Silver Stock Report
by Jason Hommel, June 14, 2007
In my article last week, I spelled out various statistics on gold, as measured in tonnes.
155,000 tonnes of gold were produced in the whole world, in the entire history of mankind.
2500 tonnes of gold are produced by the world’s mines each year.
5000 tonnes of gold are actually traded each year (best estimate).
500 tonnes of gold are sold each year by European Central banks under the “Central Bank Gold Agreement”. (CBGA)
Recent news of Swiss gold sales of 250 tonnes over two years will fall under the existing, known CBGA. Thus, there is no material change in the status of the gold market.
Furthermore, there is no change in the fact that paper money is still being created at the same rates as yesterday.
The world’s central banks continue to print up as much paper money in one year, as the total value of all the gold ever mined in all of human history. Both annual paper money creation, and all the gold in the entire world ever mined in all of human history, are both worth about $3.3 trillion, or $3,300 billion.
Swiss gold sales of 250 tonnes are worth $5 billion.
Swiss gold sales pale in size in comparison to the Bank of China’s $1200 billion of reserves. China hopes to diversify 5% of that into gold, which is $60 billion.
Where is China going to get $60 billion worth of gold, or about 2871 tonnes?
This remains the unanswered question in the gold market.
China’s reserves: Golden dragon or sitting duck
Therefore, you can see how ridiculous and misleading the following headline is:
Swiss sales dash hopes of gold recovery
On the contrary, Swiss sales of 250 tonnes are a non event, and will not remotely satisfy China’s oft-repeated desire and need for 2871 tonnes of gold.
Not even Resource Investor reports the facts correctly (and I advertise there!):
Switzerland Central Bank to Sell 250 Tonnes of Gold
RI reports that Virtual Metals claims that Portugal has 79% of its reserves in gold.
Matt Turner, commodities analyst with Virtual Metals, told RI it was significant that the bank said gold as a percentage of reserves had gotten too high, since many European countries have a higher share of gold reserves.
Greece has 80% of its reserves by value in gold, Portugal 79%, Italy 66%, Germany 63%, Netherlands 56% and France 56%. If these banks were to reduce their reserves to 30%, Germany would have to sell 1,802; Italy 1,341; France 1,273; Switzerland 394; Netherlands 311 and Portugal 235 tonnes.
However, GATA has shown that Portugal has already leased out 70% of their gold. Therefore, Portugal’s gold cannot be sold twice at the same time!
GATA.ORG therefore writes a different headline regarding the Swiss gold sale:
Switzerland keeps bailing out its banks short gold
If the Swiss gold has already been leased, then this gold may be “phantom gold” sold directly to banks that are short gold, to let them off the hook for their gold leases. In other words, no gold at all may come to market from the Swiss sales.
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While the China boom continues, and while we wait for China to buy gold, they have been buying nickel and copper, and they need nickel and copper.
With the nickel market on fire, and nickel stocks booming, my online database of mining stocks has really begun to pay off well for my paying subscribers.
The market has not yet been able to discover all the highly leveraged nickel stocks out there
, and some very well leveraged stocks have found their way onto our online database–that also have very high grades.
For example, one of the best nickel stocks on our list has the following:
$145 million market cap
2.7% grade nickel
53 million pounds of nickel reserves
160 million pounds of nickel resources, measured & indicated
100 million pounds of nickel resources, indicated
$33 million Capex
Owning 90% of the resource.
Our database and formula says this is a “resource leverage” of 32.3.
–I own a few shares of this one.
Another nickel stock has the following:
$788 million market cap
1.7% grade nickel
1.5 billion pounds of nickel reserves
2.9 billion pounds of nickel resources, measured & indicated
2.6 billion pounds of nickel resources, indicated
$754 million Capex.
Owning 92% of the project.
Our database and formula says that this is a “resource leverage” of 33.2.
–I don’t own that one.