Tuesday, December 30, 2008

A Downbeat Assessment for Gold

... can be found at Alan Brochstein's excellent blog. Here's one particular portion that caught my eye.
On the supply side, I expect to hear about central bank liquidations eventually. According to the World Gold Council, the U.S. has about 8000 metric tons of gold. This may sound like a lot, but at $750 oz, this is "only" $211 billion. According to that same source, the U.S. is anomalous in that it holds over 70% of its reserves in gold compared to foreign currency. The total amount held by central banks and the IMF is approximately 29,000 metric tons, or about 20% of all gold.
Unlike oil, which is used as it's produced, gold just sits there. If national governments decide to pay for their shopping sprees by selling gold, that's going to be bad for everyone who invested in gold expecting it to appreciate.


Dean said...

We've got a lot of oil just sittin' around also.

Tim Eisele said...

Maybe so, but gold pretty much doesn't get used for anything *but* sitting around - either as gold bars, or as jewelry. I believe the statistic is, something like 95% of all of the gold ever mined is still sitting around somewhere accessible, and annual production of gold is only a small fraction (I think it's something like 1%) of the existing stockpiles.