Jim,
In your questioning you asked, "If we can agree that that "consumption" of gold (that is, its actual use in manufacturing or jewelery) only accounts for about 30% of production, that means that 70% of all gold produced has only psychological value, and that currently hoarded gold (by individuals as well as CBs) would satisfy any real need for gold for a helluva long time, even without any more production at all."
I hope this helps answer part of your question ...
from
gold-eagle.com
If confidence in financial assets and government controlled currencies was to significantly reduce, then the total gold reserves of all CBs (worth 320 billion dollars at current gold prices) could be absorbed in an instant by private investors.
Government controlled currencies are liabilities of the monetary agents and are backed by debt. Their value is hence based on the level of confidence in the financial and political systems and their rates of exchange tend to oscillate daily based on changes in this confidence level. For example, if doubt arises regarding the quality of the debt which provides the asset backing for a currency, then capital will shift from that currency into an alternative investment. Gold, a tangible asset which has been valued as a store of wealth for thousands of years, provides an ideal alternative.
However, it must be remembered that there are 3.8 billion ounces of gold in the world and the supply is increasing by 1.75% each year (probably less for the next few years due to mine closures), whereas there are 5,300 billion US dollars in the world and the supply is increasing by 9% each year. The end result is obvious. |
