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Albert Sung is the author of the Katchum Macro-Economic Blog, monitoring breaking economic news from a day to day basis. He started investing in 2008 because of the economic crisis and holds a masters degree in chemical engineering. Previously, he worked several years as a process engineer at... More
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  • Gold Demand And Capacity 2 comments
    May 10, 2014 7:10 AM | about stocks: GLD

    An interview from Eric Sprott came to my mind today. Apparently, Dubai will build the largest refinery in the world with 1400 tonnes/annum gold refining capacity. You can put that next to the 3000 tonnes/annum Swiss gold refining capacity today. That's a lot of capacity coming online. Now why would someone do this? It's simple, because demand for gold is going up, not down.

    Just like in the oil refining industry, capacity follows demand. The more people consume gasoline (or gold jewelry), the more oil refining capacity (or gold refining capacity) is needed.

    This is the gold refining picture today. If you add it all up we get around 8000 tonnes/annum. Most of these are Swiss companies. But now you can add Dubai's Kaloti to that list.

    I really wonder what will happen at this stage when demand is going up, while gold supply is bound to go down in 2015.

    Stocks: GLD
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  • AF1951
    , contributor
    Comments (35) | Send Message
     
    Supply and demand should be normally the key factor for gold pricing. As long as the current price fixing is largely determined by paper gold (ETFs) traders, gold is not fairly priced. For example, premiums in India are over 100$ and this is not reflected in the gold price although India is the second world consumer of gold. At some point (next year or later), one can imagine that the supply will be so poor that the discrepancy between gold paper and real gold prices will reach levels that either are unsustainable for ETF funds or will lead to a gold price fixing de-facto alternative in competition with ETF fixing. Conclusion: buy only physical gold if you dont want to risk losing money on paper gold.
    10 May 2014, 08:09 AM Reply Like
  • Katchum
    , contributor
    Comments (573) | Send Message
     
    Author’s reply » Speaking about India, I'm still amazed their premiums are so high (20% up from 15% last month) as some gold import restrictions on 5 Indian banks were lifted a month ago. I hope something changes in India.
    10 May 2014, 09:47 AM Reply Like
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