The gold market is often referred to as being “opaque”, lacking
transparency. This is something of an understatement. The chart below is
something I worked with Nick to put together. It shows all of the publically
reported holdings/stocks of gold.
It is an extensive list and much wider in scope than many others, which
usually just add up the major ETFs. The first thing that strikes you is the
dominance of the ETFs in terms of traditional stores of gold like COMEX or
TOCOM. I have no doubt that if the ETFs weren’t created the blue COMEX stock
in that graph would have been a lot bigger.
Also striking is the huge drop off in 2013 from over 100 million ounces
down to today’s 67.2 million ounces. At first glance this looks bad, like
people don’t want gold, but the chart is only showing the preferences of the
specific type of people who invest in these products (mostly Westerners). It
is not like the gold was just thrown away, and import/export analysis does show that gold ex-ETFs has been imported into
Switzerland from the UK, made into Kilo bars and then sold into China and
India.
In the end, the amount of gold stays the same, it is just the ownership of
the gold that changes. This ownership change does have some information value,
as I discussed here, and while I will comment on what is going on
with these visible stocks from time to time, it is worth putting the
chart above into context.
The latest GFMS
Gold Survey estimates the total amount of gold mined since ancient
humans were first attracted by the “tears of the sun” at 5,902,877,700
ounces or 183,600 tonnes, which they say is currently held by the following
groups:
Jewellery – 2,797,115,250 oz
Investors – 1,183,147,600 oz
Central Banks – 993,458,175 oz
Industry – 803,768,750 oz
Unaccounted For – 125,387,925 oz
So the 67,213,000 ounces of “transparent” gold represents only 1.1% of all
gold or 5.7% of all the gold held by investors. The chart below demonstrates
the relative insignificance of the transparent gold – the little blue bump at
the bottom is Nick’s chart above.
When it comes to gold held by investors, Dark Gold dominates. While a lot
of this dark gold is held privately, much of it would also be held in vaults
operated by the major security firms like Brinks or G4S or run by bullion
banks. Knowing what is going on with the gold in these vaults would give the
operators some information advantage in the market. We, however, can
only guess at what total stocks sit in these vaults (although Warren James is
giving it a go with his analysis of ETF bar lists, see here for how he does it).
