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Gary’s Note: There’s not enough gold for everyone to have an ounce…and one day soon everyone in the world will be fighting for whatever gold they can get. Jeff Clark explains what the ultimate supply squeeze will mean…and how little gold will be available for those who haven’t already been buying.

What if Everyone in the World Wanted a One-Ounce Gold Coin?


By Jeff Clark
Casey’s Gold & Resource Report
September 28, 2009

If we’re right about where the price of gold is headed, the general public will someday clamor to buy all things gold. While gold 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 U.S. 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. So, even if everyone around the world volunteered to have their chain, cross, or tooth melted into a coin, we’re already short. Those towards the end of the line are out of luck.

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However, it’s worse than that. Of all the physical metal 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 coin form. After all, you’re not selling any of your gold, and neither are many banks or institutions. Most everyone is buying.

So for those who don’t yet have a gold coin (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 (it is) and supply never decreased (it is).

But 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.

How’s that for a supply squeeze?

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But it’s worse than that. Demand continues rising. Gold is more frequently in the news, attracting more customers every day. Hedge funds, which never before considered gold, are now buying physical metal (Greenlight Capital actually sold $500 million of GLD and bought physical gold). Central banks are net buyers of gold for the first time in 22 years. China is running TV ads encouraging its citizens to buy gold and silver. Last month Russia bought more gold than they actually produced. In a recent survey, 20 out of 22 fund managers bought physical gold for their personal investments. In other words, some investors are already scrambling to get it…and in big quantities.

But it’s worse than that. Most of the ramifications of the money printing and dollar debasement haven’t even surfaced yet. How will the general public react when the dollar is crashing and standards of living are threatened? What will they do when milk and gas prices surge to twice what they are now? How will the greater collective respond when they lose faith in government interventions? Where will they invest when they see gold and silver prices screaming upward and don’t want to be left behind?

The panic into gold by the general public hasn’t begun yet. Available supply is scarce and will get smaller. There won’t be enough.

Better get your speck while you can.

Regards,
Jeff Clark
Senior Editor, Casey’s Gold & Resource Report

P.S.: The current issue of Casey’s Gold & Resource Report has a few charts that should come with a warning. We examined just how small the gold and silver markets are, and “explosive” barely describes the potential. If you want to check it out for yourself, consider a trial subscription — three full months with 100% money-back guarantee. Click here for more.

Parting Shot...

I was so happy this morning, Shooters. Once again you have done most of my work for me!

First an angry shot was taken squarely at James Howard Kunstler’s head. And another one bites the dust…

This is the last straw.  The idea that American's desire to live a better life in the suburbs is the cause of the financial meltdown is a flat lie and you and he know it.  Our desire to live differently than him is part of something called "freedom" that he has never grasped.  Are you going to tout Jimmy Carter as our new guru next?  I am unsubscribing.


Harrumph. I know nothing of the sort. What I see is America bankrupting itself in large part because we are holding onto a very expensive — and ultimately unsatisfying — living arrangement. Frankly, I don’t know how people afford car-dependence now!

It’s been my experience that the more emotionally one is invested in something — even if it is irrational and harmful — the more viciously one will defend it — even it is irrational and harmful.

Auto-dependent suburbia, popular democracy, bigger government and other abusive relationships, infant sacrifice and the designated hitter rule: these things all make sense to some groups, somewhere at some time. Doesn’t make any of them morally right or worth keeping. 

As a twice-elected libertarian city councilman in a western community of ~40,000, I feel like I'm living the nightmare that Mr. Kunstler described. He didn't mention that "planning" is mandated and not simply our lemming-like behavior when presented with the levers of power as elected officials. 
 
We have an entire "Planning" department devoted to furthering urban sprawl as we pay homage to the "Local Land Use Planning Act." These people take college classes to learn how to find a credible nexus between seemingly unrelated planning items and how to use "nexus" regularly to bolster their oral argument for some planning point.  The libertarian in me wants to jump up and scream as we publicly debate what requirements we should place upon a given development before we "allow" them to construct their subdivision, strip-mall or whatever in our community.
 
It is amazing that any kind of market functions in commercial or residential real estate considering how we strangle most of the life out of it with statism.
 
Having another shot sounds pretty good right about now...


Ah, but Jim does explain elsewhere how the built environment is not the result of the market. Like so many catastrophes, our surroundings are the result of the voting booth and nightmare regulations attempting to give people what they think they want. Sort of like national healthcare!

I never cease to be amazed and amused about why I continue to read James Howard Kunstler's W&G contributions with rapt attention. I mean, I've been riveted by his insightfulness and powerfully eloquent wordplay. Ultimately, I think it's HOW he says what he says that has kept me reading his stark diatribes so far. Because, really, once you have read one or two, you know the gist. It's similar to someone who can use words so well that, if time could be made to stand still, you'd be almost endlessly willing to listen to that person tell you in myriad ways how a bullet is speeding toward the midpoint between your eyes. (Maybe the key word there is "almost.")

He makes you feel like you are the victim of a bad wreck in progress but, at the same time, the witness who cannot look away.  I also can't shake the sense he enjoys playing the Prophet of Doom role. I mean, much like Boris Karloff, he's GOOD at scaring the wits out of people.  And y'know, if he's making a buck off it, I can't blame him. But meanwhile, I wonder if he is actually rooting for suburban Apocalypse. Would that bring validation?

Oh well. None of us have a crystal ball and perhaps it's a case of what will be will be. Meanwhile JHK gives us some stimulatingly provocative and controversial food for thought. I'm not sure what I could do about problems he cites. I'm not inclined to write my congressperson and ask that suburbia be changed, even if I felt sure it needed it.

*******

Mr. Kunstler has some good points about suburbia, but he missed an important one.  A big reason for the flight to suburbia was the increase in crime in the cities and the threat of riots after '68.  Most folks I know that left the cities did it because of crime.  After that, he is correct...suburbia took on a life of its own.

It seems to me that the American suburbs developed because middle class white people do not want to live with poor Southern blacks in crowded cities or send their children to integrated schools.  I am not implying that this is good or bad, it is just human nature.  I doubt high priced gasoline, traffic congestion, growth management acts, etc. will change this pattern.

*******

Most important first: Congratulations on the results of the Annapolis meet. Very impressive. Mens sane in corpore sana...you're the man!

Re James Howard Kunstler's offering: I know he takes his share of knocks in these pages and elsewhere, but I continue to believe he is dead-on accurate in his characterization of the psyche that has produced the American scenes he so aptly describes as cartoons. There is a road running through Disneyland that dead-ends in the heartlands of our country, and it is a dark reflection of the American Dream. Every positive impulse can be perverted; that's been know at least since the Hellenes were knocking about. I believe the fatal flaw in the American character is the perversion of our almost boundless optimism, and it manifests itself as the simple inability to entertain any idea that we could be laid low. This is Chamber of Commerce chutzpah on steroids and we are well on our way to choking to death on it. Someone needs to shake us collectively and remind us we can't 'grow' out of every corner we find ourselves in...if we could, cancer centers would be places to go where you pay to contract it.

It's fascinating to me how the very can-do attitude that made us the world's leading light may be the same principal we follow over the cliff of military expansionism and resource exhaustion. I think I could enjoy the spectacle more if my life wasn't hanging in the balance...

Random bloviation from Barstool #25 (go team)

*******

Gary,

You can trace the growth of suburbia directly to urban politicians and bureaucrats.
Families by and large do not want to live in cities due to crime, congestion and poor quality schools. All of these less than desirable attributes of urban living are the result of liberal, left wing government policy.
 
While urban living is attractive to very high-income families and single professionals, middle-income families cannot afford a quality urban environment in which to live.

True, it is more efficient to live right next to where you are working. However, with the advent of growth management laws that focus all industrialization to the urban centers to retain the property and employment taxes for the pleasure of the urban politicians, rural towns that once thrived with small scale sustainable industry shriveled up and died. These towns largely survive financially on week end tourists and wealthy summer home families. The manufacturing base that employed family wage jobs that were 'right next door' to the homes in these towns have been decimated by government policy that restricts or forbids industrial development in rural counties.
 
As one who grew up in a rural area, then following college moved to Seattle downtown and now I live and work back in the rural areas. I earn less money than I could in a city however, I have 7 acres, horses quietly grazing out side my window and zero crime as everyone knows each other and looks out for the neighbor's well being.

Vastly more enjoyable than the city where my apartment and car were victimized by criminal activity weekly. Making a few sacrifices for a good family life, but I save half my income and invest in gold and silver on a regular basis as I don't trust the banks.

The regional bank I use just last week was another zombie bank taken over by the FDIC.
 
At any rate, thanks for a great online forum and publication. I look forward to your musings every day.


Here are some of those musings right now…

Yesterday was my paternal grandmother’s 82nd birthday. My immediate family has managed to wind up living very close together in the Central Florida region and they we’re throwing gran’mama a bash. I called to pay my respects.

“I don’t know how much longer I have left,” said gran’mama, “And I keep hoping you’ll give me some great grands before I go. Look, your sister is so much younger than you and has a beautiful child.”

Your editor has given up explaining the reasons for his reluctance to reproduce…at least to the family matriarch. The rest of you aren’t so lucky.

First there is the genetic endowment my offspring must inherit. I look at how my life has played out with my own genes and I have to ask myself, “Do I really want another iteration of this?”

Then there’s the immediate and likely unpleasant future as discussed by James Howard Kunstler. His latest book World Made By Hand is fiction, but I suspect it hints at sobering truth about how things will play out. It’s not the end of the world, mind you; just the end of the world as we have known it.

I suppose the world as we’ve known it is always ending in one way or another. Heraclitus reminds us that we can never dip ourselves into the same river twice. When you become an ancestor, you automatically cast your descendants into a world you could not have known.

(One thing you should know: Your descendants will be footing an enormous tab that’s been running up for the past few generations. In fact, the government is increasing that tab right now and picking your pockets too as they do it. Outrageous, I know, but that’s the way it goes… Though you could do something about that by clicking here.)

Then there’s the general sweep of history itself. Competition for resources and gene space, predation and extinction are all part of the pageantry of biological life. They’re also a few of the themes at this here Whiskey Bar!

How nice it would be to float endlessly on a warm see without a worry to wrinkle one’s brow ever again. That’s how I imagine heaven.

But we must live while we live. Worry and toil are ours. But to paraphrase good Mr. Franklin: Whiskey is proof that God loves you and wants you to be happy. We’ll keep doing our best to make sure you never get blindsided by all the things that will catch the sheeple unawares.

Till tomorrow…

Regards,
Gary Gibson
Managing Editor, Whiskey & Gunpowder


Whiskey & Gunpowder covers the spectrum of the many factors that affect economics including, but not limited to politics, technology, nature, history, and anything else our writers could possibly dream up. Sign up free today, click here.

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