GOLD 0.15% $1,276.5 gold futures

Gold Supply and Demand 2013-14

  1. 7,271 Posts.
    lightbulb Created with Sketch. 74
    I have been looking at the latest World Gold Council demand and supply statistics.

    This is what they summary of demand and supply in Table 6:
    Screen Shot 2015-02-17 at 4.17.03 am.png

    I have reorganised the data a little to make the meaning less opaque.
    - I have treated ETF sales as a "Supply" to the market.
    - I have differentiated between "End Buyer" Demand, and purchases make by the wholesale market in the process of market making.

    Screen Shot 2015-02-17 at 4.50.49 am.png

    These are a couple of quick observations.

    The whole market shrank significantly between 2013 and 2014.
    - Falling ETF sales (divestment) reduced the amount of bullion for sale in the market;
    - Sales in Jewellery, gold bars and coins fell away.
    Summary: There is less gold for sale, and there is less interest in buying it.

    The inventory carried by the wholesale market increased
    (This is my interpretation  of the change in "OTC Investment and Stock Flows". WGC defines this item as:
    Screen Shot 2015-02-17 at 5.11.27 am.png
    WGC does not have access to inventory data from banks and trading houses.)

    The increase in this number is the "smoking gun" explaining the weakness in the price of gold during the last couple of years. The amount of gold purchased by parties for the sole purpose of selling it on has increased. The spruikers who claimed that there was a gold shortage couldn't have been more wrong.

    I should add a disclaimer:
    This is historical data. It provides a very good explanation for why the price of gold has been weak in the past. The strength in the price of gold since mid December suggests that some of these dynamics may have changes. We will have to wait for the next report for confirmation.

GET SUPPORT arrow-down-2 Created with Sketch. arrow-down-2 Created with Sketch.