Not Enough Gold to Go Around?

Gold futures continue to break records and set new highs. While conquering the “how high is high enough” questions I thought I would interject some old school supply and demand numbers into the conversation. According to an article on Bloomberg from May 24, 2010, exchange-traded products like gold futures, backed by bullion added 41.7 metric tons in the week ending May 14 which is the most in 14 months (UBS AG data). Compare that to the weekly output from China, Australia, and the 15 other largest mining nations at 41.6 tons that the researchers from GFMS Ltd estimate.




To me, this helps build a case for $1,500 per ounce gold futures. Further, I feel more comfortable with a bullish forecast with underpinnings of a waning supply picture cast against a healthy demand picture. So often the talk about gold is about speculators, the crisis with the Euro, the crisis with Greece, or the ever-present poor global economy, but never about gold old fashioned supply and demand. Granted, one week of supply and demand numbers do not a full econometric model make, but it is one nice puzzle piece to consider.



Also from the Bloomberg article is the forecast from Evan Smith, who helps manage the $2 billion U.S. Global Investors, Inc. in San Antonio and in 2006 correctly predicted that gold would reach $700 within two years thinks “You could see gold go up another $1,000” because of “All the of the turmoil and problems we’ve seen in Europe and is just another reminder that there’s a lot of value in gold as a safe haven.”