An Inconvenient Truth ....The Facts!...............................
What is the old saying? Figures don't lie.......
Maybe we should look at both sides of the supply - demand equation rather than just the demand side, no?
Sooooo.......I dug further into the statistics on the very site cited as a reference by Slidey.......
Source:
Gold Investment Digest: Quarter 3 2006
October 2006
World Gold Council
gold.org
[one may need to register in order to be able to see the doc.]
DEMAND (H1 06)
Tonnes
Jewellery 1,091
Identifiable investment 327
of which ETFs 148
Industrial & Dental 218
TOTAL 1,784
SUPPLY (H1 06)
Tonnes
Mining output 1,207
Net Producer hedging -299
Total Mine supply 908
Official sales 151
Recycled gold 581
Total 1,640
Goodness! This looks like demand exceeds supply!
It looks like demand exceeds supply by 144 tons per year!
It looks like demand exceeds supply by 8.9%!
But look at this from the text of the report!
Mine Production
Mine production is the biggest source of supply, accounting
for 62% of total gold supply over the past five years. Lead
times in gold mining are very long: it can take 10 years to
bring a new mine on stream and five years to re-open an
existing mine. Thus, although the gold price has rallied since
2001, boosting exploration and development spending,
there has been no tangible pick up in mining output. Instead,
it continues to suffer from the underinvestment that took
place in the late 1990s and early 2000s.
Mine production remained subdued in Q2 06, rising just 2%
from a year earlier. Australian output recovered after a weak
Q1, which, in addition to normal seasonal factors, had been
adversely impacted by an unusually severe cyclone season.
Output also rose in Mexico and Brazil and from the Polyus
mine in Russia. By contrast, there was a planned output
reduction at Grasberg, Indonesia, the world’s largest gold
mine. South Africa remains the world’s largest producer by
a small margin, but its share in world output continues
to slide.
In the 1990s, producers hedged much of their output by selling
gold forward - a process which contributed to depressing
the price. But the rally in the gold price of the past five
years – coupled with buoyant price expectations – means
this practice has diminished. Producers are now buying
back those hedges. Producer “de-hedging” amounted to
157 tonnes of gold in Q2 06.
Central Banks
Another source of supply comes from central banks, which
hold around a fifth of the world’s stocks of gold. Most of this
is in the hands of the US and European central banks, a
legacy of the gold standard. Although a number of central
banks have increased their gold reserves over the past
decade, the sector as a whole has been a net seller, contributing
an average of 562 tonnes to annual supply flows between
2001 and 2005.
The second year of CGBA2 ended on September 26th 2006, at which point signatories had sold a reported 395 tonnes of their 500 tonnes annual quota. The CBGA covers both spot and forward sales, although the
latter are not reported until the trade settles. This means the
395 tonnes could be revised up at a later date if further forward sales (booked in year 2) mature. However, as it stands,
this is the lowest level of CBGA sales since 1998 and compares
with 497 tonnes in year 1.
Hmmm......perhaps there are two (or three) side to the coin, depending on one's perspective!
H3 |
