Bob Johnson keeps track of Au supply and demand using industry figures. Here is a post of his to me.
http://www.siliconinvestor.com/readmsg.aspx?msgid=14441189
> The gold market could be more than 82.6 million oz/year
Of course, that is just primary mine production.
In 1999, there was 20moz scrap, 14moz forward, an 14moz central banks for a total of about 130moz
There is a significant amount of unrecorded supply I believe as well. Pirates, gangsters, warlords, drug cartels, outlaw miners, unrecorded sources of all kinds provide additional supplies making precise accounting impossible.
As with all supply/demand things, perfect control is impossible as well. The pendulum swings back and forth, and makes sense for a brief second once in a while. Meanwhile, as with all things human, everyone can be right and wrong at the same time for different reasons, and probably not for the reasons they thought were correct at the time (gggggggggggggggggg). If the POG increases, demand will decrease. People inclined to buy it will not be able to afford as much.
Why do you call CB supply, "excess"? It is merely another source of supply. When it was built up over many years,...it was demand,...should we call that demand "excess"? The CB's are just another player in the market, whatever their motives. Kids (and non-kids) buying excess beanie babies created a bubble in the beanie baby market in a similar way(gggggggggggggggg). The central bank gold demand bubble has burst.
The world is becoming a smaller and smaller place. It is also becoming more and more electronic. Currency oscillations are becoming a real pain for world wide commerce. At some point, the world will likely seek to eliminate that risk, and have a single world currency traded electronically. I believe this would preclude gold from becoming that currency. It is a pain to store, protect and administer. The US$ does not have these drawbacks,...and is accepted in most countries of the world, readily, for most goods and services. The US$ has displaced gold's use as a currency in many countries, and can be easily traded electronically because it is in plentiful supply throughout the world. If the US$ becomes unstable, a more stable currency will take probably take it's place over many years. Gold may shine bright for brief periods, but eventually it will be valued against the new currency and get dull again. This will continue unless the mine and recycled supply drop below demand. Then the price will climb short term, but then demand will drop in reaction, and the pendulum will continue to swing around around eratically until equilibrium is re-established.
As the past role of gold in world commerce has diminished, it's reserve levels in central banks has as well,...that makes sense to me. All a result of the world getting smaller and smaller, and the chance of world war diminishing as well. There would be no island of peace in the next world war,...most of us would simply cease to exist, and the world would get along very well without us :-(((( This does preclude most of the industrial world from pushing the war button, except on a very limited basis.
Without a big war, electronic commerce will continue to strengthen, causing further weakness in gold's currency role in world markets as it has since computers were first installed in banks. Without the currency use, gold becomes only something pretty to look at, for the most part. Most industrial uses can be substituted by other metals.
Now look what you got me rambling on about,...I have to get back to trading or I will lose my job(ggggggggggggggggg). |
