A Gold Shortage Is Coming Says Eric Sprott

Friday, May 16, 2014
By Paul Martin

Gold Silver Worlds
May 15, 2014

Eric Sprott, with more than 40 years of experience in the investment industry, has been speculating since late 2012 that Western central banks could be running out of gold. He attributes the sell-off in gold and silver in 2013 to the fact that the Western banks needed a way to generate physical gold supplies. The metals prices were going down while there was a lot of liquidation of gold which increased the supply by an estimated 900 tonnes last year.

Driven by data, Eric Sprott explains in this article the case for a gold shortage. The basic figures are centered around the following:

The annual supply of gold is around 4,300 tonnes.
3,000 tonnes come from mining and the other 1,300 tonnes or so from recycled material2.
In 2013, an additional 900 tonnes came onto the market from ETFs that were being liquidated – a supply increase of around 21%.
Looking back to the price smash of April 2013, it resulted in a tsunami of buying:

India bought 336 tonnes from April to June of 20133.

Chinese started buying record amounts of gold.
The mine supply, excluding China and Russia which tend not to export any gold, is only around 190 tonnes per month. You had Indians buying 50 tonnes and China buying 90 tonnes – that does not leave much left over for the rest of the world. Blogger Koos Jansen, from In Gold We Trust, says that Chinese demand alone last year was 2,000 tonnes. So demand has far outstripped supply.
There is also interesting news coming from Dubai concerning this supply/demand imbalance. A group there is building a gold refinery that can process 1,400 tonnes of gold per year6. Well, the current refining capacity in the world is around 6,000 tonnes. Somebody is going to add another 20 percent of capacity. The supply falls far short of that at only 4,300 tonnes. Why is this refining capacity so much higher than the official supply of gold?

The Rest…HERE

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