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Recently, the western banking cartel media has been out in full force to
mislead everyone regarding a narrative of falling and “soft” demand for
physical gold and physical silver, as they typically frame the market in the
US as representative of the global market when this is patently false.
Furthermore, the usual suspects, like Goldman Sachs bankers, have piled on to
this misinformation by calling for a plunge in gold prices, but more on that
later. First let’s discuss the misleading statistics being disseminated by
the mainstream financial media regarding physical gold and physical silver
demand. Last month Reuters reported plummeting silver Eagle coin sales for Q3
at 3.7 million ounces, and attempted to frame weak US physical silver demand
as weak overall silver demand by calling the silver coins data “the
lowest in 10 years”. Furthermore, they attempted to frame physical gold
demand as weak by referring to the Q3 2017 American gold eagle coins sales of
38,500 ounces as a 80% plunge from the same quarter, prior year. If
you were to read just this one article to gauge physical gold and physical
silver demand worldwide, you would likely believe that demand was dead and
that no one was interested in buying physical gold or silver anymore,
as the Reuters journalist literally provided zero context to these numbers.
As I’ve repeatedly stated for the past 10 years, anyone can use statistics to
present a biased and false picture of reality by stripping presented data of
any context. This is precisely what the Reuters journalist did.
Furthermore, Bloomberg hopped on the “no one wants to buy physical
gold and physical silver” Reuters bandwagon as well with a similar
narrative of gloomy gold demand by reporting last week that “sales of gold
coins [in the United States] in the first nine months of the year shrank to
the lowest in a decade.” As well, various mainstream US financial websites
prominently reported that demand for US Mint produced gold bullion has fallen
off a cliff this year, with the first 5-months of 2017 only generating
185,500 ounces of gold sales, yielding a projected 2017 annual figure of only
445,200 AuOzs sold.
And while all of the above figures are factual and true, they are entirely
misleading when it comes to global physical gold and physical silver demand
as all the data are provided out of context, and within a very narrow lens
that presents US gold bullion and silver bullion sales as the most important
data in the entire world. In fact, American physical gold and physical silver
consumption is irrelevant to global physical gold and physical silver demand
as these figures pale in comparison to aggregate physical gold and silver
consumption in China, India, and Japan. Though aggregate gold demand in all
three of these countries far outweighs aggregate gold demand in the United
States, and gold demand on the Asian continent is far more representative of
total global demand, I can use one country, China, without even discussing
the details of the enormous physical gold demand in India and Japan this
year, to prove my point. Before I continue with a discussion of Chinese
physical gold demand this year, let me just briefly note that for the first
seven months of this year, India’s gold imports more than doubled over the
prior year to 550 tonnes. With another 150 to 200 tonnes of gold estimated to
be illegally smuggled into India, a conservative figure for India gold demand
this year amounts to about 637.5 tonnes, or more than 20.5M AuOzs, for the
first 7 months of this year. Recall that annual sales of gold bullion
in the United States from the US Mint for the entire year are projected to be
2.4% of the 7-month Indian demand, yet Reuters and Bloomberg journalists
discuss US Mint bullion sales in American media, providing zero context of
global demand, as if they are the barometer for the entire global
industry.
In China, gold and silver panda coin sales only make up a small portion of
the overall demand for physical gold and physical silver as in 2016, only 1M
China gold panda coins and 8M China silver panda coins were minted. For this
reason, let’s compare physical bullion bar consumption in China to US Mint
gold bullion sales, though I want to stress that we are not comparing apples
to apples when doing so. Of course, the US mint figure does not include coin
and bar sales of independent US bullion dealers, as there is no reliable
source that aggregates these numbers in the United States every year. Still, since
most “gold” sales in the United States occur in the form of paper gold and
the GLD ETF, I’m going to assume that independent dealer sales of physical
gold are not going to inflate the US mint number that significantly. In
China, the best source of aggregated individual retail purchases of gold
bullion bars is provided by the Shanghai Gold Exchange (SGE), as various
Chinese banking sources have confirmed that the PBOC, the Chinese Central
Bank, does not buy any of its gold on the SGE, and that all withdrawals
represent private demand in China.
In the first 8 months of this year, according to data provided by the SGE,
the Chinese withdrew an aggregate of 1.29 M kgs of physical gold. Annualized,
this figure amounts to approximately 62,230,302 ounces of physical gold.
Because recycled gold has to flow through the SGE, this figure is actually
slightly higher than real demand, but even if we consider 5% of all withdrawn
SGE gold to be recycled gold, and subtract an estimated 5% from this number,
then annualized wholesale demand for physical gold in China would still be an
estimated more than 59M AuOzs. Note that this figure only represents the
official amount of physical gold being withdrawn from the SGE and does not
represent wholesale and retail gold bullion purchases from banks, independent
dealers and from neighboring countries like Hong Kong, as many Chinese often
buy gold when in Hong Kong and then import it back into China. Thus, even if
we add a 20% premium to the US annualized physical gold purchase number above
to represent all physical gold purchased outside of the US mint, we are
speaking about a minimum of 59M AuOzs purchased in China this year versus
445,200 * 1.2 = 534.2k AuOzs purchased in the United States.
In other words, US demand for physical gold is likely less than 1%
of Chinese demand and less than 2.5% of Indian demand, yet US
financial media has repeatedly framed physical gold and silver demand as
cratering for the duration of this year thus far, by deceptively only
reporting cratering numbers for physical gold demand in the United States.
Even taking into account the 1.4 billion people that live in China versus the
325M people that live in the United States, we are talking a giant
discrepancy in physical gold demand as there are only 4.3 times more Chinese
than Americans, yet physical gold demand is not 4.3 times more, but 110 times
more. In addition, the Economic Times, the Financial Express, and the World
Gold Council all have pegged private physical gold ownership in India at more
than 643M AuOzs, and Koos Jansens of BullionStar has produced similar
estimates for private physical gold ownership in China. While I have read
articles regarding how estimates are calculated for private gold ownership in
India and China and found them to be credible, I have not yet discovered any
estimates about private gold ownership in the United States to be credible,
so it’s difficult to know how private US gold ownership stacks up to India
and China other than to estimate that it is a fraction of the ownership in
these two countries.
Finally, the same shenanigans that happen with US financial media
reporting regarding physical gold sales happen with their reporting of
physical silver sales as well. YTD, up until August, the SGE reports that
retail withdrawals of silver have amounted to 990,105 kg, or about 31.8M
AgOzs. Annualized this amounts to roughly 48M AgOzs and again if we estimate
5% of this figure to be recycled silver, then Chinese wholesale demand for
silver for 2017 will still amount to more than 45M AgOzs. The US Mint
reported that silver bullion sales for the first 5-months of the year were
11.2 M AgOzs, or less than 27M AgOzs annualized. In the case of silver, since
the Chinese population is 4.3 times larger than the American population, the per
capita sales of silver is weaker in China than in the US. However, it is
still extremely misleading for Reuters to try to paint a collapsing demand of
physical silver by reporting, as they did last month, that “third-quarter
sales of American Eagle silver coins fell to the lowest in 10 years.”
In China, the retail demand for physical silver will likely not be the
driving force for silver usage for the next 5 to 10 years, but it will be
industrial demand that drives overall physical silver consumption patterns.
China currently plans to clean up one of its most persistent problems,
heavily polluted air in its major cities, by aggressively pursuing a plan of
solar energy to replace less green energy sources. Just last month, Xin
Guobin, the Vice-Minister of Industry and Information Technology, stated that
China had begun “relevant research” to establish a timeline to phase
out petrol and diesel vehicles in the Chinese market and a desire to add 20
gigawatts of solar power annually nationwide. In order to achieve this, China
would need to utilize about 56M AgOzs a year to produce 20 gigawatts of solar
power. Furthermore, other countries outside of China have also stated a
desire to rely on solar energy much more heavily over the next 5 years, also
increasing global demand for silver. With the declining silver prices in the
past few years, one would be mistakenly led to believe, based upon what every
student learns in Economics 101 class in business school, that supply has
been exceeding demand by a healthy margin every year for the past 5 years.
However, this is not the case. For the last several years, according to the
Silver Institute, global silver supply, every year, has been insufficient to
meet global silver demand. In addition, global silver mine production
decreased in 2016 for the first time since 2002 from a base of about 1
billion AgOzs of production per year in years past to just 885.8M AgOzs. This
year, global silver mine production is once again expected to fall again for
the second time in the last 15 years. With many of the world’s largest silver
mines suffering depleting reserves at a rapid pace and many of the world’s
largest silver mines suffering shorter LOMs, I suspect that global silver
mine production may have peaked last year at a time when global demand will
be significantly increasing.
But don’t let the above facts get in the way of incessant price
suppression schemes executed against spot prices of gold and silver via the
paper gold and paper silver markets by the Rothschild Central Banks and the
large Wall Street commercial banks. In fact, just on schedule, as I was
looking for the latest Goldman Sachs banker propaganda to prop up digital
currencies and to take down gold prices, the bankers certainly did not
disappoint. Yesterday, Goldman Sachs bankers Sheba Jafari and Jack Abramovitz
stated they now expect gold to retreat back to $1,100 an ounce from its
current price of around $1288, a very transparent effort to help out the
still very large commercial banking short gold positions still held that are
firmly in the red at the current time. By the way, Sheba Jafari is the
Goldman Sachs analyst that has also continually projected significantly
higher prices for BTC every time the BTC price has significantly corrected at
any point this year. In other words, Jafari seems to always state gold
negative, and BTC positive positions, as one would expect a banker to do.
There is little doubt that all the Western financial media attention given to
BTC has diminished the luster of physical gold this year. Given that
commercial banks still have large short gold and short silver positions
outstanding at the current time, and given that their analysts are trying to
manufacture another retreat in prices, price behavior in gold and silver may
be volatile from now until the end of the year. However, even if they are
successful in manufacturing another volatile drop in spot prices so they can
profitably exit their current gold and silver shorts, I do not expect such a
drop to have a long life span, as such a drop, if it happens, will have been
entirely artificially manufactured and be viewed as just another opportunity
by the Chinese, Russians, Indians, and Japanese to scoop up more physical
gold/silver at bargain prices.
As an interesting final note, the Russian Central Bank has now followed the PBOC in banning all
exchanges that allow trading of cryptocurrencies that have no intrinsic
value. It seems to me that lines in the sand are being drawn between the Western Central Banks that clearly desire to take the
world to a 100% digital cryptocurrency platform to replace their currently
failing 98% digital fiat currency system and the BRICS nations that
clearly desire physical gold to be an integral component of their currency
system moving forward, with perhaps a slight speed bump in India, as Indian
PM Narendra Modi seems to temporarily have been captured by Western banking
interests in pushing a digital currency agenda. In my humble opinion, the
best way to prepare for the coming massive global asset bubble collapse is
still to purchase physical gold and physical silver at these insanely low
prices at the current time.
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