The Great Gold Heist of 2013: Exploding Demand & Falling Supply

-- Posted Tuesday, 17 September 2013
By Steve St. Angelo, SRSrocco Report
No one was prepared for the orchestrated take-down of the price of gold and silver in the first half of 2013. Forecasted supply was generously overstated while demand... grossly under-estimated. Thus, the tremendous imbalance had to be resolved which came to be known as "The Great Gold Heist of 2013."
Not only were the investors taken by surprise from the huge price declines, but so were the Fed and member bullion banks -- one by price movement and the other by huge demand. To understand why I believe there was a gold heist, we have to dissect through some of the just released official data.
Thomson Reuters GFMS just came out with their 2013 Gold Survey Update by providing interesting data that can finally shed some light on what will become an important pivotal point in history. While I realize many individuals are quite skeptical of the data coming from the World Gold Council and Thomson Reuters GFMS, at least we can make some key assumptions from these statistics.
If we go back to Thomas Reuters GFMS 2013 Gold Market Outlook from earlier this year (April), here were their supply & demand forecasts. (NOTE: I will be referring to Thomson Reuters GFMS as just GFMS in the figures and article below).
GFMS Early 2013 Gold Market Outlook (in tonnes):
Mine Supply = 2,877
Gold Scrap = 1,754
Total Supply = 4,631
Fabrication = 2,404
Physical Bar = 902
Net Official Govt Purchases = 490
Implied Net Investment = 825
Total Demand = 4,631
As you can see everything has to match up nicely by the supply and demand figures balancing out in the end. I omitted the net-producing figure in the demand area of the equation as it was insignificant. These forecasts were released before the gold market take-down of April & June.
In their most recent Sept. 2013 Gold Survey Update, they released the following:
GFMS Sept 2013 Gold Survey Update:
Mine Supply = 2,917
Gold Scrap = 1,397
Net Disinvestment = 213
Total Supply = 4,527
Fabrication = 2,960
Physical Bar = 1,166
Net Official Govt Purchases = 361
Implied Net Investment = 0
Total Demand = 4,527
The Change in Forecasted Supply
You will notice several alarming changes in the forecasts. If we focus on the supply portion we can see that mine supply has increased a little, but the real surprise was the decrease in gold scrap. Earlier in the year, GFMS stated that gold scrap would total 1,754 tonnes in 2013. However, they revised it down a hefty 357 tonnes to only 1,397 tonnes for the year.
This is indeed a significant 8% decline in total gold supply that was not expected. More about the "Gold Scrap Situation" later in the article. In addition, you will notice that a new category has appeared in the update that wasn't included in the prior supply forecast.
GFMS has now added 213 tonnes of Net Disinvestment as supply. Basically, net disinvestment is gold that has been withdrawn from institutional holdings and put back on the open market. Thus, total supply for 2013 is now estimated 4,527 tonnes -- 104 tonnes less than the earlier forecast.
If we look at the demand picture, this is where the real damage took place greatly motivating the bullion banks to increase supply.
The Change in Forecasted Demand
First and foremost, total fabrication is estimated to now increase a staggering 550+ t (tonnes) from 2,404 t (forecasted earlier this year) to 2,960 t by the end of 2013. Total fabrication includes industrial, jewelry & coin.
Furthermore, physical bar investment is now slated to increase from 902 t to 1,166 t for 2013. This turns out to be a 30% jump of physical bar demand than previously forecasted. Official Government demand is shown to decline by 129 t from the 490 t early forecast to 361 t now updated for 2013.
Lastly, the big change comes in the "Implied Net Investment" category. GFMS originally forecasted implied net