Seriously? “Simon Black” (it’s a nom de plume) wrote an article titled “Demand For Physical Is Collapsing.”
He focused on retail bullion demand numbers. The headline and the
content is largely fake news as it focuses on the demand for minted
coins vs the paper gold market. We’re not really sure about the intent
of article, but the content was devoid of any relevance to the actual
global demand for physical gold.
While the retail minted coin and small-size bar demand is down from
last year’s levels, there’s two factors to explain this. First is price.
The price of gold and silver was lower in early 2016 than it is now.
The price of gold in February 2017 averaged $1230-$1240 while the price
of gold a year ago February averaged $1175. Retail buyers of gold/silver
coins are highly sensitive to price and tend to chase the price higher,
up to a point. On this basis, it’s not surprising that more minted
coins were sold a year ago compared to this year. This “price effect” on
the demand for retail gold and silver coins likely explains about 25%
of the demand comparison between 2016 and now.
The second factor is the economy. Remember, the end user of minted
bullion products is largely the retail buyer. In the first two months
of 2017, real wages have declined. Even more negative for retail sales
of any sort is the fact that real disposable income has been declining
on a year over basis since December 2015:
While we at the Shadow of Truth do not consider buying and owning
bullion to be “discretionary,” retail sales, including sales of bullion
coins, is highly dependent on the relative level of real disposable
income. Thus once again it should not surprise, based on just looking at
retail demand for physical bullion, that retail bullion sales are
falling.
On the other hand, the Black article purports the idea that retail
bullion sales represents global demand for gold and silver. Nothing
could be further from the truth. Retail demand at the margin has no
affect on price other than maybe the price premiums in the coin market
based on mint supply and retail demand.
The majority of gold bullion demand comes from the jewelry industry,
eastern hemisphere Central Banks and sophisticated wealthy and
institutional investors. India and China alone import more gold than is
produced from mines globally. This is why Black’s “paper gold” price is
rising. It’s why the BIS and western Central Banks have failed to
eliminate the significance of gold in the global monetary system.
Gold imports into India jumped 175% in February from February 2016 to 96.4 tonnes (LINK).
In fact, official gold imports into India have been rising since
December. And that does not include dore bars or smuggled gold. 179
tonnes of gold was withdrawn from the Shanghai Gold Exchange in
February. This is 60% higher than February 2016. The Russian Central
Bank gold reserves have been rising almost monthly since mid-2007.
To claim that the global demand for physical gold is collapsing is
seeded in either ignorance or mal-intent. But either way, the
assertion is outright idiotic when the facts are examined, which we do
in today’s episode of the Shadow of Truth:
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Dave Kranzler spent many years working in various Wall Street jobs. After business school,
he traded junk bonds for a large bank. He has an MBA from the University of Chicago, with a concentration in
accounting and finance, and graduated Oberlin College with majors in Economics and English. Dave has nearly
thirty years of experience in studying, researching, analyzing and investing in the financial markets. Currently
he co-manages a precious metals and mining stock investment fund in Denver and publishes the Mining Stock and
Short Seller Journals. Contact Dave at dkranzler62@gmail.com.
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Rory Hall, Editor-in-Chief of The Daily Coin, has written over 700 articles and produced more
than 200 videos about the precious metals market, economic and monetary policies as well as geopolitical events
since 1987. His articles have been published by Zerohedge, SHTFPlan, Sprott Money, GoldSilver and Silver Doctors,
SGTReport, just to name a few. Rory has contributed daily to SGTReport since 2012. He has interviewed experts
such as Dr. Paul Craig Roberts, Dr. Marc Faber, Eric Sprott, Gerald Celente and Peter Schiff, to name but a few.
Visit The Daily Coin website and The Daily Coin YouTube
channels to enjoy original and some of the best economic, precious metals, geopolitical and preparedness news
from around the world.
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The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The
views and opinions expressed in this material are those of the author or guest speaker, are subject to change and
may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy,
completeness, timeliness and reliability of the information or any results from its use.
