What If Everyone in the World Wanted a 1-oz Gold
Coin?
Jeff Clark
Casey's Gold
& Resource Report
posted Sep 28, 2009
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 ounces.
- 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.
[The current issue of Casey's
Gold & Resource Report has a few charts that should come
with a warning. We examined just how small the gold and silver
markets are, and "explosive" barely describes the potential.
If you want to check it out for yourself, consider a trial subscription
- 3 full months with 100% money-back guarantee. Click
here for more.]
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