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Gold Prices Up 18% on Average

By: Jason Hommel, Silver Stock Report

-- Posted Thursday, 7 June 2012 | | Disqus

(For the 12 years of this bull market in gold)

Silver Stock Report

Gold Prices have gone up for nearly 12 years now and have stabilized in recent months in a range around $1600 per troy ounce.  This is up 18% per year on average since $250/oz. in 2001.  Americans have yet to understand gold, or get on board the 12 year bull market that started in 1999 and 2001.

Worldwide, 2500 metric tonnes of gold are mined each year.  A metric tonne contains 32,151 ounces, for a total of 80 million troy ounces.  At $1600/oz., this is a world gold market of $128 billion.

Americans are only buying about 1 million American Gold Eagle coins per year, and are buying perhaps 4.7 times as much for "industry and the arts" according to the report, page 31.14.

Americans are thus consuming only about 7% of world gold production, or 5.7 million troy ounces out of 80 million ounces of newly mined gold, and only 1.25% of that (1/80) is "consumed" for investment purposes in the form of American Gold Eagle coins, worth a mere $1.6 billion dollars, which is a mere a footnote given the size and scale of American finance.

Typically, Americans consume up to 25% of the world's natural resources, but not so in gold.  Clearly, when some of the world's wealthiest consumers have not yet bought into an asset class, it has a lot of room left to run up in price.

Officially, The US Government continues to hold 8,140 metric tonnes of gold, which is 261 million troy ounces, and yet it has not been independently audited since the 1960s. 

The US gold hoard, ostensibly, anachronistically, could back up $15.77 trillion in public debt.

This would imply a gold price of $15,770,000 million (which is $15.77 trillion) divided by 261 million ounces, which implies a gold price of $60,421/oz.  That is not a typo.

Clearly, letting the US gold be audited may draw too much attention to how little gold there is (or, it could be less) to back up the debt of the United States.   Best to let the American public remain asleep regarding such things, I suppose.

The other problem, of course, is the annual debt, which is increasing by $1,200 billion this year, which is over 9 times as large as the value of world annual gold production.

The BLS (Bureau of Labor Statistics) claims that the inflation rate is only 2.3% for April, 2012.

But most people feel that the inflation rate is substantially more. 

The national debt is increasing at a rate of 7.6%.  $1.2 Trillion / $15.77 Trillion = 7.6%.

The NY Post estimates the real inflation rate is 8% as of March, 2012.

Therefore, the guaranteed loss holding U.S. bonds that pay 1-3% is now a 5-7% annual real world loss.

One wonders when Americans will start buying gold in meaningful amounts to protect their bond portfolios that are often highly leveraged, and supposedly "indexed" to inflation, but such movement has yet to be seen. 

The US Bond market ranges in size of about $20-30 trillion, which is about $25,000 billion, and is going down in value by 5-7% per year, while the US gold market ranges in size of about $9 billion, and gold has been going up in price by an average of about 18% for 11 years. 

$250 at 18% for 11 years since 2001 is $1544, courtesy of the online compound calculator.

Clearly, when $25,000 billion is sitting in one asset class, bonds, and going down, and only $9 billion is going into gold per year that now has an 11-12 year track record of an average 18% annual gains, the floodgates of American money going into gold has not yet started.

Government reporting of statistics continues to be appalling.

The CBO released a report yesterday, saying, "By the end of this year, CBO projects that the federal debt will reach roughly 70 percent of gross domestic product (GDP)"

But the real debt/GDP ratio is now over 100%. 

US debt is $15.77 trillion.
US GDP is $15 trillion.

And remember, the world annual gold production is a mere $0.128 trillion, in dollars.

Gold prices may well continue to wildly fluctuate, but they really only have one way to go, up.

Some people wonder about my credibility, or my agenda, or my track record.  Please do.  Please follow my links and do your own research, and do you own math, and while you are at it, do your own thinking.  Many people in today's world who are pushing some form of gold scam may not like me, because I have exposed them, and they like to slander me or poke fun at me, rather than deal with the statistics or arguments.  Later, they actually use my arguments to lure people into their gold scams.  There are horrible people in this world, really.

I have been advocating that people buy gold since the year 2000.  Not a bad track record. 

What's better, in my opinion, is that I'm happy to say that I have never once tried to call a top in this bull market in gold that by all statistical and fundamental analysis has not yet started, regardless of the minor and temporary fluctuations in gold prices up and down during this last 12 year period.  I have been able to be both right, and sit tight, a rare combination.

I have clearly explained why I have no intention of trying to call any dollar based gold price tops in this gold bull market in my essay here:
Future Gold & Silver Prices
Silver Stock Report
by Jason Hommel, December 21, 2005

All of my articles dating back to the year 2000 can be found either at the front page of, or you can follow the link at the bottom of the front page to all of my articles prior to that, which are published here:

I started bullion dealing in August 2008.

Every bullion product that we have bought and sold from August 2010 through April 2012 can be seen in these handy charts, which indicate the most popular forms of bullion in Northern California.

As always, this report is not meant to be confusing.  I do advocate and believe in silver far more than gold, for many reasons.  In sum, the silver to gold ratio should go from today's range of about 55 to 1 and go down to 15 to 1 or better due to silver's scarcity and strong industrial demand, showing silver's expected potential outperformance.  This report on gold simply confirms that silver prices will continue to go up, along with gold prices, for many years to come.  In my opinion, gold is better suited to extremely wealthy and older investors, aged 70-80 and who might pass on before silver outperforms, and who might not want to lift relatively heavier amounts of physical metals.

I have no hidden agenda, nor even any significant monetary incentive to "push gold", or even "push silver".  At our shops, we make money whether we buy or sell gold or silver.  I have an open and transparent agenda and track record of pushing silver because I honestly believe it's the best thing for you to buy, and we stand by that decade-solid old reliable opinion, and we stock more silver than gold in our display counters, and back room vaults.  As bullion dealers, who need to stock bullion in order to sell it, we are happy to hold silver and gold, regardless of whether the price moves up or down in the near term, and we think you should be happy to hold gold and silver under today's conditions as well.

The bottom line is that you need silver and gold.  I don't understand why anyone would slave away at a job for just paper.  Nor even save it.  Yes, I know you need paper money to buy things, but it's just paper.  For your savings, you should put a large part of that into gold, and especially silver.  What else has gone up for 18% on average or more for 12 years, and stands to gain a lot more in the next decade to come?


I strongly advise you to take possession of real gold and silver, at anywhere near today's prices, while you still can.   The fundamentals indicate rising prices for decades to come, and a major price spike can happen at any time.


Jason Hommel

-- Posted Thursday, 7 June 2012 | Digg This Article | Source:

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