Guest Post by Jesse
Nick Laird of goldchartsrus.com has provided the latest statistics on the consumption of gold by the ‘Silk Road’ countries.
The monthly demand from these nations as shown below has grown five-fold compared what it was prior to 2008.
In the latest month their total consumption, that is private purchasing and additional to official reserves, was 365 tonnes.
Nick has estimated global production as averaging about 260 tonnes per month.
This represents a shortfall of about 105 tonnes per month to be drawn from existing supplies.
So this is one reason why we have been seeing the existing stocks of gold around the world drawn down to cover the steadily growing demand from these countries. And as you may recall, the central banks of the world became net buyers of gold around 2008.
Comex has little available stocks in its domestic warehouses compared to this demand, All of the gold in all the warehouses, whether it is for sale or not, if taken and liquidated is just over 200 tonnes as is shown on the report below.
London is a more substantial source of bullion, but is running down it’s supply as we have seen in the ‘gold float’ analysis also included below.
Interestingly enough, the year over year drawdown in the London free float is about 100 tonnes per month.
There is also supply in ETFs and Trusts. This too has been drawn down steadily, particularly since 2013.
These are not precise figures, but estimates gleaning from public sources. I suspect the supply numbers are ‘generous’ with regard to the free float and the unemcumbered nature of gold through multiple claims and leasing, but that is conjecture.
But no wonder the Indian government is so anxious to persuade their people to turn their gold into synthetic paper gold, and allow it to be hypothecated. And no wonder that the Fed told the German government that their gold was temporarily inconvenienced until 2019. And no wonder Venezuela is being leaned on so heavily to give back the gold that it so recently repatriated so it may be sold.
I wonder what it would take to increase mine production and bring more gold in as scrap and private sales to meet this growing demand. Higher prices perhaps?
And if so, then perhaps knocking the price down so aggressively, crippling the precious metals mining industry, is not a fruitful idea for the longer term.
Given the current rate of growth in demand and the current state of supply, next year could be interesting. Still, I never like to underestimate the ‘resourcefulness’ of the central banks, especially when they are operating in relative secrecy.