Gold Supply & Demand Statistics

Following on from my earlier posts on the Gold Symposium I would like to share some information on the supply and demand of gold. I had held off on this posts as the organisers said they would post the Keynote Speakers speeches on their website, but unfortunately they did not put up the slides which contained the information. As a result I have most, but not all, the figures mentioned (please do your own research to verify each of these figures as I did have to write them down fairly fast). Received

2000	2010	Net Increase/Decrease:
Production: 2,620 Tonnes	Production: 2,689 Tonnes	(79) Tonnes
Central Banks: Net Sellers of 400 Tonnes	Central Banks: Net Buyers of 400 Tonnes (est)	+800 Tonnes
US & Canadian Mint Coin Sales: 290,100 oz	US & Canadian Mint Coin Sales: 2,355,500 oz	+64 Tonnes
Limited ETF’s	Physical Gold ETF’s now hold 2,300 Tonnes	Say + 400 Tonnes
China Imports/Consumes: 207.5 Tonnes	China Imports/Consumes: 700 Tonnes	+492.5 Tonnes
India Imports/Consumers:  535 Tonnes	India Imports/Consumers: 918 Tonnes	+ 383 Tonnes
		TOTAL INCREASE: 2,060.5

On these simple metrics we can see that the demand for Gold has increased by over 2,060.5 tonnes between 2000 and 2010. We also need to keep in mind that Gold supply only increased by 1.4% per annum over that same period (i.e. nowhere near enough to match all the demand).

So if demand is not being met by an increase in supply then where is this extra 2,000 odd tonnes of gold coming from? Well some of the Keynote Speakers speculated that certain Central Banks are “leasing” their gold into the market and to other central banks. They can continue to do this as long as they hold the physical gold in their own vaults but eventually they will run out. Once this happens and if demand remains constant at 2010 levels then eventually total demand will outstrip supply of all new gold coming out of the ground and all gold held in Central Bankers vaults. Using simple economics and the concept of supply and demand the effect of this would be an increase in the price of gold as the large number of buyers bid for the “small” amount of gold available for sale.

When asked why Central Bankers would be “leasing” their gold out when the price of gold is clearly heading up the consensus was that Western Central Banks will do anything to maintain the “faith” in their fiat currency. One way of doing this is to make sure gold does not go too high. However, like a dam bursting at the seams there is only so long you can hold the water back, so in my opinion I think they are fighting a losing battle.