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Gold Supply and Demand

Written By Luke Burgess

Posted December 9, 2008

Jesse Lauriston Livermore is perhaps the most famous stock trader of the early 20th century.

Famous for amassing and subsequently losing several multi-million dollar fortunes, Livermore also shorted the stock market heavily during the crashes of 1907 and 1929.

Livermore, who was also known as the Boy Plunger, is famed for making—and losing—several multi-million dollar fortunes and short selling during the stock market crashes in 1907 and 1929.

One of Livermore’s core trading rules was…

Be Right and Sit Tight

It’s simple…

Invest in a growing trend and have the courage to hold long-term for really big gains.

Clearly, the gold bull market is one such growing trend. And investors who "sit tight" will undoutbly see big gains by owning the precious metal now.

Buy Gold Now

The bull market has already pushed gold prices over 300% higher since 2001. And now with the world’s demand for gold is starting to significantly outpace supplies, even higher prices are on the horizon.

During the third-quarter there was a colossal 10.5 million ounce deficit (worth $8.5 billion) in world’s supply and demand of gold. World gold demand increased over 50% since the second-quarter while supplies dropped 64% year-on-year.

Gold demand, particularly in the investment sector, is currently at all-time highs. But estimates suggest that the world will only produce 76.8 million troy ounces during 2008. This represents a 9% decline in world gold production since 2001.


Gold Mine Supplies to Continue Falling

The world financial meltdown has forced the shut down of hundreds of gold mines around the world and slashed exploration and development budgets across the board. And the near-term future of new investment still looks pretty grim.

The effects of these budget cutbacks won’t be felt in the gold market for several months to years. But the lack of investment money going into gold mines right now-and probably for over the next several months-will certainly have an effect on global gold supplies in the future.

And the lack of these supplies will positively affect gold prices.

The global economic crisis has motivated miners of all metals to cut back on exploration and development activities. Below is a just partial list of mine closures and delays that have been announced over the past several weeks:

August 21
HudBay Minerals [TSX: HBM] closes its Balmat zinc mine and concentrator.

October 13
Intrepid Mines [TSX: IAU, ASX: IAU] postpones the development of the Mines Casposo gold/silver project.

October 20
Polymetal, Russia’s largest silver miner, cuts its production forecast and says it will consider revising its investment plan for next year.

October 20
First Nickel [TSX: FNI] suspends production at its Lockerby nickel mine.

October 21
Freeport-McMoRan Copper & Gold [NYSE: FCX] announced that the company will defer mine expansions and put off restarting at least one operation.

October 21
North American Palladium [AMEX: PAL, TSX: PDL] temporarily closes its Lac des Iles platinum-group metals mine.

November 6
Thompson Creek Metals [NYSE: TC, TSX: TCM] postpones the development of its Davidson molybdenum mine.

November 10
Rio Tinto [NYSE: RTP, LON: RIO] cut its Australian iron-ore production by about 10%.

November 10
Freeport-McMoRan Copper & Gold [NYSE: FCX] cut molybdenum production at its Henderson mine by 25%.

November 10
Platinum and chrome producer Xstrata Alloys and its South African joint-venture partner, Merafe Resources, temporarily suspends six furnaces of the Xstrata-Merafe chrome venture.

November 11
Arehada Mining [TSX: AHD] temporarily shut down of operations at its zinc/lead/silver mine and plant.

November 11
Frontera Copper [TSX: FCC] suspends mining activities at its Piedras Verdes operation.

November 13
Lundin Mining [NYSE: LMC, TSX: LUN] suspends zinc production from its Neves-Corvo copper/zinc mine, and put another operation, Aljustrel, on care and maintenance until metal prices recover.

November 13
Anvil Mining [TSX: AVM, ASX: AVM] suspends the fabrication and construction works for its Kinsevere Stage II solvent extraction-electrowinning plant.

November 14
Geovic Mining [TSX: GMC] delays construction and financing for its Nkamouna cobalt project.

November 17
Teal Exploration & Mining [TSX: TL] cut output at the Lupoto copper project’s small-scale mining operation

November 18
Stillwater Mining [NYSE: SWC] scales down operations at its East Boulder mine, reduces capital expenditure and cut jobs.

November 18
The world’s third-largest platinum-miner, Lonmin, announces the closure of South African mines, and says it will halt growth projects.

November 19

First Majestic Silver [TSX: FR] temporarily suspends all activities at its Cuitaboca project.

November 19
Weatherly International [LON: WTI] announces the closing two of its copper mining projects in Namibia.

November 20
Hochschild Mining [LON: HOC] announces that the company will delay its San Felipe zinc project.

November 21
Katanga Mining [TSX: KAT] temporarily halts mining operations at the Tilwezembe open pit and ore processing at its Kolwezi concentrator.

Novmeber 21
Apogee Minerals [TSX-V: APE] halts production at its La Solucion silver/lead/zinc mine, in Bolivia.

November 24
Norilsk Nickel put its Waterloo and Silver Swan underground mines into care and maintenance.

November 26
Bindura Nickel announces the closure of two nickel mines, and its smelter and refinery operations.

December 1
The Xstrata-Merafe joint venture suspends operations at another five ferrochrome furnaces, bringing the company’s offline capacity to 906,000 tonnes per year, or more than half of its annual production capability.

December 3
BHP Billiton [NYSE: BHP, ASX: BHP] reduces manganese and alloy production.

December 8
Companhia Vale do Rio Doce, the world’s biggest iron-ore producer, has suspended operations at two pellet plants.

With demand soaring and supplies plummeting, there’s never been a better time to own gold. Gold prices could go to as high as $5,000 once this gold bull market plays out.

Be right and sit tight.

Buy gold.

Good Investing,

Luke Burgess
Managing Editor, Gold World

P.S. It’s simple, really. Demand is soaring. Supplies are plummeting. And if you don’t buy gold now, you may not get the chance to later. To get your limited-time discount on physical gold, plus access to our portfolio of incredibly bargain-priced junior gold stocks, simply follow this link.