Is a Global Gold Supply Crunch Forming?

A number of market analysts and gold-industry insiders are warning about a possible shortage of gold supply. Barrick CEO Jamie Sokalsky recently stated that since gold production is inelastic (i.e., insensitive to price changes) there will be a very limited increase in supply from gold producers, even during sharp increases in the gold price. Rick Rule, a billionaire and avid gold investor, pointed out that while we're seeing spectacular demand, a number of issues will make supply very tight in the future, especially among retailers.

The issues facing gold miners are well known: depletion of existing mines, lower grades, and fewer new discoveries – especially big and rich ones. Further, miners face increased calls for nationalization, demands from workers for higher pay or from local communities for better infrastructure, and – of course – environmental concerns. Many mining company representatives say it's getting harder to not only find large deposits but to get those deposits into production. Some estimate it now takes twice as long as to go from discovery to production vs. a decade ago.

These warnings aren't always taken seriously, especially by those who see that mine production has been growing. At first glance, they're correct – but only if you look at the short-term picture. The following chart shows that global mine production has indeed been rising since 2008. From 2009 through 2011, output rose an average of 3.9% per year. However, we know that a good chunk of this increase is due to China, and upon excluding its output, you can see how it alters the global picture. Continue reading "Is a Global Gold Supply Crunch Forming?"

How Do the Chinese View the Gold Market?

Have you ever wondered what the typical Chinese gold investor thinks about our Western ideas of gold? We read month after month about demand hitting record after record in their country – how do they view our buying habits?

Since 2007, China's demand for gold has risen 27% per year. Its share of global demand doubled in the same time frame, from 10% to 21%. And this occurred while prices were rising.

Americans are buying precious metals, no doubt. You'll see in a news item below that gold and silver ETF holdings just hit record levels. The US Mint believes that 2012 volumes will surpass those of 2011.

But let's put the differences into perspective. This chart shows how much gold various countries are buying relative to their respective GDPs. Continue reading "How Do the Chinese View the Gold Market?"

How to Play Your Gold Stocks Now

After a year or more of depressed prices, gold and silver stocks reversed with a vengeance. GDX (the ETF proxy for the Gold Miners Index) was up in just two months (August and September). Those who followed our lead and bought or averaged down this summer have profited handsomely. It's been a fun ride, and I'm convinced we'll see many more surges like this before it's all over.

What was perhaps more important about the surge in gold stocks, though, was the leverage they demonstrated, which is one of the primary reasons we invest in them. Here's a comparison of GDX to GLD from August 1 to November 1.

This chart shows the advantage of building your position on dips. It lowers your cost basis and takes leverage to a higher gear. Continue reading "How to Play Your Gold Stocks Now"

What Will the Price of Gold Be in January 2014?

By Jeff Clark, Casey Research

While many of us at Casey Research don't like making price predictions, and certainly ones accompanied by a specific date, it's hard to ignore the correlation between the US monetary base and the gold price.

That correlation says we'll see $2,300 gold by January 2014.

There are plenty of long-term charts that show a connection between gold and various other forms of money (and credit). Most show that one outperforms until the other catches up. But let's zero in on our current circumstances, namely the expansion of the US monetary base since the financial crisis hit in 2008.

Here's the performance of the gold price compared to the expansion of the monetary base since January 2008. Continue reading "What Will the Price of Gold Be in January 2014?"

The Solar Silver Thrust

By Jeff Clark, BIG GOLD

In early July, Japan set a premium price for solar energy that was three times the rate of conventional power. This meant utility companies would be paid three times more for electricity sourced from solar. It's widely expected that the premium will ignite the use of solar power – and solar uses a lot of silver.

Silver Demand from PV Panels

As you may know, silver is used in photovoltaic (PV) technology to generate solar power. A typical solar panel uses a fair amount of the metal – roughly two-thirds of an ounce (20 grams). To put that in perspective, a cellphone contains around 200 to 300 milligrams (a milligram weighs about as much as a grain of sand). A laptop contains 750 milligrams to 1.25 grams. Continue reading "The Solar Silver Thrust"