Precious Metals & JewelleryWho needs Who?

Dr Paul Walker3rd Dubai City of Gold Conference

Dubai, 21-22 February 2005

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focus on precious - Rhona O’ Connell Director

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research covering the jewellery and investment markets.

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Presentation Outline

• Historical relationship between jewellery demand and metal supply

• Who are making the money? – a look at the value chain• Important macro trends for jewellery• Conclusions

Jewellery demand as a proportion of total supply in 2004*

Gold Silver Platinum

Jewellery 68% 30% 31%

Industrial uses 14% 65% 69%

Other 18% 5% 0%

TOTAL 100% 100% 100%

*Based on GFMS preliminary 2004 data

The value of metal used in jewellery in 2004*

Gold Silver Platinum

Average metal price - $/oz 409.19 6.65 845.41

Nominal Metal Value $16,221m $1,687m $1,860m

*Based on GFMS preliminary 2004 data

Jewellery – global market size?

Gold: jewellery & mine output - An historical perspective

0

500

1000

1500

2000

2500

3000

3500

4000

1985 1987 1989 1991 1993 1995 1997 1999 2001 2003

Tonnes

Mine Output

13,000 tonnes

Jewellery Demand

24,500 tonnes

Gold jewellery & mine supply

*Based on GFMS preliminary 2004 data

0

500

1000

1500

2000

2500

3000

3500

To

nn

es

1985 1994 2000 2004*

Mine Supply

Jwlry Demand (incl.scrap)Jwlry Demand (excl.scrap)

And for silver? – demand covers supply…

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

1985 1987 1989 1991 1993 1995 1997 1999 2001 2003

Tonnes

Mine Output

93,000 tonnes

Jewellery Demand

98,700 tonnes

What about Platinum?Well, nearly the same story…

0

20

40

60

80

100

120

140

160

180

200

1985 1987 1989 1991 1993 1995 1997 1999 2001 2003

Tonnes

Mine Output

430 tonnes

Jewellery Demand

330 tonnes

Average prices over the same 20 year period

US Dollar* Gold$/oz

Silver$/oz

Platinum$/oz

1985 average 134 317 6.13 293

2004 average 85 409 6.66 845

20 year average 96 355 5.23 473

* US Dollar Major Currency Index – base year 1973 = 100

US$/gramme 24K Gold 18K Gold 950 Platinum

Wholesale price 14.12 14.45 28.90

Metal cost 13.68 10.26 27.59

Labour cost 0.20 0.60 0.72

Profit 0.24 3.59 0.59

Margin 1.7% 24.8% 2.0%

China- Jewellery Margins(Fabricator)

(Basis US$860/oz and US$411/oz metals prices)

China- Jewellery Margins(Retailing)

(Basis US$860/oz and US$411/oz metals prices)

US$/oz 24K Au 18K Au Pt 950

Retail price 495.80 675.33 1,044.34

Metal Cost 411.00 450.22 855.42

Profit 84.80 225.11 188.92

Margin 17.1% 33.33% 18.1%

But does the jewellery industry need support?

Mega trends

• women’s earning power

• men’s jewellery

• age at marriage

• leisure hours

• investment background

• Demographic changes

Competition for Jewellery

• technology goods

• travel

• luxury consumer goods

• other new products

Precious metals & JewelleryWho needs Who?

• All metals have relied upon jewellery demand to soak up

increased mine supply.

• Jewellery as a ‘spend’ category is under threat.

• Marketing expenditure does not appear to be coordinated nor

monitored.

• More strategic, independent research on the jewellery sector is

needed.

Some Conclusions