Louis Cammarosano, Smaulgld, has been reporting the explosive sales of some of the worlds largest government mints. When ever one is discussing gold and silver China usually comes up in the conversation. China is one of the worlds largest producers of gold and is the largest importer of gold as well. China also imports a significant amount of silver.
When we began discussing China, Louis painted a picture of confiscation that was an interesting take on the concept and how one could confiscate the worlds gold with merely a smile and a few scripts of fiat currency.
Confiscation is a really nasty word. It makes people believe situations are going to happen and their lives are going to change. It also makes people believe that someone is going to break down their door and begin taking their “things”.
What if confiscation looked like this instead. “We encourage everyone to acquire gold, as much as you can, and we will store it for you, in an allocated account. Or if you choose, you can keep it where ever you wish.” What if people in one particular nation lived like this? Wouldn’t those people and that nation actually be confiscating the worlds gold? Wouldn’t all the gold naturally flow in that direction? Of course it would. Now that doesn’t sound nasty at all does it? That is exactly what is happening, and has been happening for several years, in China.
In 2015 the Shanghai Gold Exchange (SGE) moved almost 2,600 TONS of gold through the Exchange. Currently the COMEX, which helps to determine the global price for gold, has less 100,000 ounces available for purchase. If you divide 100,000 by 16 you come up with 6,250 pounds. Said another way, just over 3 tons of gold. If you divide 2,600 by 365 you come up with 7.12 tons of gold moved on a daily basis through the SGE each and every day in 2015. Does something seem out of balance with this picture or is just me? The entity that sets the global price of gold has half a day of gold when compared to the SGE.
Global demand for both gold and silver is exploding. The demand for these items began ramping up approximately 3 years ago and has been on a steady up trend the entire time. Over the past three years the U.S. Mint has been forced to shut off sales on more than one occasion. The U.S. Mint has rationed sales of American Silver Eagles since August 2015 and there seems to be no end in sight.
This is to say nothing of the Royal Canadian Mint (RCM) rationing sales of the Silver Maple Leaf along the same time line as the U.S. Mint. Both mints were completely out of product in July 2015 and sales ground to a halt for several weeks. The RCM has not fully recovered, nor has the USMint.
Mining production for the past three years has been on a down trend even though demand for product has been at all time highs. The price of silver has been so low the mines have been forced to maintain operations even though most are losing money. This trend is coming to an end as we are beginning to see bigger operations close segments, shut down completely or slow down their production to a trickle. Where is the gold and silver going to come from once these mines have been stripped bare or shut down? Scrap gold and silver? Not right now. Scrap coming to market is almost nonexistent. Only with a price increase will we see more scrap coming online.
Steve St. Angelo at SRSrocco Report has been reporting falling mine production for the past two years. A few months ago he detailed how entire countries are beginning to report drops in mining production. The decline in mining production is not limited to precious metals, but is effecting base metals like zinc, copper and lead as well. All of which produce silver and gold as a “by-product”.
Where is gold and silver going to come from as the year progresses? As more mines slow or close what is going to happen to the price of gold and silver? Is demand slowing or picking up? When does the whole thing blow apart? Got physical?
Let’s listen in to one of the more lively conversations I have had recently. Louis is a great guest and brings a lot of knowledge, energy and a few laughs to the table. We believe you will learn a lot and be highly entertained at the same time.
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