Institutional Investment in Gold

Gregory Mthembu-Salter Thank you very much, Shane. We move on now to Dr Graham Birch, who is the former Head of Natural Resources at BlackRock. He began his career as a geologist, gaining a PhD from Imperial College back in 1984. He then became a gold analyst with sell side broking firms before joining Julian Baring at Mercury Asset Management, now BlackRock, in 1993. There he helped launch the Mining Trust, the largest investment trust float at the time, and broadened the fund range into areas such as energy, alternative energy and agriculture. Gold remained a focus though and Graham won numerous performance awards as manager of a $3 billion BlackRock Gold and General Fund. Under his leadership, natural resources

funds at BlackRock grew from $2 billion to around $50 billion in total. Since retiring from BlackRock earlier this year he has become a non-executive director at Petropavlovsk and is vice-chair at Rothamsted Research, as well as venturing into farming. He will now address the related topic of institutional investment in gold. Institutional Investment in Gold Graham Birch Former Head of Natural Resources, BlackRock I. Preamble Thanks very much for that introduction, Gregory, and thanks to Shayne for setting the scene for my comments on institutional investment in gold. II. Why Do Investors Like Gold? Before I say too much about that, though, I do think it is worth just recapping over the thing that most of you already know, which is why do investors see gold as an investment, because they do not see all commodities in that way.  I am afraid the most boring and obvious thing is that it is a store of value. It has a fantastic track record over many hundreds of years or, indeed, thousands.  It is also one of the few major financial assets today that remains, if you want it to be, outside the banking system.  As Shayne has already alluded to, it is an asset, not a liability pretending to be an asset like all those equities and bonds are.  It is invisible to prying eyes. We are in an environment now where governments are seeking to tax everything they can and it is difficult for them to do that if they do not know you have it.  Of course, looking at all of you here, you know that it is freely exchangeable all around the world. That makes gold a great asset for people who are rich who want to stay rich. It is not so suitable for people who are poor who want to become rich, although it has not been too bad in the last year in that regard. III. Gold’s Value Is Not Always Valued However, people do not always see gold’s attributes. You do not really need gold if you think inflation is dead or if governments are benign or if taxes are very low or if currencies seem solid or if markets are booming. When market returns are high and they do not seem risky, then people tend to sell their gold, but that is not what they are doing...

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