Published by Dan Popescu Jan 13, Articles Most financial analysts, including some who specialize in precious metals, analyze gold as a commodity however gold is not a commodity since unlike other commodities it is not consumed. Therefore, the traditional economic models and theories of supply and demand simply do not apply when analyzing gold. Gold is a monetary metal and as Prof. Rather, they might make supply shrink.
And we gave short shrift to the forces pushing the dollar down.
We said only that to own a dollar is to be a creditor. And if the debtors seem in imminent danger of default, then creditors should want to escape this risk.
The dollar is not redeemable so there is no way to be paid in full for the debt represented by the dollars. That is to buy gold. We said that Federal Reserve insolvency is not imminent. And then we went on to the case for a rising dollar.
It was good timing, as the dollar went up from The trader does not think of gold as moneyis not into gold other than as a trade along with all other asset classes, and probably would not describe himself even as a libertarian or Austrian.
He is, however, very smart and very good at what he does. He shared that he had recently been with a group of his peers and they were all discussing the monetary system.
As he presented the consensus of that group of traders, a thought struck Keith. We will get to that in a moment.
After the crisis ofthe central banks lowered interest rates enabling governments and everyone else to go deeper into debt. However, that debt is now a problem. The next crisis will be a debt crisis including sovereign debt.
Like inevery asset will go down. Gold will go down with all other assets, though less. Afterward, gold will rocket up 10 or 50 times.
This thesis mostly makes sense to us last week we argued for pressures pushing the dollar up in the intermediate term, at least against other irredeemable currencies if not gold.
And we believe that this really is the mainstream consensus. Outside the gold community, people extrapolate recent price trends and they see commodities like copper falling. Traders are good at spotting a pattern and profiting from it.
They are not necessarily expert at predicting a discontinuity that leads to a new pattern.
In a banking crisis, prices of assets drop because everyone is suddenly desperate for liquidity. They need to get their hands on the currency in which their debts are denominated.
They may not want to sell real estate or gold, but they have little choice. This problem is experienced by those who have leverage, and in proportion to the degree of leverage. Leveraged Gold Owners So our first question: And we know something else. Based on this, we infer that lots of people used leverage to own gold, and many likely borrowed against their gold.
We do not refer here to those who buy futures contracts with leverage. We do see a rise in the basis beginning 2Hand lasing for two years. This coincides with a drop in the dollar from around 77mg gold to under 50mg i.Gold Demand History. This chart shows what made up global gold demand from to Central banks were net sellers of gold from to , and since have become net buyers.
Technology use has fallen slightly during this time going from tonnes in to under tonnes in After setting a new low in December , gold rocketed up to reach the target anticipated in last year's annual VC PMI report of $ to $ The VC PMI sees the current trend momentum for.
Gold supply and demand statistics A comprehensive time series of gold demand – broken down by sector and country – and gold supply – broken down by mine production, recycling and producer hedging. The Gold Supply Demand Dynamic is in Surplus. Despite strong global gold demand and claims that a lower gold price will lead to a shut down of unprofitable gold miners, the gold supply/demand dynamic, unlike the silver supply/demand dynamic, is in surplus.
For investors, one of the significant differences is that the supply of gold (called "above-ground gold”) never decreases; it only increases. So declining demand should cause a decline in the price of gold, not an increase. Sep 24, · Our supply and demand data (produced by Metals Focus) tracks changes in demand across sectors and countries, and changes in mine production, recycling and net producer hedging.
A detailed commentary explaining the factors driving the changes in supply and demand can be found in our quarterly Gold Demand .