing production.


E-Commerce will not totally change your business, but failure to take part will place you in Further peril. Unfortunately, it will not be good news for everyone. 828 e-commerce increases competition and decreases margins, sometimes dramatically. A transparent market increases turbulence, of which there is a lot already. You have a magnificently intelligent system in your market, which tells you just what is happening, but not who is driving change. This issue will become more important as e­commerce takes hold. E-gold could use up a considerable amount of gold if it is made to work. Actual consumption of gold would be better, but this is a gift-horse - don't look it in the mouth.

Why the Inertia?

I believe that you all know what needs to be done. Thus, I have to ask why you have not done it. I have seen a large number of businesses across the world in this situation and the reason is always the same - the comfort level is still too high. I suspect that the pain level must get a lot worse before it gets better.

I do not believe that you deserve that. The future lies in your hands. I am sorry to be depressing - I admire people in this industry a lot. However, it is time to catch up with the rest of us in the new century.