GOLD MARKET TRENDS: 2 Interesting Charts

Something changed in the minds of investors in 2008 as more individuals switched to buying physical gold bullion.  How much more physical gold buying has taken place since 2008 can be seen in the two charts below.

Gold jewelry and physical retail investment are the largest demand segments of the gold market.  In 2000, the world consumed 3,187 metric tons (mt) of gold jewelry compared to a paltry 156 mt of physical gold investment.  Thus, physical gold investment was only 5% of these two markets in 2000.

However, if we look at the first chart below, we can see how the trends of these two markets changed over the next decade and a half:

Gold-Jewelry-vs-Physical-Gold-Investment

Global gold jewelry fell from 3,187 mt in 2000, to 2,153 mt in 2014.  On the other hand, physical gold investment demand increased from 156 mt in 2000, to a peak of 1,765 mt in 2013.  Basically, gold jewelry demand declined 32% since 2000, whereas physical gold investment increased more than 1000% at its peak in 2013.  Even if we include the drop of physical gold investment to 1,064 mt in 2014, it is still nearly seven times more than it was in 2000.

If we break down gold jewelry and physical investment into two periods, we have the following chart:

Gold-Jewelry-vs-Physical-Investment-2000-2014

Total physical gold investment demand from 2000-2007 was 2,712 mt, compared to a stunning 21,503 mt of gold jewelry demand.  During this time period, physical gold investment was only 11% versus 89% of gold jewelry demand.

This all changed in 2008 as the U.S. and World were experiencing a meltdown of its banking and stock markets.  Thus, total physical gold investment demand increased more than three times to 8,436 mt and now accounted for 37% of the mix compared to gold jewelry demand of 14,375 mt at 63%.

If we convert these metric ton figures to troy ounces, here is the result:

Physical Gold Investment vs Gold Jewelry Demand (million oz – Moz)

2000-2007 Physical Investment = 87 Moz

2000-2007 Jewelry Demand = 691 Moz

2008-2014 Physical Investment = 271 Moz

2008-2014 Jewelry Demand = 462 Moz

Furthermore, if we consider present gold demand (2014: physical gold investment of 1,064 mt vs 2,153 mt gold jewelry), the world is now buying (1) ounce of physical gold investment for every (2) ounces of jewelry demand compared to (1) ounce of physical gold investment versus (20) ounces of gold jewelry in 2000.

Which means, individuals are now buying physical gold investment compared to gold jewelry at a rate ten times higher than they were 15 years ago.  That is an amazing statistic, and it goes to show that investors increasing rather buy gold as an investment rather than for adornment purposes.

Of course, India (and China to lesser extent) view gold jewelry as a form of wealth, rather than something fashionable to wear around one’s neck, wrist or finger.  So, we could actually take a good percentage of total gold jewelry demand and place it into physical investment demand.

These two charts show that investors have increasingly switched to buying more physical gold investment rather than gold jewelry… especially since 2008.  As conditions in the world’s bond and stock markets continue to weaken, I would imagine we will see physical gold investment surpass gold jewelry demand for the first time in recent history.

Lastly, this will likely occur when the value of gold will change from a commodity pricing mechanism (supply-demand & cost) to a store of wealth due to the collapse in value of most paper and physical assets in the future.

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19 Comments on "GOLD MARKET TRENDS: 2 Interesting Charts"

  1. I believe all 401 K plans should be required to offer a precious metal ( allocated account ) option. If anyone currently has that available I would like to hear more. A lot of money is being kept out of the PM market and forced into other alternatives. PM prices are being suppressed to buoy fiat currencies as most of us know.

  2. Maybe placing a USD price line would be helpful. Demand for ‘cheap gold’ jewelry would naturally increase when gold was on sale around 2000. Alongside a decline in scrap at such low prices. Nothing particularly noteworthy here. Substituting gold jewelry for lower premium coinage would also occur.

  3. Steve: Another fantastic statistic that does amount to a hill of beans.. Gold is still bottoming. AS
    for silver: Miners are losing billions according to your production numbers, peak oil is
    out to 2035, India has tripled their import, mints cannot produce enough coins to fill demand,
    eagles average a $6 premium to spot i.e. almost 40%, yet silver drops another 6% last
    week. So much for the useless analysis by Morgan, Butler and all gurus. I said it many
    times before: Unless investment demand increases by another 1% from here, silver will
    remain low. Oil, Fiat debt and all that B.S. is just what it is i.e. B.S.

  4. I heard on conservative media the govt. is considering a rule that 401K money can only be in “Socially Responsible” investments as determined by the govt. of course. This is going through the back door to confiscate funds to finance the agenda of the dems and the establishment RINO’s. .They have been eyeing this pool of money for years to get access to it. I expect the propaganda to start soon selling the idea of how good it will be when of course it is tyranny in disguise.

    • Here in Holland the dutch central bank sued a pensionfund that had a stake of 13 percent in gold back in 2011. But the silly fund downsized her stake to a shere 3 percent during the trial.

      Because of the premature sell the fund SPVG lost about 12 million euro’s and sued the dnb for the losses, which in turn they won.

      to summarize: if you have to much gold, I’ll sue you.

  5. Maybe time to convert 401 to private held PM’s.
    Sure there’s a 10% penalty, but if govt takes it or forces conversion to “safe” treasuries, what’s the penalty then?

  6. What’s going on here? This is my second email “not posted.” Is it because I
    think Morgan, Schiff and all gurus are con men. Good grief! Each of them sells
    bullion. All the things Steve mentions from production costs in the $20s; Mints
    not supplying demand, India tripling their imports of silver and on and on even
    to peak oil in 2050. Silver won’t rise until demand exceeds supply. If 7/10 of a
    % of the world is buying, then we need 1.5% to create a rise in price. With all the
    speculation, forecasting since 2011 silver has fallen 70% and it fell 6% last
    week. This means that what you are writing about is meaningless to the silver
    price. And don’t go after the FIAT currency collapse. It just doesn’t fly. A devaluation
    across 5 years of 50%……maybe.

    • Lol

      Wages in ounces of gold have been falling since 1971 so… Keep thinking what you think, and see who’s right 🙂

    • Joe,

      I had thought from previous posts you understood spot price set on the COMEX is different than a physical supply/demand price but perhaps not. COMEX becomes the de facto “benchmark” price, but rising premiums over spot occur during times of increased demand, like recently with silver.

      Physical demand for gold and silver IS exceeding supply based on the best mining and recycling statistics that can be gathered [Steve correct me if your information says I am wrong in this statement]. Gold and silver to meet demand over mining + recycling is coming from somewhere…central bank vaults, national holdings, who knows. I’ll leave that to others. That discrepancy has been discussed by the most knowledgeable in precious metals, as well as conspiracy adherents.

    • The bottom is in! That is the message from November 2014. However, the most probable bottom for silver is 12-13 dollars per ounce or even lower. The so called Cartel cannot allow PMs to soar as it would be the confirmation of their failure. One should expect another drop in PMs until the GS ratio raises to 90.

  7. silverfreaky | November 1, 2015 at 1:58 am |

    Einer der das Geldsystem verstanden hat.Es hat mir sogut gefallen das ich es hier reinkopieren möchte.Jeder sollte sich das durchlesen.Es ist sicher ein Techniker oder Ingenieur der das erklärt und kein Banker.

    Komentar Aus.:

    http://www.wallstreet-online.de/diskussion/1218221-1-10/papiergeld-monopol-schulden-kollaps-schneeballsystem-zentralbanken-stuerzt

    der Knackpunkt ist aber, dass das Geld zwar aus dem Nichts kommt
    … der Knackpunkt ist aber, dass das Geld zwar aus dem Nichts kommt, dennoch aber mit Werten hinterlegt wird, eben mit den Sicherheiten. Und wenn der Kreditnehmer nicht mehr zahlen kann, sagt die Bank nicht etwa: „na, dann machen wir den Buchungssatz eben wieder rückgängig“, nein: die Bank greift dann auf die Sicherheiten zu, die ihr zugeschrieben werden, weil sie Geld verliehen hatte, dass sie eigentlich gar nicht hatte (also keine Spargelder anderer Kunden, für die die Bank eine Sorgfaltspflicht hätte).

    Wird der Kredit allerdings bedient, dann erhält die Bank über Jahre Zinsen, nur dafür, dass sie eine kurze Buchung und etwas Kreditprüfung ausführte. Und das mit den Zinsen muss man dann gesamtsystemisch sehen, das Geld dafür ist ja jedes Jahr aufs Neue erst mal nicht da. Sollen die Kreditketten nicht reißen, muss sich irgendwer immer weiter verschulden, damit neues Geld in den Kreislauf kommt – ergibt den wirtschaftlichen Mindestwachstumszwang in Höhe der aufsummierten Zinsen, und dieser Betrag bringt der Allgemeinheit jedes Mal wenig, der landet nur bei den Vermögenden, nur wenn das Wirtschaftswachstum größer ist, als die Gesamtzinsbelastung p.a., dann wächst dabei der Wohlstand im Lande insgesamt.

    Leider kann eine Wirtschaft langfristig bestenfalls in etwa linear wachsen, die Kurve der Vermögen/Schulden verläuft exponentiell, erst langsam, irgendwann fast senkrecht nach oben – Anfang der 1990er durchbrach die Vermögens/Schulden-Kurve die lineare Wachstumskurve, seither wachsen nur noch die Vermögen/Schulden, während die Mittelschicht ausdünnt etc etc … – das ist die reine mathematische Geldwesenproblematik heute.Einstein hatte den Knackpunkt schon begriffen.

    Aus der Logik, dass es Geld nicht “netto” gibt, sondern – egal wie weit wir in die Vergangenheit zurückfahren – immer zweimal verbucht wurde, als Guthaben und als gleich hohe Schuld, die ihrerseits nach Verzinsung giert, ergibt sich, dass alle Preise nichts anderes sind, als die “Geschichte” aller zeitlich vorangegangenen Zinsverpflichtungen. Der Kunde zahlt an der Ladentheke nicht nur die Gewinnmargen, Steuern und Umlaufkosten der Unternehmer an der Ladenkasse – auch der in der Produktkette bis zum fertigen Produkt angefallene Zinslast. Die macht heute an jedem Produkt zwischen 30 und 40 % aus, bei Mietzins, den er zu entrichten hat, sogar bis zu 75 %. In dieser Kreditkette muss sich immer ein Neuer verschulden – sonst platzt das ganze System. Aus dieser inneren Logik heraus ist ein Grundeinkommen auch nur ein Schuldschein. Das ist die eherne Logik des kapitalistischen Systems.

    Die international privatisierte Bankenmafia hat es geschafft, ein Geschäftsmonopol zu errichten, indem nicht nur Geld verkauft, sondern auch mittels einfachem Buchungssatz – das unvergängliche Tauschmittel erschaffen wird. Jeder, der Bargeld benötigt –, legt der Mafia ein Versprechen, ein Stück Papier vor, also ein Schuldbrief, mit dem er im Umfang der benötigten Geldbeträge plus Gebühren, Zinsen und Tilgung auf seine Freiheit verzichtet. Sein Haus, seine Anlagen, sein Land oder künftiges Einkommen – muss, für diese Transaktion als Sicherheit hinterlegt werden.

    Über Schatzbriefe von Staaten, die die Fähigkeit haben – die Staatsbürger, über Steuern zur Kasse zu bitten, wird das Staatsvolk als Ganzes Kunde – dieser Bankenmafia. Die Mafia lässt Geld in die Wirtschaft fließen, indem es Leben, Güter und Wirtschaft belastet – dieses Kartell, durch die Kontrolle über diese Tauschmittel, ist zum Pfandleiher für Bürger und Staat geworden.

    Wenn dann die Produktivkräfte, die Zinsen nicht mehr bedienen können, ist dies das Ende. Die Banken leiten die Kündigungen der Darlehen an die Unternehmer ein; und gehen somit – bankrott, Arbeiter werden entlassen und das Bargeld zieht sich in die Kanäle des Geburtsortes zurück. Die Krise und das damit verbundene Elend, würgen das gesellschaftliche Leben ab.

    I’am to lazy to translate this into english.Maybe someone with good german/english knowledge can translate it.It’s the shortest and best Explanation about the fiat Money System.

    Max Meister for example.

  8. Steve

    Trying to draw any distinction between (so called) investment demand and jewellery is meaningless (and very questionable) in my opinion. It is all physical gold and it is all representing a preference over fiat and demonstrating Gresham’s law in practise in whatever form the buyer prefers.

    Anyone who has visited the vast gold markets of the East or Middle East can bear testament to the huge abundance of objects fashioned from pure gold that are sold by weight at the prevailing price (just Google ‘Dubai gold souk’ for an idea of the scale involved). There is usually little in the way of coin or bullion bars as these are largely a Western preference.

    Given that the vast majority of the world’s population demonstrates a preference for holding wealth in gold (whatever the form) rather than in depreciating paper currencies, it is surely just a matter of time before the tide of physical demand overcomes the futile attempts of derivative exchanges to cap pricing. As an example, just Chinese retail demand alone has reached 2,118 tonnes so far this year and will likely consume nearly all mine production over 2015.

    Simple arithmetic demonstrates the inevitable result of continued low pricing.

    For a world population of 7 billion, all annual production would be consumed by a per capita purchase of just 0.4 grammes. Such a purchase, at the current gold price, would be c. US$14.8. For just China and India alone (who are both populations with strong preference for gold) the annual accumulation of just 1.1 grammes per capita (ie US$40.7 currently) will consume all mine production.

    Whether those grammes are bangles, coins, bars or paperweights does not really matter a jot, it is still all physical metal held by the buyer and will ultimately and inevitably overwhelm un-backed derivative contracts.

    • “Whether those grammes are bangles, coins, bars or paperweights does not really matter a jot, it is still all physical metal held by the buyer and will ultimately and inevitably overwhelm un-backed derivative contracts.”

      It also has to overwhelm the ability to supply physical metal into the marketplace i.e. drain central bank and national treasury vaults meeting the current physical demand over mining + recycling.

      • The problem is that gold demand is falling in USD terms as exchange rates with USD fell.
        Physical demand is too low in order to stop the paper market slow motion crash.
        It will most surely continue this fall and in 2016 as USD will not be replaced as the reserve currency so “early”.

        • Mike Maloney points out that since about 2013 Turkey, Russia, China, and India have bought more gold than the entire world’s mine supply. Since investors in Europe, Canada, the U.S., etc do buy some gold, it would appear physical demand is not too low. Of course exactly when this could cause a paper/electronically traded “gold” market crash is up to people with a lot more information than I could have.

          https://www.youtube.com/watch?v=sLcNy-MyME4

          • To stop a paper gold crash, you have to have extreme physical shoertgages, that’s not the case in gold and especially silver recently, so gold will crash. Period.

  9. USA cannot increase interest rate.So we go in slow Motion downwards with PM.
    How long is this possilbe?I don’t know.

    Longer than most of us ever thought.Years?

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