An exhaustive report by Standard Chartered predicts that gold will more than triple to $5,000 an ounce because of a lack of supply, not just because of a surge in demand that most bullion bugs cite in their bullish calls.
“There are very few large gold mines set to commence operation in the next five years,” said Standard’s analyst Yan Chen in a report Monday. “The limited new supply comes at a time when central banks have turned from being net sellers to significant net buyers of gold. The result, in our view, will be a gold market in deficit, even assuming flat growth in demand. With the supply-demand balance so out of kilter, we see the gold price potentially going to US$5,000/oz.”
The London-based firm is among the first to focus on the supply-side of the gold equation amid the many bullish forecasts out there on the metal. After analyzing 345 gold mines and 30 copper/base metal gold mines around the globe, the team estimates annual gold production will be just 3.6 percent over the next five years.
“They make a pretty compelling argument, especially when it comes to mine supply,” said Brian Kelly, head of Brian Kelly Capital and a “˜Fast Money’ trader. “Most analysis focuses on demand from China and India, which of course can disappear as quickly as it materialized.”
But that’s unlikely to happen over the next five years as central banks look to further diversify their holdings of U.S. dollars and as emerging countries buy more gold in the aftermath of the global paper currency crisis.
“Currently, only 1.8 percent of China’s foreign exchange reserves is in gold,” wrote Chen and the Standard team in the 68-page report. “If the country were to bring this proportion in line with the global average of 11 percent, it would have to buy 6,000 more tonnes of gold, equivalent to more than 2 years of gold production.”
The bold call is among the most bullish out there. In a Bank of America/Merrill Lynch survey of global money managers released Tuesday, just about a third of money managers felt gold was overvalued. However, that is the highest reading in that survey in more than a year.
Standard Chartered recommends that clients buy shares of smaller gold miners to get the most upside from its prediction, but also said clients could buy physical gold and gold exchange-traded funds.
Go read the comments on this article. Nobody is buying this line of b.s., and neither am I.
$5K per coin? Good luck eating that!
You can’t eat gold and there is a huge surplus relative to the actual demand for industrial use. Gold is a purely speculative investment and the “demand” is pure guesswork.
Whatever – when the price inevitably crashes, no one will remember this “report”/promotion.
Here’s a comment I had made elsewhere that touches on this topic:
Unfortunately, nobody needs either gold or silver. While these may be a store of value, they are only traded in extremely limited markets and subject to fluctuating rates.
Try buying a loaf of bread with silver bullion. Or land with your stash of gold. Or a car, or a tank of gas, anything at all.
You must first go the exchangers, of which are limited in number and never convenient, and exchange for cash.
Gold and silver also require ‘timing’ in order to realize their potential profits. Not always possible when you must have some cash to pay the doctor. Or eat. Or bail your kids out.
The truth is obvious to anyone who has actually stored gold and silver. It’s not the least bit convenient and requires increased levels of security against theft (including “gold vaults” online, ie., “electronic gold”). It’s only useful when it is physically exchanged, period. Otherwise, it’s just a lump of metal, not much good for anything except that “day” when you exchange it for the money that this world actually uses.
It’s more liquid then real estate, but less then stocks. I would never recommend an investment in the “market” however, whereas real estate can actually be useful. You can live on it, plant on it, park your stuff on it, etc., but hard to sell these days.
My gold and silver are still sitting here, unused, unneeded after all these years of storage. It’s worth more, but then again, so is my food supply. This has quadrupled in value and what do you know, I can actually use it (and do).
The things you need to live, day by day, food, clothing, shelter, energy, land, etc., are the real ‘investments’ required for those who are concerned (and for those who are not). The rest is just “dross” as they say, window dressing for ‘investors’ who are concerned about “staying ahead” or “getting ahead” or making a profit, etc.
Get out of debt, own everything you require to live debt-free, buy more for your kids (because they’ll never be able to do this on their own now), stockpile those essentials you require to live, including what you intend for your kids to inherent and own debt-free, and then, and maybe just “then”, buy some gold or silver.
Otherwise, it’s absolutely useless. I’ve read all the arguments about a “store of wealth” and historical use and on and on and on. But everybody should notice that absolutely none of the fears these people all are afraid of come true. And even if they did (total market meltdown, financial collapse, Armageddon, etc.), gold and silver will be the LAST thing anybody will “want” (or need).
Argentina’s financial collapse showed that gold and silver traded at junk prices, so buying bullion for the “collapse” is kinda stupid, a huge waste of money for those who will need to spend their horde to buy what they should have already stored.
One final point. We will NEVER go back to a gold standard (as we once understood this to be) as long as we can print digital money. And since we can reasonably expect that even in the most worst-case scenario to print digital money, any “gold standard” will be effectively meaningless. Gold bugs / promoters / hypsters / hucksters refuse to tell you any of this.
Just use your head and realize that our world, collapsing as it is, is not going to be without electronic banking (digital money) and Federally controlled “value”, ever — which means that your horde of gold is simply only going to be worth what they TELL you it’s worth (if anything). Confiscation remains a very real prospect to gold hoarders too.
I take plenty of heat from gold bugs, but have steadfastly refused to change my position all of these years. Recently, silver hit about $45 or so per ounce and I was too preoccupied to sell my little stash. It’s bounced all over the place and is now about $35. This exemplifies the “store of value” issue with any precious metal. You must time this right, converting to usable cash. Not always convenient, easy or even doable.
Meanwhile, everything keeps going up in price, so your investment is already deflated. Whatever you intended to buy now costs more (usually, exceptions definitely exist such as our crashing real estate market).
IF gold goes to $5000 an ounce, it’s dead obvious that nobody will be buying it as an investment (why would you when it was so overpriced? Only the very rich would do this). It also means hyperinflation is at work, causing the price of things you actually need to be extremely overpriced. What would you rather have? An ‘investment’ that is subject to severe price fluctuations, hard to exchange, or the things you and your family are going to need?
Gold investments can work — but they are not a replacement for sound strategies that make sure your actual needs are being taken care of.