World Gold Council Q1 2010 Supply and Demand Statistics Report (Years 2007 through 2009)

You can download this report in PDF format here: http://www.research.gold.org/supply_demand/

Observations:

Average mine production over the last 3 years is 2484 tonnes, while average global demand is 3612.1 tonnes.

Miners closing out hedge books continues to subtract from overall global supply, with miners closing 254 tonnes of hedges off their books in 2009 ($9.8 Billion with gold @ $1200)

Official sector sales (Central Bank Sales), has dropped for 3 years in a row, with only 41 tons of sales in 2009. It is important to note, that this area of supply has historically been in the area of 500 tonnes per annum, and Central Banks halting sales of gold leaves a large hole in the supply equation, that is only now being taken up by recycling gold scrap.

The gold scrap industry is booming. From 2007 to 2008, there was a 334 tonne year over year increase in gold scrap recycling, which is roughly $12.87 Billion with gold @ 1200 /ounce. From 2008 to 2009, gold scrap supply increased yet again by another 352 tonnes year over year, which is roughly another $13.58 Billion year over year from 2008. Total gold scrap supply in 2009 was 1668 tonnes.

We have considered that perhaps this is what is paying for those MC Hammer commercials.

Summary:

Overall supply has actually been increasing due to increased scrap recycling and a lower amount of net hedge reduction.

Overall demand for jewelery and industrial (electronics and dental) use has been falling. Total fabrication demand for industrial and use in jewelery has gone from 2882 tonnes in 2007, to 2632 tonnes in 2008, and finally as low as 2132 tonnes in 2009. This continued drop in industrial demand does not reinforce the idea that the US or other economies are in a recovery.

The investment demand category has been consistently increasing year over year, and now is approaching as much as jewelery demand, coming in at 1323 tonnes for 2009.

Official coin sales have increased consistently over the last 3 years, from 134.6 tonnes in 2007, to 187.3 tonnes in 2008, and finally 228.5 tonnes in 2009.

The fascinating thing is the trend in ETF type vehicles, which in 2009 for the first time in history surpassed all other investment demand at 617 tonnes (approximately $23.8 Billion), compared to 472 tonnes for bar and coin retail.

GLD ETF added record tonnage in a single day. According to Adam Hamilton of the Zeal Speculator,

“May 25th, GLD made one of its biggest bullion buys ever. Differential buying pressure on this vehicle from stock investors was so intense that GLD had to add 30.4t,taking its total holdings to 1267.3t.”

This is the equivalent of 977,390 troy ounces, or $1.172 Billion dollars worth of bullion in a single day.

Note: the largest increase in the ETF demand category came in Q1 of 2009, right after the Q4 2008 near collapse of the global financial system. It is possible we will see another large increase following the ECB bailout of the Euro in Q1 2010, although Q1 2010 ETF demand seems to have fallen off a cliff from previous quarters in 2009.

Total investment in nominal terms for 2009 was approximately $51.05 Billion.

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