Why a Gold Crisis Looms? by Jeff Nielson -
LewRockwell | August 25, 2012
The World Gold Council recently released its second quarter
statistics on gold “demand and supply trends”.
For those not familiar with the WGC, it is an “industry
trade group” composed of large-cap gold miners who
How much do these mining companies love bankers? So much
that they allow the bankers to keep all the records for
their sector, and pretty much do all of their of their promotion
to the world. It is the WGC which elevated two private “consultancies”
(of bankers) – GFMS and the CPM Group – to the
status of quasi-official record-keepers for the entire global
gold (and silver) industry.
It would be problematic at best for the gold industry to
allow itself to be almost entirely represented by a “profession”
now known only for its rampant fraud. However, given the
known hatred of the banking community toward gold and silver,
and their relentless attacks on both the bullion market
and the miners themselves; it’s almost beyond comprehension
that the world’s largest gold miners choose bankers
as their spokesmen.
I’ve already exposed the devious/perverse manner
in which these consultancies produce phony inventory numbers
in the silver market. In the upside-down world of these
“record-keepers”, when someone purchases an
ounce of silver from a silver-ETF (and thus takes that ounce
of silver off of the market), the CPM Group adds another
ounce to total inventories.
In other words, if silver investors were to buy-up every
ounce of silver currently available in the world (via silver-ETF’s),
global silver inventories would supposedly double, while
if silver-ETF holders were to sell all their holdings it
would (apparently) collapse inventories.
GFMS, the authors of this Q2 gold report are technically
no longer “bankers”, since they have been bought
out by the Thompson media oligopoly; one of a handful of
companies who have a complete choke-hold on the world’s
entire English-speaking media. When it comes to the data
they produce, the esteemed John Embry of Sprott Asset Management
was blunt in a recent interview:
“Those guys have been providing misinformation for
years…[They] basically churn out negative gold news
constantly and I would ignore them.”
While Mr. Embry pointed to several historical examples
to emphasize his point, I’m going to focus on what
they’re currently saying about the sector to make
the same point.
If we look at the WGC (GFMS) headlines for Q2, it’s
pretty straightforward. Gold demand was down 7%; gold supply
was down 6%. Looks pretty even, with perhaps a slightly
bearish bias. Right? Wrong.
We don’t even get to the end of the first paragraph
before we begin to see the ‘slipperiness’ of
these numbers. We note that expressed in dollar figures
that gold demand was only down about 1%. So we immediately
see the following dynamic: a 1% drop in (sales) demand –
virtually no decline at all – is accompanied by a
6% drop in supply.
In other words, based upon GFMS’ own numbers we see
the decidedly bullish scenario of a market which can only
be kept in balance if accompanied by steadily rising prices
– a markedly different picture than what was presented
in the headlines, and entirely different than what GFMS
asserts in its analysis in talking about “The lack
of a clear price trend…” When a market can only
be kept in balance with steadily rising prices, that certainly
looks like “a clear trend” to me.
Dig deeper into the numbers and we find that:
…[investment] demand is also heavily-skewed by demand
in India and China…excluding them from the total data
gives a notably different result: a 16% year-on-year increase
in demand to 195.2. Outside of these two markets, investment
demand declined in only four countries [in the entire world].
When it comes to China, what we apparently witnessed was
a mere pause in demand, brought about by the long sideways
movement in prices. In fact what we have seen with Chinese
gold-buyers is that they are encouraged to buy with rising
prices, and since prices must rise to offset declining supply;
it’s inevitable that Chinese buyers will soon leap
back into the market.
With India, we had a large coordinated manipulation in
the value of the Indian rupee lower, causing the price of
gold in rupees to soar. Unlike the Chinese, Indian buyers
are notoriously price-conscious, thus they too can be expected
to move back into the market in much larger numbers –
since the devaluation of the rupee appears to be at an end.
Meanwhile, GFMS acknowledges the explosive growth in central
The second quarter was another period of significant purchasing
by official sector institutions, with demand amounting to
157.5 tonnes. This was a record quarter for central bank
So what we see is the bankers ‘sitting on the market’
to restrain demand (along with a little currency-manipulation
in India), and then jumping into the market to swap their
own paper for gold at the fastest rate on record. However,
it’s when we look to the all important supply-side
that the half-truths of GFMS and the WGC are most glaring.
Despite representing the world’s industry trade group
of miners, apparently no one at GFMS actually knows anything
about the gold-mining industry. If they did, they would
have noted that the miners are in the midst of their second,
severe depression in five years – in the midst of
the longest/strongest bull-market in history.
Yet, incredibly, after noting that net mine-supply has
now actually started to decline, we have these propagandists
The recent growth in mine production stalled during the
second quarter of this year as recent increases in supply
from new operations reached a plateau. Mine production is
likely to remain in a consolidation phase for the remainder
of 2012 ahead of a further raft of new operations, scheduled
to come online next year.
Gold mine production was further constrained by a combination
of adverse weather conditions, production interruptions
at a number of operations and slower ramping up of production
at a number of mines…
Apparently GFMS is capable of seeing anything and everything
which affects mine supply – except the severe depression
currently gripping the entire mining industry. I wonder
why that is? Could it have anything to do with the fact
that the current “depression” being experienced
by these gold miners is entirely due to the extreme/rampant
manipulation of the share prices of these miners by the
How else do we explain the share prices of these miners
collapsing by well over 50% (across the board), in a bull
market which requires constantly rising prices merely to
Remaining willfully blind to the banker-created depression
in this sector, we have GFMS (and the WGC) predicting a
rebound in mine supply next year because of “a further
raft of operations scheduled to come online next year.”
These propagandists have the audacity to make that assertion
immediately before noting that currently all project-development
is running well behind schedule – due to the severe
depression that is completely invisible to GFMS.
In fact, with the junior miners who are the life-blood
of the industry, and responsible for well over 90% of all
new gold deposits discovered in the world; it would take
at least a year of strongly rising gold prices to break
through the rampant share-price manipulation of the banking
cabal so that these companies can properly function again.
In other words, the implication of GFMS that these miners
can simply “turn on” new supply like flicking
a switch is totally opposite to the realities of mining;
meaning that this consultant hired to represent the world’s
leading gold miners either knows nothing about this industry
or is being intentionally misleading with its analysis.
The half-truths continue when we come to the only other
component of supply “scrap sales”. Again, we
have GFMS noting that scrap sales have plummeted, and then
immediately implying that those sales will surge the moment
that prices start rising. In fact the truth is precisely
opposite to what is being implied.
What we have seen over the past 10 years (and last 5 years
in particular) is the transfer of vast amounts of the world’s
total gold stockpiles from “weak hands” to “strong
hands”. We see this inexorable trend on display around
the world, but perhaps epitomized best with the following
In Portugal, we recently received a media report that ordinary
Portuguese residents have been entirely cleaned-out of all
their own gold holdings – forced to pawn-off “the
family jewelry”; as the fraudulent manipulation of
most of Europe’s debt markets (by bankers) has thrown
many of Europe’s economies into severe depression.
These people aren’t going to start “selling
gold” as soon as prices heat-up, because they have
nothing left to sell. Obviously a similar dynamic exists
in Greece, Spain, Italy, Ireland, and perhaps even GFMS’
own home base: the UK.
Then we have the world’s central banks, gobbling
up the world’s gold by the hundreds of tons, in anticipation
of their own, worthless, fiat-paper currencies going to
zero. Obviously these institutions are not going to be selling
their gold onto the scrap market…at any price. Thus
as we appear to be on the brink of a genuine supply-crisis
in the gold sector, we have GFMS (and the WGC itself) playing
the role of Nero – and fiddling their propaganda while
the sector burns.