Gold Price Discussion

[user 4386]

Yesterday the World Gold Council (WGC) released its Gold Demand Trends Q2 2018 which highlighted the following:

Overall demand was 964t, a decrease of 4% compared with 1,008t in Q2 2017
Total consumer demand fell by 1% to 758t, from 767t in the same period last year
Total investment demand was down 9% to 281t compared with 310t in Q2 2017
Global jewellery demand fell 2% to 510t, from 519t in the same period in 2017
Central bank demand decreased by 7% to 89t compared with 96t in Q2 2017
Demand in the technology sector increased 2% to 83t compared with 81t in Q2 2017
Total supply was up 3% to 1,120t, from 1,086t in the same period last year
Recycling was up 4% to 295t, compared with 283t in Q2 2017

Looking at above i would say overall falling global demand.

Yes, my figures on demand seem a bit out of date. This is similar to what I just posted in the post referred to above. I said an annual demand of 4,000 tonnes, this says 3,856 tonnes as it has been for many years. However it says supply was 4,480 tonnes, exceeding demand.

Two issues:

(1) figures are for the quarter and it may be inaccurate to simply multiply by x4 (as I do here) to get annual demand - eg might the jewellery demand differ at Christmas or other times (and it dominates the market), or might a change in the price of oil cause the Saudis to buy more jewellery in a quarter e.g. it only requires a small percentage change in a particular quarter for a quarterly result from changing from an apparent annual deficit in supply to an apparent annual excess.

(2) I said an annual supply FROM MINES of 3,000 tonnes, 1,000 less than the total demand of 4,000 tonnes which is made up by recycling jewellery etc (so that there is always an adequate supply, easily adjusted at any time, so that annual mine production does not affect the gold price greatly as supply soon adjusts). The gold price goes up, you sell a bit of grandma's jewellery that you inherited (jewellery still being nearly 80% of demand on these figures), and any increase in price because of that increased demand soon corrects the price. Jewellery is not the only adjustment made, but other adjustments don't require physical gold to exist to change demand from memory (e.g. futures). The quarterly figures above says total supply of 4,480 tonnes but what is meant here by "total supply" - I assume that it is not mine production but the total including from recycling 295t and from "non-physical" sources. It is probable that Russia has come on stream as a major producer in the last 5 years only, increasing supply by perhaps 200 tonnes (I think it only ranked in the top 4 countries for the first time last year). Mine production was 3, 150 tonnes in 2017, not much different to the figure that I used of 3,000 tonnes.

I would be very surprised if the demand decrease of 144 tonnes ESTIMATED for 2018 on quarterly figures, together with the increased mine production of 150 tonnes (estimated even less accurately) has any significant effect on the price of gold this year (much less than 10% change prior to adjustments being made). I still suspect changes in the $US dollar price (the only REAL estimator) relate to Korea and Iran (I think I said Iraq in error elsewhere, that one has largely gone) and Trumps expected tariff war. I don't think the tiny change has turned gold into behaving like a normal commodity after all these decades of mine production (i.e. "new" gold) always being far less than demand yet gold never recently "taking off" in real ($US) terms. Jewellery and futures will always be a strong offset, because as soon as the gold price changes significantly, so do they to offset it (why sell jewellery at a time of low price, why keep grandma's ugly jewellery at a high price when you can make a killing now and always buy new jewellery you like when it is down again). Someone contracts to buy gold from your mine, you later realise that you will only produce less gold than you promised to supply so you buy gold to make up the difference (you have to supply it to them at the price you promised or you are out of business) - but up to this time (perhaps for some time to come) no physical gold has changed hands, only promises on paper that appear as expected production and apparent demand. And no, I don't understand this side of things very well....but it does seem to keep gold prices fairly stable.

 

[Swinging & digging]

Many in the Finance and Investment industries have a very negative opinion of gold expecting it to crash in value? :N: 8.(
That is based on their poor understanding of the Gold Market.

Their perception of its value drop potential is fake news!
I agree you that its price will remain fairly stable. :Y:

 

[user 4386]

Many in the Finance and Investment industries have a very negative opinion of gold expecting it to crash in value? :N: 8.(
That is based on their poor understanding of the Gold Market.

Their perception of its value drop potential is fake news!
I agree you that its price will remain fairly stable. :Y:

It would take something stranger to totally crash it than it would to substantially increase it - we go back to being quite primitive in times of physical and financial danger (Jews wisely bought gold and diamonds as they were high value and low weight, easily hidden and kept their value in each country each time you went on the run during the latest pogrom- I am not as confident about diamonds nowadays).

There are no guarantees - even living is a risky, However a total crash in gold price seems less likely than a bank crash or a war to me (which is saying something about gold). However I would never put all money in one type of asset.

And don't spend so much time worrying about what happens that you forget to live.....I have a lot of wealthy friends who wondered a bit about why they worked so long and hard to earn more than they will ever be able to spend now they are so old (but it still beats poverty, they aren't crying about it and neither are their kids and grandkids). And grandma can always leave it to Derrick and reap some benefits in the meantime

 

[user 4386]

Well articulated Goldierocks,..... thanks. :Y:

Thanks - I am currently doing a course in economics in my old age.....

 

[OzzieAu]

Well articulated Goldierocks,..... thanks. :Y:

Thanks - I am currently doing a course in economics in my old age.....

A geologists perspective on economics...i think it showed in your commentary. :Y:
Economics......a demanding gig at any age.

 

[bjarvie]

HI Robert doesn't gold / aud correlate roughly 80% of the time... ie gold prices up generally aud up with opposite being true just as it is inversely correlated with usd... ie usd up = gold down. ? layful:

 

[19.3]

Hi Robert,

Thanks for the very detailed multi facetted synopsis - a couple of queries if I may...

If new production each year is consistently short of demand by 25% (and this is made up by recycling) would be interesting to track the change in this percentage - it should give an indication of future 'long term' gold trends - assuming other factors continue to wobble (technical term) up and down.

Another factor I have often wondered about is the quantity of gold used in electronic equipment which ends up in landfill. I know the layer of gold in gold plated electronic components is incredibly thin but the volume lost must still be high or at least significant and presumably increasing when summed around the globe? Can you elaborate more about this aspect?

 

[Goldfreak]

That was an interesting and imformative read. Goldierocks. Perhaps the gold standard is long gone and cash is slowly disappearing but after a glitch in an American service center caused wide spread eftpos outages in Victoria and cost people real money we need something more tangible to trade ? Not saying gold is the answer and gumnuts are obviously way too easy to grow.

 

[user 4386]

That was an interesting and imformative read. Goldierocks. Perhaps the gold standard is long gone and cash is slowly disappearing but after a glitch in an American service center caused wide spread eftpos outages in Victoria and cost people real money we need something more tangible to trade ? Not saying gold is the answer and gumnuts are obviously way too easy to grow.

You just have to have faith in gumnuts - as with gold, as with paper money. It is all really psychology - it works while people have faith in it, but fails when they don't. Quantitatively gold is one of the least useful elements (we can live without jewellery or gold bars in a vault, and jewellery alone is 82% of its consumption) - people's desire for it just psychological - if it were aluminium, manganese or iron it would at least have value because it could be used. However those are far more common elements, and one could rapidly ramp up production and flood the market, and they would then be no different to printing paper money. Gold does have the advantage that it is too rare to do that - the problem being is that for decades we have only been able to meet 75% of demand each year despite NOT being on a gold standard, and if we went back onto a gold standard there would never be enough gold to back the huge cash economy that now exists (and it would be disproportionately produced by different countries, although we, the USA, Russia and China would be sitting pretty in the longer term if the price was hugely increased). However it would cause devastating effects in the short term, much greater than brief ATM problems (remember that the digital money still exists but you are simply unable to access it temporarily). Australia only has 80 tonne of gold (stored in England) which only covers a few percent the money in our economy, so we would instantly go broke (and even that in England could not be rapidly accessed - despite being there (we assume). Even if we had enough, and it was in Australia, we would still not be using gold coins (we gave them up 70 years or so before we went off the gold standard) - if we were not digital we would still be taking our passbooks into banks and getting paper money depending on our balances - the gold is only there to back the paper money, it does not give us something physically that we can trade in shops nowadays.

It is solely confidence - the US dollar is the de facto standard and it works only while we have confidence that America will repay its trillions in debts.

 

[user 4386]

Hi Robert,

Thanks for the very detailed multi facetted synopsis - a couple of queries if I may...

If new production each year is consistently short of demand by 25% (and this is made up by recycling) would be interesting to track the change in this percentage - it should give an indication of future 'long term' gold trends - assuming other factors continue to wobble (technical term) up and down.

Another factor I have often wondered about is the quantity of gold used in electronic equipment which ends up in landfill. I know the layer of gold in gold plated electronic components is incredibly thin but the volume lost must still be high or at least significant and presumably increasing when summed around the globe? Can you elaborate more about this aspect?

No, we can readily make up any shortfall by simply melting more jewellery etc, so it does not vary in price like true commodities. Yes, you are completely correct - I had a friend who pegged a sewage farm because the gold in sewage sludge was nearly economic to extract. Your reasoning is 100%.

 

[user 4386]

HI Robert doesn't gold / aud correlate roughly 80% of the time... ie gold prices up generally aud up with opposite being true just as it is inversely correlated with usd... ie usd up = gold down. ? layful:

No, although broadly so with the $AU price. If you look at plots of the $A and $US gold price, we have been on a steady overall upwards trend in gold price, whereas the trend in $US gold price has been a bit of a yo-yo. The actual gold price is set in $US and varies but other factors tend to increase the $A gold price because our exchange rate against the $US tends to go down with time.

 

[yep]

Gold $1738.00

a hard Brexit is looking more likely with 3.5k troops being readied for the streets if need be in 100 days plus the us fed meets tonight,the fed is damned if they do and damned if they don't

my advice is if you have any yellow that you have found in the ground or in the sand keep it

 

[grumpygold]

Is buying bullion or prospected gold the best

ray

buying shares in gold producers, northern star, evolution, ect. get the biggest bang for your buck, plus these 2 pay divies as well. northern star was 14c around 8 yrs ago, now over $10.00. just my humble ol opinion. :Y:

 

[yep]

gold 1774.00

yes gold miners shares are a good thing for profit but as the old marriage vow says to have and to hold is my preference

just to make a point a gold traded eft is virtually a receipt/piece of paper that in theory gives you gold

but for every etf of paper gold promised the ratio is about 1 oz of gold to 130 paper 1oz gold oops

so if there is any rush to get your paper gold cashed in to get your gold I wouldn't expect that you will get yours being beaten by the big end of town

but don't worry you will be in the 99%

paper gold is a nice dream but in reality just fake gold

 

[yep]

Gold $1800.00 :inlove:

Up $62.00 in less than one week and 2018 is not over yet i'm thinking $2000.00 + next year

2019 will be a year to remember good and bad don't sell your gold i'm not :Y:

note - just in case you are wondering I have no affiliation or association with any gold buyer or dealer I am just another gold bug :koala:

 

[Swinging & digging]

I held NST shares for a while, made money on them.
Still get the email updates, what a wonderful company and some very intelligent geological
exploration team they have. Nothing but good news with every update.

Would have been great sticking in 10k at the start.

Gold in AUD is not far off its all time high ( August 22, 2011 ).
Did drop very quickly after that?

Who knows were price is headed but lots of economic storm clouds gathering on the horizon.
GFC round 2. could be far worse than the first one. ]

 

[Outback]

Precious metals are way under priced , most other asset classes are artificially overvalued & are about to hit the wall .
Having money in a bank account is dangerous now , Why ? because the Govt voted in bail in law' Feb this year !

All our banks can confiscate deposits if needed to help stop their collapse .
The dream Govt guarantee of $250,000 per account is just not possible !!! :argh:

 

[Swinging & digging]

The deposit guarantee is Socialism on steroids!

The Government would have to charge a levy which would be paid mostly by people with virtually no savings in banks which will be passed on to people who had hefty deposits. Can't see it occurring without legalisation enacted to seize all monies held in Superannuation. ( Which is a real possibility ) In the Rudd / Gillard government, Bill Shorten was minister for Superannuation and he looked into doing exactly that. In 2019 he is going to become PM, now that ought to get savers, investors & speculators nervous. Due to unfolding global economic fractures occurring we are in for GFC round 2.

ASX down around 14 % of yearly high.
Property prices dropping $1000 per week in Sydney & Melbourne. 8.(

 

[Moneybox]

Is buying bullion or prospected gold the best

ray

I think that depends on the quantity you buy and what you want it for. We sell almost all we find and as nuggets we get a lot better than bullion price. I can't afford the risk of having it lying around waiting for some idiot to steal it.

 

[yep]

gold has closed the week at $1818.00 and has stayed at that or about for a week I am a little surprised it has held

the US fed will continue to raise the cash rate to the annoyance of Potus because the data points to a US recession next year if they don't raise they cannot cut when needed

there is still plenty of other reasons for gold to be gold just to name a few like the continuing trade war with china and a hard landing looking very likely for Brexit which is only 3 short months away

I am really looking forward to 2019 it should be one hell of a year :argh: