Everyone Wanted One ounce Gold?
By Jeff Clark
If we’re right
about where the price of gold is headed, the
general public will someday clamor to buy all
things gold. While gold stocks will be where the
real leverage is, the rush will start with gold
itself. As a gold editor, I have a very natural
question: is there enough to go around?
According to the U.S. Census Bureau, there are
6.783 billion earthlings. Meanwhile, CPM Group,
a highly respected industry organization,
estimates there are 4.8 billion ounces of
above-ground gold in the world. And this
includes jewelry, electronics, and dental. So,
even if everyone around the world volunteered to
have their chain, cross, or tooth melted into a
coin, we’re already short. Those towards the end
of the line are out of luck.
However, it’s worse than that. Of all the
physical metal ever mined...
2.1 billion ounces, or 43%, is found in jewelry,
decorative, and religious items.
Private stock – gold already held by various
private parties – accounts for 1.1 billion
Official reserves (central banks, IMF, etc.)
stand at 1 billion ounces.
Industrial use accounts for 530 million ounces.
Very little of this is likely to come available
for purchase in coin form. After all, you’re not
selling any of your gold, and neither are many
banks or institutions. Most everyone is buying.
So for those who don’t yet have a gold coin (or
you greedy investors who want more than one),
this pretty much leaves us with mine production
and scrap sources.
CPM forecasts that total new supply in 2009 will
be around 122 million ounces. Only a small
percentage of this is made into gold coins and
bars, but if all of it were, it would amount to
less than two one-hundredths of an ounce, or
about half a gram, for every man, woman, and
child on earth this year. A product of this
dimension is about half the size of that small
button on your shirt collar.
Since this supply is only available annually, it
means 0.018% of the global population – one in
every 55 people – could buy a one-ounce gold
coin this year. Or, said differently, it would
take 55 years before everybody had one, assuming
the population never increased (it is) and
supply never decreased (it is).
But it’s worse than that. Actual 2009 coin
production will be around 5 million ounces
(excluding medallions or “rounds”), leaving two
one-hundredths of a gram of gold (or 0.3 of a
grain) available this year for each of the
planet’s inhabitants. This is about half the
size of the sesame seed that fell off your
hamburger bun at dinner last night. It means
that only 0.0007% of earth’s citizens – or one
in 1,356 – can buy a one-ounce gold coin this
year, and it would take 1,356 years for everyone
to get one.
How’s that for a supply squeeze?
But it’s worse than that. Demand continues
rising. Gold is more frequently in the news,
attracting more customers every day. Hedge
funds, which never before considered gold, are
now buying physical metal (Greenlight Capital
actually sold $500 million of GLD and bought
physical gold). Central banks are net buyers of
gold for the first time in 22 years. China is
running TV ads encouraging its citizens to buy
gold and silver. Last month Russia bought more
gold than they actually produced. In a recent
survey, 20 out of 22 fund managers bought
physical gold for their personal investments. In
other words, some investors are already
scrambling to get it… and in big quantities.
But it’s worse than that. Most of the
ramifications of the money printing and dollar
debasement haven’t even surfaced yet. How will
the general public react when the dollar is
crashing and standards of living are threatened?
What will they do when milk and gas prices surge
to twice what they are now? How will the greater
collective respond when they lose faith in
government interventions? Where will they invest
when they see gold and silver prices screaming
upward and don’t want to be left behind?
The panic into gold by the general public hasn’t
begun yet. Available supply is scarce and will
get smaller. There won’t be enough.
Better get your speck while you can.