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Gold Supply: China is emerging as the world’s largest gold producer

Posted November 25, 2007

“While gold retains its allure for hard-money American armchair economists writing newsletters and daily relevances and their followers, Americans’ fascination with gold seems strange to most European analysts — for whom recent gains in the metal price have been reduced by the synchronous decline in the dollar.” — J. Christoph Amberger

by J. Christoph Amberger, TFN

Baltimore — (TFN): If you’re reading this, chances are you have arrived on this site as a result of subscribing to one or several American financial newsletters. The reason you subscribed probably was to get an alternate, unbiased perspective on what is really going on in the markets. The inside track. A view unhampered by the petty limitations and biases of the mass media.

By and large, you may be happy with what you’re reading. And my guess is that over the past years, you may have been reading a lot about gold. Mining stocks. Gold mining stocks. Which are all up in recent years.

What you may not realize is that this fortuitous conversion of gold price increase and the newsletter predictions that it would is not quite what it seems to be. The American financial newsletter industry has its roots in the lobbying movement to legalize the possession of physical gold by US citizens in the 1970s and the subsequent gold bubble. While many primary players have withdrawn from the predictions business, the most influential (and their acolytes) are still at it, predicting gold prices of up to $4,000 an ounce based on some adventurous math involving money supply and inflation adjustments, or the universal adoption of gold by an utopian event involving world governments adopting asset-backed currencies for global trade.

Predicting gold prices at $4,000 an ounce has been a lucrative business for the last 30 years

The gold bugs have been doing so for 30 years, non-stop. It’s a lucrative racket. And except for the last five years, their predictions have been about as successful as Lyndon LaRousse’s bids for the presidency of the United States.

While gold retains its allure for hard-money American armchair economists writing newsletters and daily relevances and their followers, Americans’ fascination with gold seems strange to most European analysts — for whom recent gains in the metal price have been reduced by the synchronous decline in the dollar.

One of my favorite gold analysts is Marino Pieterse of Goldletter International. Based in the Netherlands, his approach may lack the dancing sugar plums of his American colleagues. But his analytical approach is rational and, well, analytic — as becomes someone who considers gold not a mythical cure-all for half-digested or perceived economic and moral ills but a speculative commodity.

China is overtaking top producers in gold production

His latest report is about China’s role as the emerging world leader in gold prodution. China’s gold industry has depended entirely on State investment since 1949. Domestic demand has resulted in heavy government investements during the 1990’s. As a result, China’s gold production overtook Australia’s in 2006 as the
world’s third largest producer. According to the China Gold Association, production is forecast to produce 270 tonnes in 2007.

With China’s gold output increasing 13% in the first nine months, total gold production for 2007 may actually reach 275-280 tonnes — while gold production in South-Africa will fall by 7% to 270-275 tonnes.

What does this mean for the global gold supply? Click here for the complete report.

And while you’re at it: Pieterse’s July Report “Gold’s way is not only up” is quite a timely reminder to all of those who still think that rising gold prices have anything to do with inflation… and that gold is not just another highly speculative commodity.

***Don’t forget to watch this weekend’s Smart Trading Action Alert: Smart Trading Action Alert: Given the beating some blue chips have taken in recent weeks, select small-cap stocks now provide opportunities for safe profits. Ian Cooper explains.

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Posted by J. Christoph Amberger · Filed Under Gold and Resources 

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