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g.vidmar
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The Myth of the Gold Supply Deficit

- Robert Blumen - 24hgold

I have some serious objections regarding your thesis about gold supply and demand. As far as I know, gold price is determined on daily basis mainly by LBMA and COMEX. Sydney and Hong Kong don't have much influence yet.

Gold price, as you stated, is a matter of dollar supply and demand rather than gold ounces supply and demand. I couldn't agree more with this statement. But now we come to the point: you probably know that only 1-2% of paper contracts end up with actual physical delivery. The rest 98-99% of contracts never finish with "notice of delivery".

In other words: when you stated that annual supply and demand represent only 2-3 % of the total supply and demand, you came out with almost correct numbers, but the way how you came to that numbers was dead wrong.
It is not about the buyers and sellers who move gold from one stockpile to another as you stated. In fact, it's about fiat money which buyers and sellers move from one account to another. Sometimes, when naked short sellers are requested to deliver gold they actually don't have, they usually try to borrow requested gold from some Central Bank. The amount of physical gold disposable at that moment is crucial for price movement. This is why big price fluctuations almost regularly occur around contract expiration date.

So in your essay you completely missed the point: it's fiat money which governs gold prices. And the main "governors" are JP Morgan, Goldman Sachs, Deutsche Bank, ECB, IMF and , nonetheless, Fed.

Commented 5140 days ago

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Beginning of the headline :Analyses based on annual supply and demand of gold appear on a daily basis, whether posted to gold web sites or in the financial media, many of them by the most respected analysts of gold mining shares. These articles typically show an imbalance between supply and demand, suggesting that there is a gold supply deficit. From there, the conclusion follows that a much higher gold price is required in order to bring supply and demand into balance... Read More

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