Calculations taken from an Eric Sprott presentation.

And perhaps I can explain it best just by comparing ‘10 to ‘11.In ’10 we had the IMF theoretically selling 400 tons of gold.This year we have central banks buying 400 tons of gold.That’s an 800 ton change in one year in a 4,000 ton market.We’re getting data outta China which suggests that their purchases might be up 3 or 400 tons this year.

So with those two items I can come up with one 1,100 tons of change year over year in a stagnant market that provides 4,000 tons available.Where could the gold possibly have come from?And I have no other conclusion to come to other than to believe that central banks are surreptitiously continuing to lease out their gold.And then when they lease it out they essentially lease it to a bullion dealer who sells it to the real buyer and the bullion dealer owes it back to the central bank who still says they own it but of course getting it back won’t be easy because of the shortage.

And what about China, as figures show demand is clearly rising

this shows the gold imports that mainland China receives from Hong Kong.And this date is up to November of this year.And you can see the stunning change in demand whereas most months was below 20 tons, we’ve had a series of month where it goes 20, 40, 50, 60, 80 and the latest month which was November was 102 tons.As I mentioned, the annual production of mines is around 2,700 tons, 350 that’s produced in China; none of it leaves the country.The world has 2,350 tons left to buy which is less than 200 a month and China bought 102 tons of that last month.

Pension funds have been massively short of gold in their portfolios as a hedge in recent years and are now due to beef up their holdings.

the World Gold Council that basically said studies were done showing that even a pension plan that had minimal amount of risk should have two or three percent of their investment in gold, medium risk would be four to nine, max risk or high risk would be at ten percent.And just to put that all in reference, the amount of gold in gold stocks that is available in the world’s investment pool today is .75 percent of all assets.So even just to get to two would imply a huge influx of buying in both bullion and equities from that sector.But the work stands up to analysis and I think ultimately the pension fund advisors will have to go there.

Then there’s gold’s relationship to silver in its price.

A company called Gold Money that many of you might know that’s on the Internet, their sales of gold and silver are just about equal and I’m unofficially I think the Royal Canadian Mint’s about 1.5 to 1.And all I can suggest to you is if people keep buying gold and silver at a 1 to 1 ratio, there’s no way in this earth that the price could be 55 to 1.In other words you’re buying 55 times more silver and even just the relationship of silver to gold, there’s 80 million ounces of gold available per year.There’s 900 million ounces of silver.That would imply something like 11 to 1 ratio but half the silver’s used in industry.So it really is something like 5.5 to 1 is the ratio of what’s available and yet the prices are trading at a 55 to 1 ratio.

 

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