Ambrose Evans-Pritchard at The
Telegraph.co.uk reports that the US Academy of
Sciences calculates that "some 26% of all the
copper and 19% of all the zinc that ever existed
in the earth's crust has already been lost to
mankind, mostly wasted in milling or smelting or
buried in landfills."
Gregory Wilkins, of
Barrick Gold, says that the same thing is
happening to gold, as "Global mine supply is going
to decrease at a much faster rate than people
generally believe. Many of the new
mines that people are
anticipating will never come into production."
Kevin McArthur, chief executive of
Goldcorp, is quoted as agreeing that "global
output was on a relentless slide".
The
point of the whole thing is that "the era of 'peak
gold' has arrived", which is truly momentous,
because it means that the "easy to get at" gold
has been gotten at, and the rest of the gold left
in the earth is harder to get to, and thus the
rate at which gold is being discovered has
collapsed when compared with the old days, which
is just like the collapse in new discoveries of
oil, which is where you get the phrase "peak oil",
and they both have crucially to do with how a
rising demand growth curve and a falling of supply
growth intersect at that place called Lonely
Street. Oops! Sorry! That's Elvis Presley!
I mean, falling supply and rising demand
intersect at that precise point that is
scientifically referred to as "expensive like you
wouldn't freaking believe!" And since everything
from fuel to fertilizers to plastics to medicines
to everything you can name under the sun is made
from oil, then you are going to see inflation in
prices like you will not freaking believe, which
means that the currency will buy less per unit
like you will not freaking believe, which means
that people are going to be hungry and broke and
miserable and rioting like you will not freaking
believe.
And here is where I reveal why I
am so insanely bullish on the future of gold, and
how I am actually salivating at the prospect of
having so much money that I can spend my time
gallivanting about in a carefree manner, playing
golf and hiring lawyers to, as my old high school
said in its school song, "fight until we have
victory, and all our enemies have gone away",
which I always thought was kind of a stupid creed,
since my enemies could be massing just over that
hill in preparation to attack us, and our best
course of action is to immediately track them down
and kill them all in a frenzied orgy of blood, and
then dance like ghouls on their dismembered
bodies, swaying to the hypnotic sounds of
captivating rhythms on the bass line, but they
called me mad! Mad! Hahahaha! I'll show them
madness!
But this is not about stupid
sanity hearings or about psychiatrists recoiling
in horror at what I "see" in their stupid ink
blots, or how traitorous neighbors and family
members are lying their heads off in their
testimony, but about why I am so bullish on gold.
Easy. Mr Evans-Pritchard reports that inflation is
hitting gold mining, too, and "Costs are rising at
$60 an ounce annually. They will average $460 by
next year. From tires to diesel fuel and the
geologists' salaries, mine inflation is running at
15%."
Inflation of 15%! Yow! At that rate,
dividing 15% into 72 as per the "Rule of 72", this
means that costs will double in about five years!
That means that it will cost $920 an ounce to mine
gold in five years, which means that gold is
selling right now for $140 below the cost of
mining gold in five years!
And while
supply may be falling, Junior Mogambo Ranger (JMR)
Ed S sent me a posting from the Gold Anti Trust
Action Committee about Reuters reported that
"Global gold demand in the third quarter rose 19%
year-on-year to 947.2 tonnes on the back of robust
inflows into bullion investment funds and improved
jewelry consumption, industry-sponsored World Gold
Council (WGC) said on Thursday."
Even more
significant, Milling-Stanley said, "The increase
in investment demand has replaced jewelry buying
as the major source of growth for the third
quarter." It was then that I wished I knew of any
time in my whole freaking life when some woman
ever said to me, "Don't buy me any more jewelry!
Buy gold bullion as an investment, instead!" And I
laughed.
The details, in case you are
interested, are that they all wanted more jewelry,
and that their wishes were answered, in that
"Total gold supply for the third quarter was 1,045
tonnes, up 16% year-on-year due to significantly
increased official-sector sales."
And in a
related news item, the St Louis Post-Dispatch
reported that some outfit called Missouri Coin
"sold seven times as much gold and silver as it
did a few months earlier". Wow! A 700% increase!
And this is seemingly borne out by Junior
Mogambo Ranger (JMR) Chad K, who writes, "I went
to purchase some silver today. There is now a 4-8
week waiting period and prices cannot be locked
in." He says that "I am glad I started listening
to you weirdo gold bugs a few years ago and
purchased when the dealers actually had some."
Me too, Chad! Me too!
Richard Daughty is general
partner and COO for Smith Consultant Group,
serving the financial and medical communities, and
the editor of The Mogambo Guru economic newsletter
- an avocational exercise to heap disrespect on
those who desperately deserve
it.
Republished with permission from The Daily Reckoning.
Copyright 2007, The Daily Reckoning.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
