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Global Gold Demand Will Overwhelm the Manipulators
Nathan McDonald for Sprott Money
Precious metals have taken a horrible beating over the past month. They were suppressed to levels not seen since 2010. The result of this price depression was a massive increase in demand from individual investors and nations alike.
No longer are people fooled by the paper price of precious metals. Premiums have remained relatively high through this price correction and demand has been so intense, that the US Mint was forced to cease sales of their ever-popular Silver American Eagles.
Nation states, such as China and Russia are well known for their affinity to gold and have also continued their accumulation of precious metals. Russia, which officially became the fifth largest holder of gold recently, announced that it has once again increased their gold reserves by another 150 additional tonnes in 2014. An increase of 8.4% year over year.
The demand from China, Russia and India are well known, but now a previous seller of gold products could be entering the arena. The ECB, a long time disbeliever in precious metals is currently battling stubbornly low inflation and may be forced into a very unconventional strategy.
Yves Mersch, a member of the ECB’s executive board, indicated that inflation levels are only 0.4 percent, a far cry from the targeted goal of 2 percent set by the ECB. The average person should take this news as positive, given that your standard of living and hard earned savings are not being eroded at a faster pace. Yet central bankers don’t look at it this way. To them, this is incredibly negative news.
Western central banks know that they need to massively increase inflation. This is the only way in which they can alleviate the huge debt levels that have been accumulated by their misguided wars and spending.
To help assist in increasing this inflation the ECB has indicated that it may begin acquiring gold, shares and ETF’s. This news comes as a shock to many, given the ECB’s previous resistance to all things gold and the fact that their fiat currencies are in direct competition with the yellow metal. Mr Mersch, does however add a warning:
“Every purchase of a security – or precious metal or foreign currency – naturally increases the credit risk of the buyer”
This additional demand, if the ECB pursues this policy, could be the straw that breaks the camels back. As reported demand is already severe enough at this artificially depress price levels and any additional demand could cause a fail to deliver from the COMEX, a scenario that would catapult prices to new highs and set the gold market free.
Some sources of this demand are the Shanghai gold exchange, which is currently acquiring roughly 60 tonnes of gold per week, or in other words a staggering 3000 tonnes per year! India and Russia are not helping alleviate supply restraints either, having acquired 94 tonnes and 37 tonnes in September alone.
This cannot and will not go on forever, given the fact that this is only a few key sources. Don’t forget, much of the Eastern world is also a net buyer of precious metals. With a weekly global mine production of only 230 tonnes, a default of delivery could happen at any given time.
The question is, where is this source of additional supply coming from? Western central banks cannot have much more in the vaults and we are seeing huge withdraws from the COMEX, that are putting it dangerously close to a default.
Perhaps, the recent admission by the Ukrainian central bank indicating that their gold reserves are near depletion, is the source of this additional unknown supply:
In an interview on Ukraine TV, none other than the head of the Ukraine Central Bank made the stunning admission that “in the vaults of the central bank there is almost no gold left. There is a small amount of gold bullion left, but it’s just 1% of reserves.”
The writing is on the wall. The fact is, the world is now a net buyer of gold and demand is beginning to overwhelm supply. The recent price drop has only helped boost this demand as investors are correctly seeing precious metals prices as “on sale”.
Those manipulating the price of precious metals are going to be forced into a strategic retreat, recent price action is already indicating this. The metals will recover and their prices will go higher. It is only a matter of time before the dam breaks.
Nathan McDonald for Sprott Money
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It's certainly plausible. The ECB is getting desperate, but buying gold would put them at war with Washington.
Kicking up the gold price should do the trick to add a few percentage points to the inflation rate. However, it also risks blowing the entire system sky high... now.
I say bring it on, just as soon as I can row my boat back over to the bullion dealer. The last batch I had was lost in an unfortunate tippy canoe accident. Damn boats.
"We've drilled too Cheap, men! Lookout, she's gonna Blow! Run!"
Let me get out my little calculator here...
230 tons per week x 52 = 11960 tons annually
- 3000 tons Chinese demand = 8960 tons
- 94 tons x 12 (1128) for Russia = 7832 tons
- 37 tons x 12 (444) for India = 7388 tons
- 300 tons a year if Swiss initiative passes = 7088 tons
Not that I have anything against specie but I'm not going to be gullibly played for a sucker by people who are allegedly on my side.
If, on the other hand, world gold production is around 2500 tons a year (approx 230 a MONTH), this could be more of a problem. But people who want to base their argument on statistics really ought to use real ones rather than sloppy assumptions and shit-ass proofreading.
As the article actually reads, the guy is either lying... or he's lying some other way. Take your pick.
I have the same Russky coin! I had to go check the lake bed to make sure Sprott had not found it. Whew.
The global production is about 230 tonnes PER MONTH, not per week.
I know that and you know that and Mr. WC knows that but read the article and pay attention to what the alleged expert says about gold production. It is just as important to fact check the people you agree with as the people you do not agree with.
180 tonnes per month outside of the BRICS,Russia and China aren't selling theirs.
Not sure about S.Africa.
utter nonsense, there is and always will be sufficient (paper) gold.
There is also always adequate physical gold....if the price is high enough. Even the evil olde banking families would prolly let some go....if the price is high enough.
With gold there can't be a supply problem, it is ALWAYS a price problem.
Goldbugs: welll shit buddy tptb have manipulated it duh....ok ....using that story/logic than "they" can manipulate it from 1200 back to 383$....like it was in the late 90's when I sold some coin.lol
They do not have enough gold to pull that off and that is the whole point. So sad you missed it. It was great.
The run up to 1900....nah at that time I was to busy fucking and drinking my way around...you have to be sober to make money lol
gold peaked @1900...since than a whole lotta crazy shit has transpired in the world and its @1200.... gimme a fucking break
Paper took it too $1900 no talk of manipulation then.
"
So 2014 will be a milestone and hopefully a magic year in may respects
So if we think about 2014, all right, I’m just giving you 2014. Read Again ...... I’m just giving you 2014....
find complete story @
https://www.youtube.com/watch?v=QYmViPTndxw
Hope this help in understanding why market going north in 2014 .....but will be upside down in 15 ?
Total gold ever mined is around 166,600 tons. Of which more than 50% is tied up in jewelry and another 13% has been used in other ways leaving 31,000 tons privately held and about 29,000 tons held by various governments and government institutions. Russia has around 1800 tons itself. If 230 tons a months are mined, that only amounts to 2760 tons a year added to above ground stock and taken out of a finite underground stock of approximately 56,000 tons still in situ.
If the world's demand and extraction continues at the pace it is, the planet's gold will be used up in 20 years... talk about default on delivery!
That 50% 'tied up in jewelry' is really held as bullion in a pretty form. Only in the West is the gold weight ignored. In China and India the weight of gold is always posted. Just check out a site that sells India Bridal necklaces. The weight of the gold in the piece is clearly stated. This is not just for looks. It is held as wearable wealth. Buyer and seller know that. Any analysis that calculates this as gold lost to the system is in error. All this gold will come to the market if the prices rises although much will continue to be held by the owner if they do not need to convert to currency now.
As for 'enough gold'...there is already enough. All that has to happen if there is relative scarcity a price increase will fix that.
If you need a ton of copper then you need 1000 kg of metal. If you are using gold to store wealth then you just need so much currency equivalent in the metal. If you need to convert a million dollars into gold then it matters little if you hold a pound or 50 pounds. Eventually we will get a stable market at a higher price and this will become clear.
the difference in attitude is the same with the gems wealthier indians like to adorn their gold with. labor arbitrage accounts for much of the difference. it costs a lot less for a guy in india to hammer out some ornate piece of gold jewelry than zales has to spend to get you to buy some overpriced piece of bling(one of my favorite ghetto words) just so you can brag that it is real gold and diamonds and your relatives can sell it for wholesale value. put it this way. in the usa, if you bought gold jewelry of any kind but especially earings in a retail setting back when gold was at the bottom of the cycle(2000?) the real value of the piece is breakeven somewhere between here and the top. in india it has the value of the gold.
Exactly, the amount of gold in gold jewelry is laughable. But morons still fork up many times the melt value for jewelry.
TO DA MOON, ALICE
The OP left out that now GS and HSBC are under investigation.
http://www.bloomberg.com/news/2014-11-25/hsbc-goldman-rigged-metals-pric...
"Investigation"... haha... that's funny...
"Here, let me put on my "Stevie Wonder investigation goggles. . . "
Ahhhh. Everything looks good to me now!
Total world production is NOT 230 Tonnes per week as in the OP. I think he meant 230 Tonnes per MONTH. That would be total mining output ex-China and ex-Russia.