Gold Silver Worlds: In this month’s Markets at a Glance, Eric Sprott presents a collection of thoughts on why he thinks precious metals is a compelling investment right now. He looks at three major topics: physical shortage in gold and silver, manipulation of precious metals prices, and the dire state of the economy. All this points to the same conclusion, i.e. the fundamental strength of precious metals investments.
- The Gold Forward Offered Rate (GOFO) remains very low, with extended periods of time in negative territory (Chart 1).
- Why is Germany’s repatriation of their 674 tonnes of gold taking so long? As of March 2014, only 69 tonnes had made their way back, a pace of less than 5 tonnes a month.
- If there is no shortage of gold, why are the U.S. and U.K. exporting so much gold to Switzerland? (which itself exports most of it to China).
- According to some estimates, China consumed over 4,800 tonnes of gold in 2013, implying that about 3,600 tonnes were drawn from global stocks (i.e. western vaults) to satisfy demand.
- All this Chinese buying is reflected in the monstrous amounts of gold deliveries on the Shanghai Gold Exchange.
- Dubai is building a new gold refinery capable of handling 1,400 tonnes, and current global gold refining capacity is about 6,000 tonnes (world mine production is less than 3,000 tonnes a year). Why would they need so much refining capacity if physical demand was not buoyant?
- As the major gold miners cut back on exploration, future mine supply will remain constrained.
- Another “temporary source of supply” (900 tonnes) has been ETFs, which have been raided for most of 2013. However, as Chart 2 shows, they have now stabilized. Other things being equal in demand, where will that 900 tonnes of supply come from in 2014?
- Interestingly, the Silver Institute, in its 2014 World Silver Survey, noted that there was a 96 million ounces shortfall in 2013 due to strong physical demand.
- read more @ http://etfdailynews.com/2014/06/03/physical-shortage-of-gold-and-silver-manipulation-economy/
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