Gold Supply-Crisis Looms?

By Jeff Nielson, Bullion Bulls Canada

The World Gold Council recently released its second quarter statistics on gold “demand and supply trends”. For those not familiar with the WGC, it is an “industry trade group” composed of large-cap gold miners who love bankers.

How much do these mining companies love bankers? So much that they allow the bankers to keep all the records for their sector, and pretty much do all of their of their promotion to the world. It is the WGC which elevated two private “consultancies” (of bankers) – GFMS and the CPM Group – to the status of quasi-official record-keepers for the entire global gold (and silver) industry.

It would be problematic at best for the gold industry to allow itself to be almost entirely represented by a “profession” now known only for its rampant fraud. However, given the known hatred of the banking community toward gold and silver, and their relentless attacks on both the bullion market and the miners themselves; it’s almost beyond comprehension that the world’s largest gold miners choose bankers as their spokesmen.

I’ve already exposed the devious/perverse manner in which these consultancies produce phony inventory numbers in the silver market. In the upside-down world of these “record-keepers”, when someone purchases an ounce of silver from a silver-ETF (and thus takes that ounce of silver off of the market), the CPM Group adds another ounce to total inventories.

In other words, if silver investors were to buy-up every ounce of silver currently available in the world (via silver-ETF’s), global silver inventories would supposedly double, while if silver-ETF holders were to sell all their holdings it would (apparently) collapse inventories.

GFMS, the authors of this Q2 gold report are technically no longer “bankers”, since they have been bought out by the Thompson media oligopoly; one of a handful of companies who have a complete choke-hold on the world’s entire English-speaking media. When it comes to the data they produce, the esteemed John Embry of Sprott Asset Management was blunt in a recent interview:

“Those guys have been providing misinformation for years…[They] basically churn out negative gold news constantly and I would ignore them.”

While Mr. Embry pointed to several historical examples to emphasize his point, I’m going to focus on what they’re currently saying about the sector to make the same point.

If we look at the WGC (GFMS) headlines for Q2, it’s pretty straightforward. Gold demand was down 7%; gold supply was down 6%. Looks pretty even, with perhaps a slightly bearish bias. Right? Wrong.

We don’t even get to the end of the first paragraph before we begin to see the ‘slipperiness’ of these numbers. We note that expressed in dollar figures that gold demand was only down about 1%. So we immediately see the following dynamic: a 1% drop in (sales) demand – virtually no decline at all – is accompanied by a 6% drop in supply.

In other words, based upon GFMS’ own numbers we see the decidedly bullish scenario of a market which can only be kept in balance if accompanied by steadily rising prices – a markedly different picture than what was presented in the headlines, and entirely different than what GFMS asserts in its analysis in talking about “The lack of a clear price trend…” When a market can only be kept in balance with steadily rising prices, that certainly looks like “a clear trend” to me.

Dig deeper into the numbers and we find that:

…[investment] demand is also heavily-skewed by demand in India and China…excluding them from the total data gives a notably different result: a 16% year-on-year increase in demand to 195.2. Outside of these two markets, investment demand declined in only four countries [in the entire world].

When it comes to China, what we apparently witnessed was a mere pause in demand, brought about by the long sideways movement in prices. In fact what we have seen with Chinese gold-buyers is that they are encouraged to buy with rising prices, and since prices must rise to offset declining supply; it’s inevitable that Chinese buyers will soon leap back into the market.