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Thomson Reuters GFMS Gold Outlook for Next Three Months:

Date of Release: 4th May 2012

IMPORTANT NOTE: The following is for informational purposes only and was developed by Thomson Reuters GFMS. It does not take into account the investment objectives, financial situation or particular needs of any particular person. Information is from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Opinions and estimates are the judgment of Thomson Reuters GFMS and are subject to change without notice. Distribution of this information does not constitute agreement with, or an endorsement of, the views expressed. Obviously, future outcomes are impossible to predict with certainty. Investors should obtain advice based on their own individual circumstances and understand the risks before making any investment decisions.

In April, gold traded within a tight $1,620-$1,680 band, its narrowest monthly trading range since last June. in our view, this could be considered as a period of consolidation before investors return in force to drive gold higher, potentially to test again its all-time-highs later this year.

Turning to the near-term outlook, similar to april, the growing likelihood of further dollar strength will remain the key handicap for the gold price, as renewed sovereign debt worries, an increasingly bearish economic outlook for the euro area and subdued Qe3 expectations will boost the safe-haven appeal of the american currency. in addition, we would caution that the forthcoming elections in france and Greece may well cause some jitters to the market. related to this is gold’s recent sideways trading, which will see investors continue to increase their cash positions and wait on the sideline for a clear direction. furthermore, physical support from major asian markets is likely to remain somewhat quiet, as china enters a seasonally weak period in terms of jewellery sales while demand in india is expected to be restrained by elevated local gold prices.

Nevertheless, it is of note that, although gold is still biased towards short-term downside risk, the scale of the decline could be relatively modest and we expect prices to be well supported at $1,580. in part, this is due to the fact that net “investor” positions had fallen to fairly low levels by end- april. With further long liquidation likely to have already occurred in early May, the scope for another major wave of speculative selling is limited at the time of writing. additional support for the yellow metal should come from ongoing robust purchases by central banks, some of which are believed to have occurred on price dips. indeed, although fresh investor interest in gold has remained subdued year- to-date, the official sector has continued to add to their bullion holdings, at a similar pace to 2011. for instance, both Mexico and russia added roughly 17 tonnes of gold reserves in March, while the preliminary statistics released by the Philippines indicated a sizeable amount of purchases over the same period (most likely via the international market instead of acquisitions of local mine production). This also helped to explain gold’s resilient performance in the last few weeks, despite persistent long liquidation in both gold eTfs and futures markets. Going forward, we remain of the view that net official sector purchases will stay elevated this year, which should provide a solid floor for the yellow metal.

In addition, we would argue that the underlying economic backdrop for gold investment remains broadly intact, particularly in light of rock-bottom interest rates and elevated public debt on both sides of the atlantic. even though the impact of the ongoing sovereign debt crisis in europe has not been gold-friendly so far this year, due to the pressure on the euro against the dollar, a further deterioration could spark more gold purchases as a means of wealth preservation. Meanwhile, there is still a good chance that the fed will announce some form of additional asset purchases in late 2012, as we expect us economic growth to slow down mid- year. as the prospect of further new stimulus measures grows, this will encourage a firmer tone to investors in gold, which should push the gold price back to levels around the $1,750 mark before end-July.

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