Gold to Reach $5,000 Due to Supply Shortage: Report http://www.cnbc.com/id/43396080 An exhaustive report by Standard Chartered predicts that gold [GCCV1 1525.50 1.10 (+0.07%) ] will more than triple to $5,000 an ounce because of a lack of supply, not just because of a surge in demand that most bullion bugs cite in their bullish calls. AP "There are very few large gold mines set to commence operation in the next five years," said Standard's analyst Yan Chen in a report Monday. "The limited new supply comes at a time when central banks have turned from being net sellers to significant net buyers of gold. The result, in our view, will be a gold market in deficit, even assuming flat growth in demand. With the supply-demand balance so out of kilter, we see the gold price potentially going to US$5,000/oz." The London-based firm is among the first to focus on the supply-side of the gold equation amid the many bullish forecasts out there on the metal. After analyzing 345 gold mines and 30 copper/base metal gold mines around the globe, the team estimates annual gold production will be just 3.6 percent over the next five years. "They make a pretty compelling argument, especially when it comes to mine supply," said Brian Kelly, head of Brian Kelly Capital and a 'Fast Money' trader. "Most analysis focuses on demand from China and India, which of course can disappear as quickly as it materialized." But that's unlikely to happen over the next five years as central banks look to further diversify their holdings of U.S. dollars and as emerging countries buy more gold in the aftermath of the global paper currency crisis. "Currently, only 1.8 percent of China's foreign exchange reserves is in gold," wrote Chen and the Standard team in the 68-page report. "If the country were to bring this proportion in line with the global average of 11 percent, it would have to buy 6,000 more tonnes of gold, equivalent to more than 2 years of gold production." Beyond the money The bold call is among the most bullish out there. In a Bank of America/Merrill Lynch survey of global money managers released Tuesday, just about a third of money managers felt gold was overvalued. However, that is the highest reading in that survey in more than a year. Standard Chartered recommends that clients buy shares of smaller gold miners to get the most upside from its prediction but also said clients could buy physical gold and gold exchange-traded funds.
Supply shortage? Sounds more like a demand overload. From what I understand there is no actual need for gold, other than as a store of value. The industrial uses are negligible. So what we have is some people and more importantly big banks wanting to get hold of the amount there already is. Without an increase in supply the price will go up but surely when the price goes up to $5000/ounce every man and their dog will be dumping all the gold they have for the cash. Added to that, all the companies that are now digging it out of the ground at $1500 ounce will just work a bit harder to dig it out of the ground for $5000/ounce. More exploration, more old mines being reworked, dirt containing gold that was not worth processing will now become so. I hope that it does get there for all you gold bugs but I have never been that excited by it so I haven't read up much on it. I think when it starts to get that high people will lose interest in it, I wouldn't pay $1500 for an ounce coin now so I certainly wouldn't pay $5000 for it. The only people who would are the speculators....and the shadow puppeteers who will make gold unaffordable to the massess, entice everyone to sell their gold so none is left in private hands and then they will have the largest heaviest, shiniest stack in the world. And they can then achieve their goal of a One World Fiat Currency without competition from the pesky metal!
Or one may perceive this response as typical of one who missed the boat when Gold was $680/oz only 3 years ago. Colour green anyone?
Not sure what they meant by this bit? Will rise by just 3.6%? Increased mining of currently uneconomic deposit will raise the average cost per ounce so if the price does start to pull back after reaching such heights mines will be shut down much quicker than they opened which will help keep the new price levels in balance somewhat.
Ha Ha Hi Ho Incorrect, though I didn't exactly back the truck up! Although I have a handfull of sovereigns (10-15?) and some foreign commemoratives, (mostly for the coin collection) the gold itch was taken care of by my wife who has enough gold jewelry to sink a battle ship. I stopped buying the coins when it hit around $800/ounce. Gold rings etc. seemed to be a better way of stacking gold than coins, at least you can use them in the day-to-day, plus, you give someone (who isn't on this forum) a gold ring and they thank you, you give them the same amount of gold in a coin and they ask you what they are supposed to do with it or where they can spend it. Like many on the Silver stackers forums, I had an overall view of precious metals, not just silver! Gold was well and truely on the radar, I didn't miss the Gold boat, I chose to take the silver yacht! I went heavily into silver as it seemed to be making the most impressive gains, and I could get a load of the stuff less than spot, increasing the profit, gold always seemed to be higher than spot and the premiums were larger than the silver premiums for the pure stuff. Plus if I want gold all I have to do is wait for the manipulated Gold:Silver to correct back to its historic ratio and then I can swap out, making even better savings! And I still haven't bought into the idea that gold will ever be used for money. Don't get me wrong, I believe that the fiat currency will collapse, maybe not in the next 10 -20 years but it will, however I think it will be replaced with a stronger fiat currency or a new fiat currency altogether. Don't underestimate the gullibility of the people. This response may be typical of those who missed the boat but it is also the response of those saw a better boat and climbed on board. Whether gold outperforms silver is all a matter of time period, however you can't go wrong with either it seems. The really green people will have missed both boats but fortunately for them they are blissfully unaware and will stay so until the much anticipated Phase III.
I prefer the second sound reasoned response thanks JizLiz.... One analogy I think gets a well thought answer is if someone offered you $1500 or an oz of Gold right now, the only caveat is you have to store them both for 10 years, which one would you take?
$1500 of fiat? Australian or US? Store how? In a high interest account or under the pillow? No contest anyway, take the gold! What if they offered you $1500 in fiat $1500 worth of silver $1500 worth of gold Same conditions? Coin flip between silver and gold? I have no idea which one would do better, they will both probably do well.
I think Gold has a better change of those sort of huge gains than silver but i place that belief in the fact silver is used as a industrial metal and any huge rise in gold would be caused by some disaster which would subsequently result in a drop in industrial demand anyway. I wouldn't take too much notice of these pie-in-the-sky type numbers being are throwing out there, but if there is a breakdown in the U.S monetary system anytime soon which i don't think is impossible then were else would investors go? the Euro isn't in that greater shape anyway. Eventually the USD will become a stable currency again or a new reserve currency will be formed which may or may-not be gold backed. There is definitely abit more focus on the yellow metal rather than silver recently which may provide us with some more substantial gains to what we have seen in recent months.
Slightly off topic but not a complete tangent....I have seen a few of these massive price gains being calculated by taking a factor which could affect either the gold or the silver to the extreme. Then stating that the Gold to Silver Ratio has historically been 16, now it is 40 or what ever and then 'correcting' it. e.g. Gold is $1500/ounce Gold to silver ration is 1:50 so silver is worth $30/ounce but if we correct for the historical ratio of 16:1 then silver could reach $94/ounce without doing anything!!! I have seen this in a few blogs and a couple of sponsor links as well (on the blogs, not here). They usually get Gold up to a couple of thousand due to some reason and then do the correction. I have seen this used to sell the potential for silver to $250. EDIT: Sorry, just wanted to know if this was a valid, semi-valid or smoke and mirrors technique?
Actually Gold is a jewelry metal. Industry has never been a big factor in its price. For the price to drop either people will have to decide to stop buying gold jewelry (57% of demand!) or Central Banks and people of the world will decide they no longer want gold as investments (31% of demand). http://www.gold.org/investment/why_how_and_where/why_invest/demand_and_supply/ I don't see that happening.
Nice graphics, thanks for that. I can see there being less demand for jewelry at $5000/ounce, that will price most people out of the market.
THats why they have 9 carat gold dude so we can afford it? Also 1/10 oz will cost $500 people will still buy gold
Any idea what a 9 carat gold ring costs at the moment? Google indicates that the cheapest seems to be around $100 or so, is that about right? So the cheapest gold ring will go up to around $300+. Not unaffordable for occassions like weddings and engagements (which are price gougers anyway) but starts to go a little beyond the impulse buy range. Sure, some people will still buy expensive gold, people don't always do rational things, people still smoke and that kills you. If there was a gold bubble I guess people would chose to spend more on gold whatever price it was in the hopes of reselling it at great profit. However outside of a bubble, with 57% being used for jewelry and not investment, you will be able to buy less gold for your money, so you either chose to spend more money or buy less gold. If you have the luxury to spend more on gold then you probably don't mind the price increase as it will be a more exclusive club you are in. Jewelry tends to hang around as well, most of our jewelry is passed down from relatives so it is not like there is suddenly going to be a shortage of the stuff, not in the way that other metals are consumed through industrial use. I guess lots of it are given in Indian weddings so there will always be strong demand for it. I just can't see many of the people I know buying jewelry at those sorts of prices, they don't buy much at the moment so I can't see them racing to get any at those prices. I don't think I know particularly poor people either, most are middle class, they have money but prefer to spend it on their family, holidays, cars, things for the house, pets that sort of thing, even the mortgage would probably be put before accumulating gold. They would probably consider gold for investment but if they were only looking at short term strategies they would probably avoid it. As much as we (you) love it, gold is a niche market, a pretty big niche granted, but it is also a luxury niche, if you make it expensive the niche gets smaller as you price some of the people who would like it, out of the market. People only buy gold if they have spare money, spare money to spend on trinkets and baubles or spare money to invest. It would be good to grow the 11% industrial use. As it is all I can see happenning if the price increases is a shift in ownership from the public into the Banks. There will still be a few of the tinfoil hatted stackers holding onto their stash, plenty of coin collectors with their collections and loads of jewelry being handed down. But with each generation passing the gold to the next more will be converted into cash. I would love to beleive that gold is worth lots but it just seems odd to think that the same people who decry fiat currency as being worthless would put so much value into something that is fundamentally useless. OK, that is a bit harsh, it has 68% usefulness, jewelry and industrial uses certainly count. But 31% as investment?! that is crazy talk, (we are not counting the missing 1% which is probably in the washing machines and down the backs of sofas the world over) Gold...? well it's an investment... How so? Well it costs a lot to dig it up out of the ground... So leave it in the ground! But then I couldn't invest in it. But if it is an investment you must expect it to go up in value... Of course! Is it getting rarer then? No, they are still digging it up out of the ground...but the demand is getting stronger! Who is demanding it? Other investors.....................and Banks! I thought you didn't like banks. And anyway, why do the banks want it? So they will have more of it than the other banks But what are they going to do with it? Nothing.........................maybe sell it to other banks for more money Why, will it be rare then? Well, they will still be digging it out of the ground........but it will cost more to do so. So leave it in the ground! But then they couldn't invest in it! Unless of course the banks and investors are intending to go into the jewelry trade, which seems to be the only reason to own the stuff. Please excuse the meandering post but I have some real work to do and I would rather do this than anything else!
Gold is useful - bury it and come back 400 years later and it will still be there untarnished and same weight.
I haven't read all of the above due to time restrictions so apologies if i'm repeating... Will gold get to USD$5k due to shortages in the metal or the USD tanking? Interesting, ABC Commodities just displayed the % rises in Copper, Oil, Silver and Tin - but no mention of gold at all!
