GFMS GOLD SURVEY 2015 Q2 UPDATE impact of Regulations 25? Switzerland 26? Bullion Coin Review 27? Gold and the Volatility Smile 28? Scrap 29TABLE OF CONTENTS4(tonnes) Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 YoY %Supply Mine production 742 805 824 711 760 844 818 729 773 1.8%Scrap 271 343 303 309 268 273 277 285 270 1.0%Net Hedging Supply -18 -5 -5 8 57 -7 46 -3 10 -82.6%Total Supply 995 1,143 1,122 1,029 1,084 1,110 1,142 1,011 1,054 -2.9%Demand Jewellery Consumption 739 606 581 565 487 514 572 504 444 -8.9%Jewellery Fabrication* 757 608 528 580 509 554 571 544 478 -5.9%Industrial Fabrication 106 105 101 102 101 100 98 98 96 -5.4%.of which Electronics 72 73 70 71 71 70 68 69 67 -4.5%.of which Dental an extra 604 tonnes is within our previous estimates for additional Official Sector purchases and no revisions have been made to GFMS data.Almost all major physical gold markets suffered in the second quarter as demand for bars and coins fell another 12% year-on-year and were some 63% below the Q2 2013 peak. In the largest consuming sector, jewellery, fabrication declined by 6% year-on-year while consumption was down by 9%. In country markets seasonal strength has seen India reclaim the top spot in regard to total gold consumption; however the first half was finely balanced with China pipping India at 394 tonnes versus 392 tonnes.The big story from the Official Sector was Chinas announcement that Junes foreign exchange and gold reserves included an extra 604 tonnes of gold (see page 15). While this can be seen as bullish for gold, in that China has publicly shown that it has been increasing gold reserves, the initial price reaction was negative. The timing of the increase could also be related to a recent commitment to meet IMF Special Data Dissemination Standards (SDDS) reporting standards as the country pushes for the renminbi to be included in Special Drawing Rights (SDRs). GFMS regularly makes adjustments to our statistics on Official Sector holdings, which we only report globally, and the increase is within our previous allowance for Chinese holdings, therefore no revision has been made to our series. 5On the supply side of the equation initial estimates for Q2 mine production are for a marginal increase of 2% year-on- year to 773 tonnes while total supply fell by 3% owing to substantially lower hedging activity in Q2 when compared to the Polyus Gold hedge of Q2 2014. Scrap supply was broadly neutral, up 1% year-on-year, but importantly this is beginning to turn a corner in some markets and Q2 2015 marks the first percentage increase in global scrap supply since Q1 2012. When compared to total new supply to the market in Q2 the 14% decline in demand leads to a 196 tonne surplus in the market with the 7.5% US dollar price decline having had little impact upon offtake.Elsewhere prices played a more important role and in Turkey quarterly average prices above 100 lira/ gramme brought large amounts of scrap back to the market and also saw net bar consumption turn negative. The largest price move came in Russia, where a recovering rouble saw gold prices fall by 18% over the quarter. Institutional investor interest in gold, like commodities in general, has remained in the doldrums for much of the year and options volatility suggests that most speculators are increasingly worried about declines in gold pricing (see page 28). CFTC managed money data to the middle of July also showed the net-long position falling to its lowest level since the series began as new short positions have been heaped on the market. ETF gold holdings meanwhile failed to repeat Q1s 37 tonne increase and declined by 1 tonne over the quarter, with further drawdowns reported in July.PRICE OUTLOOKPrices in the second quarter averaged $1,192/oz against an early April poll by Reuters of 35 forecasters that predicted $1,195/oz. Since then there has been a sell off as investor sentiment has remained negative and substantial shorting of the market has taken place. It remains our view that a US rate hike this year is already priced into the market and that an increase could well prompt review of asset allocations that leads to an increase in gold holdings. For Q3 2015 we forecast an average price of $1,135, which is forecast to be the nadir before a $1,175/oz average in Q4. This brings an annual average of $1,180/oz in 2015, $10/oz higher than our previous forecast. Strength is forecast to continue in our base case with 2016 averaging $1,250/oz. Full 10-year forecasts under three economic scenarios are available exclusively on Thomson Reuters Eikon. Total Tonnage 858tJewellery Fabrication 56%Electronics 8%Other Industrial 2%Dental meanwhile Company C has put the proceeds into the stock market and again failed to recoup its capital. As both Company B and C are now failing