Physical Gold Demand in 2013, A Quick Synopsis …. by Mitch – Silver Sufferer

By | January 12, 2014

currency_wars_china_US_gold_cartoonI wanted to write and give a quick snapshot of actual physical Gold demand as of  calendar year 2013 (full 12 months), the results of which not many people seem to be talking about at all. You will not see these facts stated by Main Stream Media or banking institutions (who are supposed to be advising their customers). Only the very serious Gold investors and their blogs even talk about this, but the information is fragmented across different sources, so I decided to pull it together (most of my  sources are linked and credited).

But lets start…

Global Gold production is reported to be 2,680 Tons in 2013, although final official numbers are not yet confirmed.

Gold domestic production

China domestic production is reported to be 430 tons, Russia production estimated at 234 tons (which are both included within the number above for global annual production) . Total being 664 tons which are never exported and held for the reserves of their own Country Reserves.

So we are left with 2,680 – 664  = 2,016 Ton’s approximately, World investment availability of new production..

Chinese import demand (over and above their domestic production) from global resources hits 2,180 tons in 2013!!!

KoosJansen at In Gold We Trust has done a phenomenal job of a accumulating this data and the 2 charts below are courtsey of his article which you can read in full here.

Alasdair Macleod estimated in November that China import demand would hit 2,130 tons in 2013. You can read his data breakdown in his article here.

Screen shot 2014-01-12 at 11.53.06 AM

SGE-weekly-2013 gold deliveries

 

India, the WGC said Indian demand could be 900 tonnes in 2013, from its previous forecast of 1,000 tonnes. However between April and September, customs officials seized nearly double the amount of illegally imported gold taken in the whole of 2012. The World Gold Council estimates about 150-200 tonnes (at least) may be smuggled during 2013.

So we have independent estimates of 1,100 tons of 2013 physical import demand and up to 1,400 tons ( illegal Gold imports have exploded due to massive domestic demand against the Indian Government curbs of allowed legal Gold imports ).

Turkey imported a record of 302 tons in 2013 data from Borsa Istanbul showed, recording a 150 percent rise from the previous year’s level of 120.78 tons, see here.

3,682 Tons of physical imports between just 3 countries alone against a World production of 2,016 Tons !!!!

William Kaye speaks of this on King World News. Kaye:  “The longer-term picture (for gold) is extremely bright.  The picture in China itself is phenomenal.  Right now China is, in terms of final demand, consuming virtually 100% of non-China global production of gold.  This is an amazing thing when you think about it….

We are ignoring for the moment physical import demand into Russia (imports over and above domestic production) , Singapore, Japan, Pakistan, Korea, Taiwan, Kazakhstan, Azerbaijan, UkraineSri Lanka.. the list just goes on…..We are also ignoring Western physical demand by wealthy individuals and general mint coin and medallion production purchased indirectly from the major mints of the World (US Eagles, Canadian Maples, Mexican Libertad, UK Sovereigns, Austrian Philharmonics or Australian Perth mint sales).

But let’s not ignore the other massive elephant in the room, Middle East oil producing nations who have been and still are enormous accumulators of physical Gold as a percentage of yearly Oil export revenues as a national store of wealth (Saudi Arabia, Iran, UAE, Kuwait, Oman, Qatar, Syria). Their respective yearly physical import demand is incredibly difficult to ascertain but is recognised to be very large indeed.

So quite simply looking at the data, we can assume that actual physical accumulation of Gold is approximately 3 times actual new yearly global production. Now these numbers may well be disputed (although I have examined WGC, GFMS and official Country import data), but really the exact accuracy of these numbers is not the point of this examination.

It’s quite obvious  that the (acute) yearly supply /demand deficit is extremely biased to a massive dis-hoarding of Western accumulated Gold Reserves. The World Gold Council and the GFMS may well state that a good percentage of this demand deficit is filled with Gold recycling, but again this is simply Western dis-hoarding  of Gold, plain and simple !!

A large proportion of this dis-hoarding of Western gold has come from one the largest holdings of physical within the GLD ETF (Custodian  - HSBC Bank).  The fund started in November of 2004 has taken 8 years to build an inventory of 1,350 tons (approximately) and within just 1 year (2013) it managed to dis-hoard itself of over 40% of it’s Gold flowing to the East.  Is this insanity ? Will this continue – I don’t think so !

GLD Inventory for 2013

This is a demonstration of Western selling as Asia is just simply not interested in paper representations of the metal  - only physical !

Now the UK Royal Mint runs out of Sovereign Gold coins due to unprecedented demand. The UK Mint stated : “Since the dip in the price of gold we have seen increased demand for our gold bullion coins from the major coin markets, and this presently shows no sign of abating,” the U.K. mint commented. “The Royal Mint continues to supply to its customers and is increasing production to accommodate the higher demand.

Gold Comex inventories brings new all time recent lows, as you can see from the chart below Registered Stocks have hit lows not seen since before 2003 !!  Leverage of paper contract ownership to physical has hit all time highs of near 95 to 1 !!!!

Comex Inventory

I could go on with anecdotal evidence of massive shortages of physical Gold against a yearly supply / demand deficit of something of the order of 3 times . But I think you get the picture. The West has been forced into a massive dis-hoarding to accomodate the flow of physical to the East.

Cycle analysis from Martin Armstrong is stating that we may see another 15 % fall in Gold prices (if we have not already completed a double bottom  in price already), but gives a target of US$ 5,000 within the next 3 years.

German Bundesbank …  In a shocking development last year in mid January 2013 Germany announced they would proceed with the repatriation of 700 tons of gold held by its “partners” the New York Fed (300 Tons) and the Banque de France (374 tons), by the end of 2020. So over 7 years they would repatriate approximately 96 tons of Gold per year. The latest announcement is that they have only received 37 Tons over the last 12 months !!!  Trouble getting the Gold ??

So let me get this straight……… demand is massively outstripping yearly production supply to a factor of 3.  Gold production costs (Inclusive of Capex) is closer to US$ 1,300 (according to Barclays bank) and reported to be closer to US$ 1,450 as a Word average and is presently selling at approximately US$ 1,200 and hence miners are being pushed into extinction.

If this is not giving all the signals one could possibly dream off as the buying opportunity of the decade, then I really do not understand free market trends and sustainability. 

 

Now I could talk again about the massive increase in debt within the World to levels that actually far exceed the Debt Bubble Peak of 2007 and hence a destruction in paper wealth is coming to a town near you – within a massive de-leveraging event. But why bother when the data presented above could not be any more succinct, definitive and unequivocal………

 global bond market 90 Trillion

 

Or you could of course ignore this factual data and continue to buy paper assets.

Be lucky

Mitch  -  Silver Sufferer.

 

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