Please consider Billionaire Sam Zell Buys Gold for First Time in Bet on Tight Supply.
Gold’s dimming supply prospects have caught the eye of one billionaire.
“For the first time in my life, I bought gold because it is a good hedge,” Sam Zell, the founder of Equity Group Investments, said in a Bloomberg TV interview. “Supply is shrinking and that is going to have a positive impact on the price.”
“The amount of capital being put into new gold mines is a most nonexistent,” Zell said. “All of the money is being used to buy up rivals.”
Misunderstanding Supply
Zell is correct about capital, about new mines, and about gold being a hedge.
Zell is wrong about supply. The supply of gold increases every month, albeit at a diminishing rate.
Since gold is not used up, the supply of gold is nearly every ounce ever mined, including gold in jewelry. The supply does not include gold buried and forgotten about or otherwise lost, gold in antiques, gold in historical treasures, etc.
At every price point, someone has to decide to hold on to their gold or sell it. Someone has to hold 100% of the supply, 100% of the time and that supply is constantly increasing.
Supply is not tight. Zell confuses supply with production as do most analysts.
But Zell is correct about gold being a hedge, perhaps not how he intends it. Gold is a hedge against central banks and runaway credit expansion.
Gold a Measure of Faith in Central Banks
As I have pointed out, gold moves primarily in response to faith in central banks.
Mike “Mish” Shedlock
To correct one poster, silver is in massive glut and has been, and look at it’s performance, very poor. It’s like expensive copper, and 60% of it comes along with copper mining. We have years of above ground supply due to it being poor mans gold, coin/bar demand over the years really built up the supply. Now, GOLD, at least I believe that since so many central banks are now stacking it physically by the ton like never before in history we cannot know what the true price really is. That’s some incredible artificial demand. Futures for gold, years coming, are flat.
SO why does a billionair that thinks that gold is/will be in short supply, miss the fact that silver IS in short and limited supply, and IS used/wasted exactly because it is so cheap that its not / yet worth trying to recycle, and even the primary silver miners are mining and selling silver BELOW production costs.
To Sam Zell, if you want to make a few billion dollars, I am for hire, for only 1 % of profits. The risk of challenging the fake money empire is falling off your penthouse balcony, so better move to ground floor first.
Mike
If you want to buy physical gold to keep yourself I found JM Buillion has the lowest premium to spot price. I would only want to keep the gold myself secured the way you find best. Some local dealers may also give good prices you’ll have to check.
Gold moves in response to confidence in Govt. The Fee could end today, but unless govt reforms gold will rise with the increase in aggression to get other people’s money to levitate their pensions, perks, and power.
“Mish, how would you recommend one to buy gold? What is a good broker? How to avoid fees?”
Not sure what you mean by fees – Markups perhaps? Storage fees?
I like GoldMoney, Bullion Vault, and OUNZ (stock symbol). All are physical audited gold. I have a relationship with GoldMoney and if you are interested in that option, email me.
The markup on coins can be hefty both buying and selling. Small bars if you insist on holding it yourself. But you exchange one problem with another. Risk of theft. GoldMoney, BullionVault, and OUNZ are secure IMO. The fees on Goldmoney and BullionVault are tiny.
There is also Bitcoin. It is not a bad option at all. It too is physical audited gold.
Some of this has to do with how much you intend to buy. Neither GoldMoney nor Bullionvault are practical to buy small amounts. They require wires and that might cost you $30 a pop. BitGold is easy to buy in small amounts so is OUNZ at roughly $12.50 a share. Both are directly tied to the spot price of gold.
In regards to the chart where inflation was 14%, I wonder what it would be today if measured in the hedonically manipulated/massaged/ doctored way they do it now.
Mish, how would you recommend one to buy gold? What is a good broker? How to avoid fees?
Shop around my favorite for consistently good prices is sd bullion.
And then it drops…. Just like in 1980 or 2012 just like any other irrational bubble. And technically Gold is not a hedge for anything unless you think that something else you are hedging against is denominated in gold or gold derived units.
And then it drops…. Just like in 1980 or 2012 just like any other irrational bubble. And technically Gold is not a hedge for anything unless you think that something else you are hedging against is denominated in gold or gold derived units.
“…gold moves primarily in response to faith in central banks.”
The ‘moves’ are very volatile but, just eyeballing the chart, I roughly estimate the long term (’79-’85) average gold price at about $400 during the early ’80s and about $1300 over the past 6yrs.
The FRED CPI averages over the same two periods, again roughly using the following chart, suggests the CPI has nearly tripled over the same period.
As I said, my estimates are very rough. However, the increases in the avg gold price and CPI, in percentage terms, are within an order of magnitude.
It’s a store of value… yep there’s spikes and lull periods, but in the long run it is steady in it’s buying power. Gold is way to stay out of bond, stock, and currency markets.
“According to this chart, 34% of gold is used in electronics”
So what?
The supply of gold goes up every month by the 65% that is not used up. Only when more gold is used in electronics than is mined will that cease to be true.
We agree. I was just adding some background information for those that don’t follow the gold market. Some gold is used up. Most gold that has ever been mined since the dawn of time, however, is still around.
How much of the gold used in jewelry and industry is reclaimed? Darn near all of it.
https://www.rt.com/news/251045-300tons-gold-wasted-electronics/
So does about 10% of world total mined not get reclaimed?
Nobody said 100%. There are plenty of people reclaiming gold out of computers… My wife was a CFO at one of them for years. The company went out of business 9 years ago after the supply sources disappeared during the financial crisis. The guy that started the company found out about gold reclamation by accident and turned that piece of info into fortune. He was a janitor before that. If that big a gap really exists, somebody could rediscover the process instead of it going into the trash. I’m sure my wife’s old boss would, but he died shortly after the company folded after 3 years battling colon cancer.
Gold reclamation from electronics was big business years ago. There was $20-40,000 of gold in a single IBM 360. Now they use a lot less. A recent article said $.50 per cell phone. It’s going to be a lot more work for a lot less gold.
Wagner – post away – I will delete every comment you make since that is how you want to play the game. Waste your time. I don’t care
Mish, I have been watching this Wagner dude for few months.
He is some kind of hippy, greenie, free-thinking, kool-aid drinking MSM watching teenager that deserves to be blocked. Thanks for doing that finally! We don’t want to hear his opinion here, because he is simply wrong.
According to this chart, 34% of gold is used in electronics:
It goes on to mention that the average cell phone uses $.50 worth of gold, and that most phones are not recycled. Gold certainly does get consumed, and it is actually possible for the total supply to shrink.
Gold is mostly used in Integrated Circuit pins that connect them to Motherboard.
I was reading one article where conclusion was that modern electronic devices are using less and less gold. Mostly thanks to:
Take a look at old Intel Pentium chips to see how yellow they were compared to modern chips. So could your article be outdated that electronics use plenty of gold?
Am I missing something here??
Unless we know what percentage of gold is held as bullion, this chart is completely meaningless. If 99% of gold is held as bullion, then 34% of the remaining 1% is not very significant. Can someone put these numbers into perspective?
I would gather that this is 34% of the gold that is used up in a year, and has nothing to do with the total supply. The vast majority of all gold mined since the beginning of time is still around today, and stored in the form of bullion. However, some gold is used every year. Some of the gold that is “used” is used to make coins or jewelry, and thus could easily be converted back to bullion, or to some other form. Some of it is used in electronics, and most of that will never be recycled.
What we don’t know is how the quantity “used” each year compares to the quantity mined. If the quantity mined every year falls below some level, the quantity of bullion would begin to shrink. I don’t think we are near that point, but we don’t really have information to answer the question.
Most people don’t toss cellphones in the trash, they put them in a dresser or desk drawer and forget about them.
Virtually all decent quality high-density PCBs are made with a pad finish called ENIG, Electroless Nickel, Immersion Gold. Most connectors have flash gold /gold plating on the pins as well. I have no idea how much that uses up, but it definitely is still used, at least where I work.