*Paul Yusem, who emailed Bloomberg’s gold reporter, Claudia Carpenter (the same Claudia who has refused to mention GATA over the past 14 years)…

Gold traders Most Bearish in Three Years After Drop

Hello Claudia,
I noticed in this article that it was mentioned that investors sold 174 tonnes of gold through ETPs last month. Let’s compare 174 tonnes to current supply and demand.

For a back of the envelope calculation, gold mine supply in 2012 was 2,700 tonnes. Since gold production in China and Russia does not leave the country, we can subtract 400 tonnes for China and 200 tonnes for Russia and we are down to 2,100 tonnes. UBS reported that Indian demand is 5 times the average of the last 12 months. Even with gold shortages in India, Indian demand should exceed 1,000 tonnes in 2013. We are down to 1,100 tonnes of gold. Assume central banks purchase another 500 tonnes of gold for 2013. We are down to 600 tonnes. China purchased 557 tonnes of gold through Hong Kong in 2012. China purchased almost 100 tonnes of gold through Hong Kong just in February of 2013. China will easily purchase 600 tonnes through Hong Kong in 2013. We are down to 0 tonnes of gold. This is where it gets interesting.

Investors took delivery of 1,000 tonnes of gold in Shanghai through April of 2013. For an aggressive estimate, we could multiply 1,000 x 3 for end of the year totals. For conservative estimates, we can multiply 1,000 tonnes x 2 = 2,000 tonnes. For confirmation of these numbers, google Andrew Maguire and his futures trading service. I believe Andrew Maguire is in London. You could be neighbors. Wouldn’t that be interesting? After subtracting 2,000 tonnes from 0, we are at – 2,000 tonnes of gold meaning 2,000 tonnes is coming from existing stockpiles.

At the LBMA, investors are taking delivery of 10 to 20 tonnes daily (google Andrew Maguire). Let’s be conservative and say that investors are taking delivery of 7 tonnes per day. That works out to about 1,800 tonnes for 2013. We are now down to – 3,800 tonnes.

Russia has one of the largest foreign currency reserves in the world at $528 Billion and Vladimir was seen holding a gold bar. I am putting Vladimir down for another 500 tonnes over and above the official Russian government purchases for 2013. We are down to – 4,300 tonnes.

I have not even included US demand, Vietnam, Turkey and the rest of the Middle East as well as the rest of the world. Let’s put the rest of the world down for a conservative 1,000 tonnes. We are down to – 5,300 tonnes.

This is at least 5,300 tonnes that have to come from existing stockpiles to balance the current gold market. This 5,300 tonnes I believe is a somewhat conservative number. Contrast 5,300 tonnes to investors selling 174 tonnes and I think you get the picture. I have not included gold scrap in the calculation since existing gold scrap figures are too unreliable.

How about the ultimate contrarian indicator – the small speculator in gold futures? The small speculator is net short for the first time since the 1st quarter of 2001. That was at the bottom of the bear market when the small speculator was last net short gold futures.

Gold futures may be going lower due to futures trading on the Comex. However, the abnormally low price has triggered an avalanche of gold buying. To keep gold prices anywhere around current levels will cost the bankers at least 5,300 tonnes over and above 2013 mine supply.

Have you heard the expression, he who has the gold makes the rules? By the way, how is your Chinese?
Paul

He followed up with…

Hi Bill,
I think that 5,300 tonnes of gold coming out of existing stockpiles is conservative for 2013. Soon after I sent that email to Bloomberg, this article came out.

http://www.bloomberg.com/news/2013-05-07/china-s-gold-purchases-from-hong-kong-expand-to-record-in-march.html

Gold imports by China from Hong Kong more than doubled to an all time high in March to 224 tonnes compared to 97 tonnes in February. The imports in March were before the big gold smash in April which really ignited physical buying.
Paul