Gold producers accused over 'misleading' data

Section:

By Neil Hume
Financial Times, London
Friday, October 25, 2013

http://www.ft.com/intl/cms/s/0/6606e0d6-3d96-11e3-b754-00144feab7de.html

A furious row has broken about between a high-profile gold investor and the industry body charged with promoting the precious metal on behalf of the world's biggest gold producers.

Eric Sprott, chief executive of Sprott Asset Management, which runs several bullion funds, has accused the World Gold Council of painting a misrepresentative picture of the real demand for gold.

In an open letter published early this week --

http://sprott.com/markets-at-a-glance/open-letter-to-the-world-gold-coun...

-- Mr Sprott said a massive imbalance between supply and demand was not being reflected in the gold price because widely followed statistics circulated by the WGC were misleading.

... Dispatch continues below ...



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"Over the past few years, we have seen incredible demand for gold," he wrote in the letter. "But demand statistics reported by the World Gold Council consistently misrepresent reality, most with regard to Asia."

Mr Sprott believes annualised demand for gold could be more than 3,000 tonnes more than supply.

Gold has fallen 20 per cent this year and is on course for its first annual loss in more than a decade.

Concerns about an end to ultra-loose US monetary policy and heavy selling by institutional investors have been among the factors driving the price lower.

On Friday, gold, which started the year at almost $1,700 a troy ounce, was trading at $1,350.

"I urge the leaders of the WGC, for the benefit of their members, to improve the quality of their data and find alternative sources than GFMS, which paints a misleading picture of the demand for gold," Mr Sprott wrote.

GFMS, which is owned by Thomson Reuters, is a leading precious metals consultancy and produces one of the most authoritative reports on the gold industry.

But the WGC has hit back, saying Mr Sprott's estimates of gold demand lacked sophistication.

“The use of import data as a proxy to measure gold demand is somewhat simplistic and does not take into account factors such as round-tripping and stocking/destocking," the WGC said in a statement. "To effectively measure gold demand, a more detailed holistic analysis is required."

Thomson Reuters GFMS said it stood by its 2013 supply and demand gold estimates. The figures were "based on highly detailed on-the-ground analysis by a large team of analysts based around the world and which are figures supported by experts at the World Gold Council," the company said.

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