New York, 21 April 2010

Gold prices rose sharply over the course of 2009, from around $807.30 early in the year to as high as $1,218.30 in early December. The average gold price in 2009, $974.70, was 11.7% higher than 2008’s average. This increase in gold prices in 2009 primarily reflected continued large-scale purchases of physical gold by investors, according to CPM Group’s Gold Yearbook 2010, released today. Investors continued to buy large volumes of gold, stimulated by the combination of financial market turbulence and severe recessionary economic conditions in most parts of the world. Investors are estimated to have bought 37.0 million ounces of gold in 2009. The combination of this strong level of investment demand and a dramatic shift in central banks from being net sellers of gold for most of the past 45 years to being net buyers of gold in 2009 kept gold prices high and rising throughout 2009. The Gold Yearbook 2010 provides detailed statistics and analysis on these and other major gold market trends last year, along with projections for 2010.

Gold prices had fallen sharply in late 2008, as global credit markets dried up, putting a squeeze on the finances of most individuals, institutional investors, and corporations in the world. Gold prices fell at that time due to two major trends. First, there were enormous gold leveraged positions, in gold-indexed notes and other derivative investment products written by major bullion banks and sold to institutional and high net worth individuals. As the credit markets seized up, the credit behind these positions contracted, forcing liquidation of many highly leveraged structured gold products. Additionally, in late 2008 and early 2009 gold once more served a function for investors that it has served for 5,000 years: Gold investments provided liquidity when there was very little liquidity available in other investments. Selling due to these two functions of gold overwhelmed the increase in demand for physical gold in small bars and coin form at this time, pushing prices downward. As the credit markets stabilized during the first half of 2009, these factors dissipated once more, allowing still-strong investment demand to push gold prices higher – to record highs by the end of 2009. CPM Group’s analysts explain these trends in detail in the Gold Yearbook 2010, along with the consequences for the gold market going forward.

Among the key trends in the gold market last year, gold prices reached record highs on a settlement basis for the third consecutive year in 2009. The official sector became a net buyer of gold in 2009, reversing a trend of being a net supplier of gold for most of the time since 1965. Mine production rose 2.7%, while total supply of newly refined gold entering the market rose 2.5%. Fabrication demand declined 16.9%, led by an 18.2% drop in jewelry use of gold.

Gold meanwhile solidified its standing among investors as a premier and exceptional financial asset to provide protection against a host of financial, economic, and political problems. The report analyzes investor attitudes toward gold, concluding that many longer term investors are expected to remain interested in gold over the next several years, even as economic conditions improve, as financial wounds remain fresh in many minds and portfolios. Short-term investors meanwhile may step back from gold as global economic prospects are expected to brighten.

Investors added 37.0 million ounces of gold to their holdings in 2009, down from 41.7 million ounces, but still high by historical standards.  Prices, basis the nearby active Comex gold futures contract settlement, reached a record $1,218.30 on 3 December. That same day on an intraday basis gold prices peaked at record $1,227.50. Prices have come off since then, but they retain the potential to reach new highs this year. Whether this happens or whether the December 2009 highs stand as the cyclical peaks for gold prices will depend how financial, economic, and political conditions fare. It would seem most likely that there would have to be a major negative  economic or political event or a combination of such events to forcefully draw back both short-term and longer term investors into gold if gold prices are to push to new highs. While such events may not unfold, investors are projected to be large buyers of gold again this year, purchasing 39.8 million ounces. This should help keep prices high, if not move them to yet new records.

The official sector purchased 15.1 million ounces of gold in 2009 on a net basis. The People’s Bank of China officially added 14.6 million ounces of gold to its holdings in April 2009, transferred from the Chinese State Administration of Foreign Exchange (SAFE). The SAFE had purchased this gold from domestic sources from 2003 through April 2009. Another large buyer of gold was the Reserve Bank of India, which bought 6.43 million ounces from the International Monetary Fund. The Central Bank of Russia purchased 3.78 million ounces of gold while the central banks of Sri Lanka, Belarus, Mexico, Mauritius and others also increased their gold holdings. This year the official sector could purchase between six and nine million ounces of gold.

These are just some of the findings in CPM Group’s Gold Yearbook 2010. The 213-page hard-bound report provides detailed statistics on trends in each sector of the gold market in 2009, with insights into developments for this year.

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CPM Group’s Gold Yearbook 2010. Available in printed and/or PDF format. US$150.00. Available from CPM Group. 30 Broad St., 37th Floor. New York, NY  10004 Tel. 212-785-8320. Fax: 212-785-8325. email: This e-mail address is being protected from spambots. You need JavaScript enabled to view it . The report may be ordered and downloaded online at www.cpmgroup.com

CPM Group is scheduled to release its annual Silver Yearbook on Tuesday, 11 May. Its annual Platinum Group Metals Yearbook will be released on Tuesday, 29 June.

The Gold Yearbook 2010 is sponsored by Barrick Gold Corporation, CME Group, The Electrum Group of Companies, Euromoney Books, Goldcorp Inc., Kitco Inc., The Metal Bulletin Group, Multi Commodity Exchange of India, Noah Financial Innovation, Royal Gold Inc., Commodities Now, and The Institute of Scrap Recycling Industries Inc.