Commodities | Jun 18 2007
By Greg Peel
Here are some interesting facts.
The total amount of gold mined in the history of mankind is 155,000 tonnes. About 2500 tonnes are produced by the world’s gold mines each year. About 5000 tonnes of gold changes hands each year. The current value of all gold mined in history is US$3.3 trillion. The value of paper money printed by the world’s central banks each year is US$3.3 trillion.
China holds US$1.2 trillion in reserves. The Bank of China has stated often (although to date apparently has not done anything about) its intention to diversify 5% of its reserves into gold. That’s US$60 billion or 2871 tonnes. Switzerland plans to sell 250 tonnes or US$5 billion between now and 2009.
There is nothing to be worried about.
This is the conclusion drawn by Jason Hommel of the Silver Stock Report. Hommel also notes many of the Washington Agreement banks hold more than 50% of their reserves in gold. If all of these banks decided, as Switzerland has done, to cash in on the higher price of gold and reduce percentage holdings to original targets, there would be a lot of gold coming onto the market. However, the question remains as to whether this gold hasn’t already be leased.
Portugal holds 79% of its reserves in gold. However, the Gold Antitrust Action (GATA) committee has shown that Portugal has already leased out (ie effectively sold) 70% of its gold. Thus Portugal cannot sell large amounts of gold, because it already has. GATA also suspects Switzerland is in a similar position, and that the 250 tonnes about to be sold will be to cover the short gold positions established through leasing by Switzerland’s banks. In other words, this gold may never see the market.
In the meantime, gold watcher James Turk pondered whether the close on Friday June 8 at US$655/oz will prove a significant low. His argument is that June 8 marked the third largest weekly fall in gold this year. Gold dropped $30.30 the week ending January 5th, $41.60 the week ending March 2nd and $25.70 last week. The previous falls represented lows of $604.90 and $641.50 respectively.
Well gold has indeed traded lower last week, but once again proved resilient around the US$650/oz level. Turk suggests his argument is still intact, noting both gold and silver have begun to trend up again. Gold was up 1.4% last week and silver 1.8%. Turk suggests breaks of US$672/oz and US$13.78/oz will be significant, although we’re not out of the woods yet.
