Quote One big factor that has radically altered supply's cadence is an actual loss of one of its major sources. Just in the last couple years gold supply from central-bank sales has completely dried up. In fact, the CBs have since become substantial net buyers of the metal. According to metals-research consultancy GFMS, in 2011 CBs loaded their coffers with 440 metric tons of gold (~10% of total annual supply) This shift has resulted in a big impact on the global supply chain. For nearly 20 years leading to 2007 CB sales averaged between 400mt to 500mt per year, a constant and reliable supply source that was the equivalent of up to 20% of global gold supply. This source is now gone! Gold's second-largest source of supply is recycling. For many years recycling was consistently good for about a quarter of global supply. But thanks to higher gold prices coinciding with a brutal global recession, this supply source has seen a huge boost over the last four years. In 2009 recycling exceeded 1500mt (nearly 40% of global supply) for the first time ever, and it has been above this level for three years running. But though this surge has partly counteracted the loss of CB supply, recycling volume has been trending down over the last couple years. Interestingly this downward trend has many folks scratching their heads considering gold's record highs, but it does make sense considering the timing of the big 2008 and 2009 recycling surges that brought us to these levels. So with central-bank sales now extinct, recycling in a downtrend, and gold demand still at record levels, gold's final source of supply has a lot of weight on its shoulders. And with mine production typically accounting for about two-thirds of total global supply, thankfully it is used to bearing such a burden. But as you can see in the chart below, even this primary supply source comes with its fair share of volatility. More http://www.kitco.com/ind/Wright/20120501.html
