Eric Sprott has been advocating for a long time that the official gold market figures are representing nothing but the truth. On several occasions, he has concluded with the words “the data simply don’t make up.” His general thesis has been that central banks of the major Western regions have been cheating with their physical gold reserves, by leasing it to their agencies.
As Sprott relies on data, and as he was not believing the official figures, he conducted his own research. Based on official data from the US Census Bureau, he calculated the simply supply / demand evolution over the span of 22 years. The summary of his conclusion (source: Do Central Banks Have Any Gold Left):
The total amount of gold that the US has exported – above and beyond its supply capability – is almost 4,500 tonnes! A truly stunning figure.
The table shows the supply/demand data, as well as the exports. To put things in perspective, the total (officially reported) US holdings are some 8,000 tonnes of gold, the highest in the world. Germany is the country with the second largest holdings, some 3,300 tonnes. Total above-the-ground gold for all purposes (jewellery, investment holdings, central bank holdings, etc) is 170,000 tonnes.
Admittedly there is an unknown in our analysis, that being gold bullion acquisition and disposition by private investors. However, strong demand in ETPs such as GLD and PHYS and demand for gold coins provide strong evidence that the private investor has been a net buyer over the years. The inclusion of the private investor on the demand side would in fact skew the ‘gap’ of 4,500 tonnes higher to a figure that would lie somewhere between 4,500 tonnes and 11,200 tonnes, which represents the gross exports out of the US. The only US seller that would be capable of supplying such an astonishing amount of gold is the US Government, with a reported gold holding of 8,300 tonnes. The US Government gold holdings have not been audited or verified in more than four decades.
In his piece, Eric Sprott also reacts on the latest gold price action and the economic evolution.
We are currently in an environment where policy makers are intent on devaluing their currencies in an effort to create growth. Real rates continue to stay negative in most of the developed world. Every marginal dollar of debt that is created is producing lower and lower amounts of growth. In a world overwhelmed by mountains of debt and economic growth which is sub-par at best, precious metals and real assets can act as insurance against the stupidity of policy makers. The evidence pointing towards the suppression of the gold price is becoming increasingly apparent.
Don’t be the last person to figure this out! The current sell-off in gold should be viewed not with extreme trepidation but as an unbelievable opportunity to buy the metal at an artificially low value.
Gold Silver Worlds | March 20, 2013