<<But mergers in the gold industry do not automatically
change the supply-demand fundamentals, analysts said.
That is because so much of the gold that has been mined
through the ages is still around, in central bank vaults, under
mattresses and in churches and museums.
Some of these above ground stocks have been mobilized in
recent years. Seeking returns on a low yielding asset, central
banks have reduced holdings and lent their gold to speculators
and mining companies who sell it forward to protect future
production against weaker prices.
Base metals and other traditional commodities get consumed
in the normal course of economic activity, thus reducing the
number of mining companies, which can lead to a shortage of
material.
But less so in gold, where official sector sales totaled
471 tonnes of supply last year, on top of the 2,573 tonnes that
came from the mines, according to consultants Gold Fields
Mineral Services Ltd. Selling by investors, mostly bars and
coins, added another 291 tonnes.
"What dictates prices is the above ground disinvestment,"
said Ward. "Consolidation matters in steel, aluminum and
copper, where you don't have 20 years worth of inventory.
"The idea that consolidation in the gold market is going to
tighten up supply is a false hope in my opinion," he said.>>
this is a complete BS argument when it comes to an investment vehicle like gold. first of all, the growth in the gold supply is far slower than the growth in the fiat money supply (gold has to be judged on its monetary merits...everything else is baloney. gold is the hedge against the monetary bureaucrats losing control...when investment demand returns, we'll find out that the existing above ground supply is way too small to accommodate it).
secondly, what about other investment vehicles , like e.g. stocks? are there now less shares of CSCO outstanding than 5 years ago? does it matter to the price of CSCO's shares that there is a huge supply that's absolutely certain to NEVER shrink? NO IT DOESN'T. when investors perceive the investment vehicle CSCO to be desirable, its stock goes to the moon, as we have seen. the same goes for gold...it has F*CK ALL to do with the supply / demand fundamentals of industrial commodities! because it isn't one. period. |
