Gold Supply

IF WE'RE RIGHT ABOUT where the price of gold is headed, writes Jeff Clark, senior editor of Casey's Gold & Resource Report, the general public will someday clamor to buy all things Gold.

While Gold Mining stocks will be where the real leverage is, the rush will start with gold itself. As a gold editor, I have a very natural question: Is there enough to go around?

According to the US Census Bureau, there are 6.783 billion earthlings. Meanwhile, CPM Group, a highly respected industry organization, estimates there are 4.8 billion ounces of above-ground gold in the world. And this includes jewelry, electronics and dental gold.

So, even if everyone around the world volunteered to have their chain, cross, or tooth melted into a coin, we're already short if everyone wanted, say, to own a single ounce each. Those towards the end of the line are out of luck.

However, it's worse than that. Of all the physical Gold ever mined:

• 2.1 billion ounces, or 43%, is found in jewelry, decorative, and religious items;
• Private stock – gold already held by various private parties – accounts for 1.1 billion ounces;
• Official reserves (central banks, IMF, etc.) stand at 1 billion ounces;
• Industrial use accounts for 530 million ounces.

Very little of this is likely to come available for purchase in Gold Bar or coin form. After all, most private investors aren't selling any of their gold right now, and neither are many banks or institutions. Most everyone is buying.

So for those who don't yet have that solitary ounce (or you greedy investors who want more than one), this pretty much leaves us with mine production and scrap sources.

CPM forecasts that total new supply in 2009 will be around 122 million ounces. Only a small percentage of this is made into Gold Coins and bars, but if all of it were, it would amount to less than two one-hundredths of an ounce, or about half a gram, for every man, woman, and child on earth this year. A product of this dimension is about half the size of that small button on your shirt collar.

Since this supply is only available annually, it means 0.018% of the global population – one in every 55 people – could buy a one-ounce Gold Coin this year. Or, said differently, it would take 55 years before everybody had one, assuming the population never increased and supply never decreased. Reality is that both those factors are moving in the opposite direction, however. And it's worse than that.

Actual 2009 coin production will be around 5 million ounces (excluding medallions or "rounds"), leaving two one-hundredths of a gram of gold (or 0.3 of a grain) available this year for each of the planet's inhabitants. This is about half the size of the sesame seed that fell off your hamburger bun at dinner last night. It means that only 0.0007% of earth's citizens – or one in 1,356 – can buy a one-ounce Gold Coin this year, and it would take 1,356 years for everyone to get one.