Gold is not an infinite resource and with the number of mine closures in countries that have been the main sources of supply like Australia and South Africa, the industry is looking at other ways to meet the demand. This has increased the number of recyclers and gold buyers who buy old gold to be refined and fed back into the market. But can we ever have enough? The demand for the yellow metal has not shown any signs of abating. The global economy is also changing with emerging markets like Turkey buying more gold to shore against the dollar’s hegemony.
During 2017 Turkey withdrew 27 tonnes of its gold from the New York Federal Reserve. Turkey’s Central bank also managed to increase its gold holdings by 83 tonnes in the same year. To add to that, the President of Turkey decreed that all IMF loans be paid in gold and not in dollars. Turkey believes that gold can help ease currency pressures that come with doing business in dollars. Counties like Russia and China have been advocating for a move away from the dollar economy. Turkey for one, has more reason to put its faith in gold because of the problems its currency has been facing.
Turkey is one of a growing number of countries that have been increasing their gold holdings. Another country that has been aggressively increasing its gold reserves is Russia. The country added 300,000 ounces of gold in March 2018 alone. By the end of 2018, Russia was on the verge of reaching 2,000 tonnes of gold in their vaults.
China has always bought more gold than most countries. It is continuing to do so and some pundits have commented about the acceleration of the whole process. The demand is driven by advancing technology and the increasing number of companies producing digital devices for the country and the rest of the world. China has also launched the Petro-Yuan which allows them to buy old without using the dollar but trading it for gold instead.
A lot of the world’s gold is held in the US and Britain, however a lot of this gold has been withdrawn by countries like Germany, Austria, The Netherlands, Turkey and China. This can only mean that the price of gold will only go higher.
Mining production has been on a steep decline over the last decade. One of the biggest mining company has cited a decline of more than 50% since 2012. This reminds us of the finite nature of gold and why we need gold buyers like Melbourne Gold Company. They are an Australian Bullion Company who buy old gold to recycle and put back into the market to sell as gold bullion.
Gold mining isn’t prepared to meet the growing demand and the explosive prices. This kind of supply destruction is a great foundation for a bull market. The market will eventually crash after years of high prices just like oil did between 2008-2014 when a barrel cost $100 only to crash by 80% to reach the $20 per barrel mark. Bull markets are authors of bear markets and when the bear market kicks in, investors will leave, marginal companies will fold and only the strong will survive.
The moral of the story is that we are at a critical stage when it comes to the price of gold. With demand outstripping supply the best time to get involved and start taking risks within the gold market is now. Talk to a reputable like Melbourne Gold company who are an Australian bullion company that know about gold investing.