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Global Supply and Global Demand for Gold

26 Apr

Calculations [courtesy Google Images]

Calculations
[courtesy Google Images]

Bill Holter (The Holter Report) recently published an article which included some math concerning the world’s supply of gold.  According to Holter, the best estimates of the total “stock” of existing gold (all the gold that’s accumulated for at least 3,000 years) is roughly 170,000 tons.

If we divide that 170,000 tons of gold “stock” by the world population (7 billion), the result is about three-quarters of an ounce of gold per person.

In addition, the world mines and adds an additional 2,600 to 2,700 tons of gold each year.  That works out to about 1/85th of an ounce of “new” gold mined each year for each person on the planet.

Holter’s math raises some implications and questions:

  1. There’s less than one ounce of gold per person in the world.  That’s a very small supply.
  2. Although Holter didn’t say so, much of the total stock of hold is held by a few government and banks.  Thus, the total supply of gold available for sale or private purchase is even smaller than the 170,000 ton “stock”.
  3. The number of people who want gold is unknown, but probably includes virtually every adult on the planet.  That’s a very large potential demand.
  4. Given the tiny supply and huge demand, does the price of $1,300 an ounce make sense?  Does common sense suggest to you that a $1,300/ounce price is the result of a free market reflecting the true forces of supply and demand—or is that price the result of a manipulated market that defies the forces of supply and demand?

 

On top of Holter’s math, implications and questions, let’s add the world’s total debt to our calculations.

According to Max Kaiser, the total world debt is about $233.3 trillion.  That has to be a conservative estimate since it can’t include the total supply of derivatives which some people value at over $1 quadrillion.

Even so, if we divide Kaiser’s conservative estimate of the total world debt by the total world population (7 Billion), we learn that the global debt averages out to (at least) $33,000 for every man, woman and child on the globe.

Let’s divide that $33,000 by the average per capita amount of gold (3/4th ounce) available on the planet.  By doing so, we learn that (in theory) the entire global debt might be backed by gold if the price of gold were raised to about $44,000 per ounce.

I’m not suggesting that the entire world debt will be backed by gold anytime soon or even ever.  But I am suggesting that backing the entire world debt with gold is absolutely possibleif we raised the price of gold to something like $40,000 to $50,000 per ounce.

More, while I don’t expect the price of gold to reach $50,000 an ounce in my lifetime, a price of $25,000/ounce doesn’t seems irrational.

I’m not predicting $25,000 gold, but if the fiat dollar collapses (as seems inevitable) and if the world returns to a gold-based monetary system (which seems likely), $25,000 gold is a reasonable possibility.

Can anyone say that the fiat dollar absolutely won’t collapse within, say, five years?

Can anyone say that in the aftermath of that collapse, the world won’t be forced to return to a gold-based monetary system?

Can anyone say that gold can’t hit $25,000—a 1,900% increase—within the next five years?

Can anyone identify any other generic investment in stocks, bonds, land, etc. that has even a remote chance of increasing in price by 1,900% over the next five years?

$25,000 gold in the next five years is not a sure thing.

But it’s not a remote possibility either.    

Govern your investments accordingly.

 
23 Comments

Posted by on April 26, 2014 in Gold & Silver Coin, US Dollar, Values

 

Tags: , ,

23 responses to “Global Supply and Global Demand for Gold

  1. moon

    April 26, 2014 at 4:46 PM

    Al, concerning this question:

    Can anyone identify any other generic investment in stocks, bonds, land, etc. that has even a remote chance of increasing in price by 1,900% over the next five years?

    If your definition of gold includes the whole precious metals group, as it sometimes does in writings and conversation, my answer to your question is no.

    If, however, your definition of gold is gold only, my answer is yes.

    If gold goes to $25000 per ounce and the present gold/silver ratio, 66:1, does not change, silver would also increase by 1900% to $378 per ounce.

    $50,000 gold is not out of line for several reasons, one is: bull markets that have been held back, manipulated, or otherwise surprise traders can overshoot fundamentally sound values in a paniced, blow off phase of trading. Remember tulips bulbs? Remember Florida swamp land? Remember Beanie Babies?

    Some folks have expressed the idea that silver is more rare than gold. I’m one that would not be surprised if that’s true. If it’s true, when traders realize this fundamental, silver could blow the doors off of gold in price increase.

    After reading your comments concerning potential demand for gold, two situations came to my mind:

    1) At the peak of the metals bull market in January 1980, most people were still either unaware of the significant price rise or were trying to decide if gold was a good investment. If not most people, I’d say very close to 50% of the adults were not part of the demand.

    2) Recently, I watched a video of a street reporter who tried to get passers by to buy his one ounce of gold for $50…I think it was a gold eagle. The reporter’s shooting location was within short walking distance of a business that bought gold. At the time, the ounce of gold would have cashed out at $1500. Nobody would buy his ounce of gold even when he eventually offered it to one woman for $10…ahhhhh, would that have been a 1500% return? Hmmmmm…

    So, I’m questioning the idea that potential demand would be 100% of earth’s population.

    Gold and silver, right now, are similar to real estate in the ’70s and ’80s. At that time one could have put a newspaper real estate section on the wall, stepped back, thrown a dart, bought the property the dart hit at list price, and made money.

    Speaking of money…paper is not money, silver and gold would be the money.

    Concerning USD, here’s a stock tip: I’m considering stocking up on wheelbarrows.

     
    • Adask

      April 26, 2014 at 5:18 PM

      I was only talking about gold.

      I agree that the demand concept may be exaggerated. Nevertheless, the point remains that there is a significant global demand for gold. That demand may be more latent that actual, but it still seems to suggest (at least to me) that the $1,300 price is “unnaturally” low.

       
      • moon

        April 26, 2014 at 6:02 PM

        We totally agree on “unnaturally” low. We, probably, also agree on strong gold demand…real demand illustrated by active traders: the big boys: banks, large funds, etc. I agree that there’s enough demand for gold to make your scenario a strong possibility.

        Even as strong as gold demand is, however, in my opinion, silver will out perform gold percentage wise as it has already done in this current bull market (from 2001 to their recent highs).

         
    • Donna Lee

      April 27, 2014 at 2:07 AM

      I like your stocking up on wheelbarrows idea, moon!

      After all, wheelbarrows are what trains most public servants to be able to walk upright on their hind legs.

       
  2. Brix

    April 27, 2014 at 1:14 AM

    Until inflation is removed from economic and business practices even a GOLD or Bi-metals – Gold and Silver backed system will have their issues. A quick study of Roman History proves that. Several times Rome had to dilute it’s amount of gold and silver in the alloyed coinage of the time to meet the demands of it’s citizery.

     
  3. Donna Lee

    April 27, 2014 at 2:09 AM

    My post above, was of course said in the most kindest, loving way.

     
    • moon

      April 27, 2014 at 12:02 PM

      Hi Donna Lee. Love is the most important fundamental in any endeavour.

       
  4. Peter

    April 28, 2014 at 9:56 AM

    The Dollar is not going to collapse it has been and will continue to collapse, in progress since A.D. 1913. Silver and Gold are in a bull market–FACT– bull markets are trends that have beginnings and endings. To the astute observer in the High State of Objective Observation it will be rewarding going forward because we are early inthis bull market . Regardless of whether the markets are manipulated or not, they may be manipulated to your advantage, providing a low risk entry level for a triple AAA rated asset class. Of course, this is not a rating of “this state” it is a rating determined by the People who possess knowledge, wisdom and aptitude that can react at a time that is seen by most as an incorrect strategy.

    This bull market is no different that any other one the bull has just tried to throw off many participants
    in the corrective phase over the last three years. When the bull has determined it has washed out all the buyers that bought into the parabolic spike that occurred in A.D. 2010 into early A.D. 2011. it will resume the next leg up.I strongly suspect that the corrective phase that commenced in early A.D. 2011 has ended and a new trend emerged in January of A.D. 2014. In technical analysis terms in regards to Elliott Wave count we are in wave 3. Wave 3’s are extremely powerful because as the awareness or the unfolding fundamentals become more obvious to the more sophisticated masses, in this case seeking safety in an environment destructive to capital in the form of promissory debt instruments.

    Try to unload your F.R.N’s while they have purchasing power soon to be “marked down” in the global FX markets. Keep your inventory of F.R.N.’s very low, it may be easier to convert them to silver and gold now than to convert them into what Jim Willie calls the “sheiss dollar a/k/a the Republic Dollar . Domestically held dollars will be brutally devalued while foreign held dollars will retain full value. Thus the reason DOLLARS ARE HEADING OFFSHORE rapidly .

     
    • moon

      April 28, 2014 at 10:35 AM

      Peter, interesting thoughts you’ve expressed. One can always turn metal into paper…however, turning paper into metal isn’t always so easy, sometimes, close to impossible. Key word is: now!

      If, in your last paragraph, you’re suggesting that FRNs will be more valuable offshore, I wouldn’t bet the farm on it. FRNs don’t motivate the admiration they once did…anywhere.

       
  5. Peter

    April 28, 2014 at 10:54 AM

    Moon, from what I have read the corporations with large cash positions that understand the coming dollar devaluation are moving dollars offshore, foreign held dollars will hold full value as opposed to domestically held dollars which will be devalued. These actions by corporations will disappear dollars out of U.S. inc. and will prompt the powers that be to infuse new dollars (republic sheiss dollars) into the U.S.inc. economy . As you and I understand the time to purchase silver is now because the move up from here is going to be fast and powerful. I look forward to posting on this blog and keeping in touch with you so we can both be in the High State of Objective Observation as this move gets under way. The new trend [SHORT TO MEDIUM TERM] is beginning and it will end AT MUCH HIGHER LEVELS . One of the characteristics of a bull market is higher highs and higher lows. This market has been exhibiting this trait since it’s inception.

     
    • moon

      April 28, 2014 at 1:13 PM

      Peter, please explain to me this difference between “full value” and “devalued” value. I’m not in disagreement that there’s movement of FRNs…they constantly move, sometimes faster than at other times. FRNs have already been devalued and are continually being devalued without overt notice in WSJ. As this devaluation occurs, it shows up in trading worldwide. Full value of an FRN is whatever it can be traded for at any given time. If a publicly declared devaluation happens, it will still dictate FRN trading worldwide.

      It is true that those who get the first devalued FRNs can take advantage of putting FRNs into tangibles before the prices (USD) of those tangibles are raised…that’s continually happening…nothing new. It’s also true that pockets of undervalued tangibles can be found around the globe at any time, which allows FRNs to buy more. That’s not new either.

      It’s also true that there is and will be a lot of money made in currency trades…also, a bunch lost. Keep in mind, though, that we’re now talking about intangibles, rather than tangibles. We’re also talking about trading through rigged markets, possibly not rigged in your favor. If you’re a corporation with a large cash position and you want to move that position offshore to trade tangibles or intangibles, knock yourself out. How would you in offshore trading have an advantage in trading FRNs?

      One can buy a Swiss Franc contract, for example, or buy a call option to buy Swiss Francs if one thinks USD may be devalued verses Swiss Francs. If the trade goes as projected, there will be some paper value created. What would one have after the trade is settled? Fiat currency. One could do spreads, straddles, swaps, flips, and all sorts of exchange/brokerage created gimmicks, but even if it all worked perfectly, one would still end up with fiat currency. Then, there’s the downside…the trade goes awry and can create theoretically unlimited loss. In paper trading, there’s something called expiration date by which one has either gained or lost. Both of these situations can happen even if one is exchange trading in gold. One might choose to take physical delivery, and can do that if physical gold is available to cover the trade. Remember that Germany isn’t getting real satisfaction on gold delivery right now. Without physical delivery, one still ends up with fiat currency, most likely.

      I may be one of those simple minded ones that EDOMS THORN has mentioned a couple of times, but I’d rather have the physical where I can touch it, especially over the next five years.

      If one buys an ounce of silver, pays in full, and takes delivery, that one is in the same position of a silver call option buyer, except that there’s no expiration date and that one already has physical delivery. If one buys 5,000 ounces of silver, pays in full, and takes physical delivery, that one is in the same position as buying a Comex 5k ounce silver contract, but without the expiration date and physical delivery having already happened. Yes, there’s a difference in one’s trading funds…I’d rather have less paper and more metal.

      Back to my original request: Peter, please explain to me this difference between “full value” and “devalued” value.

       
  6. henry

    April 28, 2014 at 12:17 PM

    If you buy gold/silver where will you store it? If it is your house and food becomes too expensive for your neighbors to buy and/or the welfare/SS checks stop would it be safe there? If the government knows that you bought some won’t they send the goon squad to collect it? If you store it in a bank (safety deposit box) won’t it be stolen in the coming bank holiday? If you store it in a depository, won’t that be raided first in an emergency? Perhaps you could bury it.

     
  7. Adask

    April 28, 2014 at 12:45 PM

    There are no easy answers in the event of chaotic times. But it will be better to have the problem of storing gold that you have, than having no storage problems because you have no gold.

     
    • moon

      April 28, 2014 at 1:16 PM

      Ditto.

       
  8. citizenquasar

    April 29, 2014 at 1:29 AM

    According to Dr. Joseph P. Farrell (http://gizadeathstar.com/), not only is no one really sure how much gold is in circulation, but there may be as much as ten times as much gold held in secret as is publicly known. Several factors contribute to this:

    1. Operation Golden Lilly swindling after WWII.
    2. Vatican Bank swindling after WWII.
    3. Asteroid mining.
    4. “White” gold production by…alchemical means.

    All that being said, Dr. Farrell is one of the few voices I know of who is NOT predicting a currency collapse. Just being informative here.

     
  9. Adask

    April 29, 2014 at 4:49 AM

    According to some sources, the total supply of mined gold on the face of this earth is about 170,000 tons–acquired and squirreled away over the past 3,000 years. So, if there’s ten times as much gold as is is reported, then there must be over 1.5 million tons of gold hidden somewhere.

    Ten times as much gold as is currently supposed? Ten times! How could they have concealed so much gold? The concealment would have to have begun generations ago, perhaps centuries. What would be purpose of concealing so much gold–and perhaps for centuries?

    Oh, wait! I didn’t see the bit about “mining asteroids”. Now, it all makes sense. We’ve been mining asteroids to accumulate and hide an extra 1.5 million TONS of gold. Perhaps, the gold in asteroids is, like Ivory soap, 99.98% pure. You just hop in your space ship, fly up to an asteroid, grab a few chunks and fly home.

    Otherwise, if space gold exists in concentrations similar to that here in modern earth mines, we’d only be able to extract about 50 grams–perhaps 2 ounces–of gold from every ton of “asteroidian” ore. If so (and if I’m doing my math correctly) our asteroid miners would have to process about 256,000 tons of asteroid ore to extract 1 ton of space gold.

    So, if they’d gathered, say, 1.5 million tons of space gold, they’d have had to process 256,000 times that much ore to extract that much gold. I think what works out to something like 384 billion tons of asteroid ore. We should be able to handle that in an afternoon.

    Now, I don’t know if they are processing all those tons of ore back here on earth or if they’ve built gold refineries in outer space, but when you stop to think about it, that’s a lotta rock. That requires a lot of men, machines and power. Of course, that kind of gold mining would be a snap if we could talk the “Greys” from Alpha Centuri into hauling gold in the UFOs like some sort of inter-galactic FedEx.

    Still, given the costs of space travel and, now, space mining, I find it improbable that we would waste much earthly wealth pursuing asteroid gold that we could only sell (currently) for $1,300 and ounce–but we didn’t sell because we wanted to keep it all very hush-hush.

    But, as you report in your “informative” comment, our secret stash of over 1.5 million “extra” tons of gold was not acquired only by mining asteroids. It was also achieved by means of the ancient and honorable art of alchemy.

    Alchemy. Of course. Why didn’t I think of that?

    And then, there’s Operation Tiger Lily and Vatican swindling after WWII. Apparently, the world only began to hide 90% of its gold after WWII–but nobody noticed! Isn’t that one for the books?! 90% of the world’s gold supply has vanished in my lifetime, and nobody was the wiser. Must’ve been Top Secret or some such. And whoever is hiding all that “extra” gold isn’t spending any of it to buy a new house, new castle, new cars and bevy of buxom beauties.

    Actually, when you think about, it’s all pretty far-fetched. In fact, call me a cynic if you must, but when I see anything explained by means space mining and alchemy, I become somewhat suspicious. I tend to doubt the credibility of the alleged explanations (asteroid mining & alchemy). I even tend to doubt the credibility of the claim (1.5 million tons of hidden gold).

    In fact, I even begin to wonder if the source of the explanations is being “informative” or “dis-informative”.

    it’s a good lesson for all of us to learn (especially in this internet age) that you can’t believe everything you read. Even the writer is alleged to hold a PhD. There is room (and even a need) for common sense.

    There’s no effing way that the world has hidden 90% of the gold supply in the past 70 years.

     
    • moon

      April 29, 2014 at 7:03 AM

      citizenquasar, I’m not sure, but I’m getting the sense that selling Al on asteroid mining will be an up hill pull. I could be wrong, though.

       
    • Tony

      April 29, 2014 at 10:40 PM

      “that’s a lot of rock.”

      Yes. Yes, indeed!

      A true classic!

      Tony

       
    • kanani

      May 3, 2014 at 4:00 AM

      If anyone has some extra time, Joseph P. Farrell is definitely a good listen.

      I catch most of his interviews and have read a few of his books.

      P.S. I think when Dr. Farrell refers to alchemy, he is talking about the alchemy of fiat money creation and the power that comes with. See his book: Babylon’s Banksters.

       
  10. kanani

    May 2, 2014 at 9:31 PM

    The coin shop in my town seems to be a little tight on British sovereigns and 20 franc pieces.

    It has not been that way previously.

    I think physical is in good demand.

    Some speculate that gold is being kept artificialy low on the spot price (USD) to settle some international debt.

     
  11. Peter

    May 4, 2014 at 3:27 AM

    Moon, there is a good explanation of the new dollar concept, just internet search SHEISS DOLLAR it will be very descriptive and cover fully valued and devalued.

     
    • moon

      May 4, 2014 at 4:25 PM

      Peter,

      One of the reasons I like this blog is that it contains some true discussion. Some on here have actually done extensive research plus have some relevant experience to share. For example: if I ask Al a question, he’ll answer based on 1) his research, 2) his experience. Sometimes, he’ll go beyond those two with speculation and/or suspectation. I’ve found that his speculations and suspectations are results of #1 and #2 and he’ll preface by saying they’re his speculations or suspectations. I’ve noticed that he’ll sometimes decline to answer a question or honor a request, again, based on #1 and #2. I don’t recall that Al has ever sent me, or anyone else, to another link or search to find out what he thinks about something.

      So, Peter, I’m going to give you another shot at revealing your thoughts by rephrasing my question to you. I’m not asking this question to Jim Willie, Al, Warren Buffet, Jim Rogers, Ron Paul, or Richard Gere (in my opinion, he’s a great actor and a good looking man, but I doubt he knows the answer to this question).

      I’ll also make it a yes or no question. That way, you can choose to answer with one word, or you can test the spacial limit of this blog with your insights and thoughts.

      Here’s the question:

      Do you, Peter, see any conflict between my thoughts concerning FRNs, expressed earlier in this thread, and Jim Willie’s speculations about his Shit Dollar?

      May the fourth be with you!

       
  12. Peter

    May 11, 2014 at 8:20 AM

    No conflict moon, your thoughts 100% correct .

     

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