> understand why the gold price has trended down in the
> last four years as demand continues to consistantly outstrip supply.
Total demand = total supply, only primary mine production is frequently quoted as being less than supply. (bad economics, IMHO) This is true for all metals, with secondary supply (recycling) always making up most of the gap. We seldom see folks making the bullish case for aluminum, however.
I have always thought the primary reason for the drop in gold prices was due to the huge capital spending in 1993/1994 when gold went up to near $400, which resulted in a huge uptrend in mine production from 2250mt to a record 2569mt in 1999. (Note: this is why I got out of gold stocks in early 1996)
Meanwhile demand has been dropping for the last three years (4228/4123/4165), so the gap between primary supply and total supply has closed from 42% to 36%. This only made it easier for central banks and forward sales to close the gap. It is easy/simplistic to blame "alleged criminal manipulation", but these activities would have had very little effect had not the primary mine supply / total demand gap closed over the last three years.
I have been through this "debate" a million times before, I have read all of the allegations (none proven, no lawsuits filed), analyzed the numbers, and have come up with the above conclusions. As a a novice in the precious metals markets, I am entitled to my foolish views. |
