How much gold is really out there? This is a good question and rather than debate whether the “official” statistics are correct or not I will assume they are. I will make this assumption because even if they are true (which they are not), the financial ship is seriously out of balance and listing badly.
The official total number on a global basis is estimated to be just over 170,000 tons. Of this figure, the tally comes to around 32,000 tons held by central banks. At the current price of gold, the total above ground supply comes to a little over $6 trillion and central banks hold a little over $1 trillion. If we break this down further and look at it from a U.S. centric standpoint, we claim to have 8,133 tons, let’s call this $300+ billion.
The title’s question “how much gold is out there?” is misleading. I say “misleading” because there are two (as many as there are currencies) numbers, one by weight and the other by dollars (or whatever currency you use). Looking at this from a dollar standpoint is the easiest way to gain perspective. If total above ground supply comes to little more than $6 trillion, we can make some comparisons. For instance, the Fed’s balance sheet is over $4 trillion, or the U.S. economy is now about $17 trillion in size and our “funded” national debt is close to $18 trillion. I have seen studies where if you include “un” funded debt and promises, the U.S. is on the hook for $200 trillion in total but this number is too out of control to compare to our “gold held.”
So the U.S. holds $300 billion in gold …or maybe not, but assuming this is the case, let’s put it in perspective. Our “family jewels” that amount to $300 billion is about 1/15th of the $4+ trillion Fed balance sheet. If we compare our gold hoard to the economy in total we come to a number just under 1/60th. More importantly, if we compare gold held to our national debt we also get a number of 1/60th. If we compared the amount of U.S. gold to our total of funded and unfunded obligations we get a really foolish number of close to 700. In other words, we “owe” almost 700 times as much “money” as we have gold.
In my opinion, the most shocking comparison of “gold to our obligations” is when you look at the amount of gold we hold versus the amount of interest we pay each year. Last year we paid $415 billion worth of interest. This number is interesting because it is actually less than we paid out in 2008 when our debt was $7 trillion lower than it is now. Because interest rates have been forced down we are actually paying less interest today than were 6 years ago even though total debt has grown by 80%. This just goes to show one of the “why’s” interest rates have been crushed…so Uncle Sam can afford to pay his interest …but I digress.
So, we are now paying more in interest each and every year than the sum total of ALL the gold that we claim to hold. Do you see a problem with this? Yes I know, some will say “it doesn’t matter and is meaningless.” Well, maybe it is and maybe it isn’t. Remember, interest paid today is far less than it would be under a “normalized” interest rate scenario. Said another way, under a normalized interest rate, the U.S. would be paying $800 billion per year just alone in interest. In case you missed it or scanned over it, the important phrase in the previous sentence is “PER YEAR” with an exclamation point!!!
Getting back to my original thought and title, “how much gold is really out there?” …the answer is “not enough.” I only made comparisons to the U.S. and I did this because we are the ones who issue the world’s “reserve currency” and whos debt is considered “risk free.” After seeing the above numbers, you now might understand “why” the U.S. went off the gold standard and defaulted to foreigners …we were running out of gold (after having 20,000 tons at one point) and simply didn’t have enough to continue making deliveries.
It is a funny thing though, this concept of “not enough” gold. In today’s financial world and numbers …there really isn’t enough. There’s not enough to back currency with. There’s surely not enough to cover or back debt with. Heck, there’s not even enough for the U.S. to pay their interest FOR ONE YEAR! Ah, but dear reader, you are far smarter than this and are already calling BS on me aren’t you? There is not enough gold “at current prices” to cover anything. The total amount of gold “at current prices” won’t cover most country’s currencies, debt or even interest payments. There is either not enough gold …or it is not priced properly to do its job? Which is it?
This is why I have written multiple times about the system going through a “re set”. Either gold prices need to be marked up or paper prices marked down (the same thing) in order for there to be “enough gold” to act as a foundation with any sort of thickness or stability. This I guess you could say is one of the laws of nature. A markup in gold will either be done by man in order to support his edifice of debt …or by Mother Nature where man’s paper edifice collapses to a point where “there is enough gold” at whatever “price” it happens to be at the time.
This is not original thought or even close to rocket science. This has happened many times before all throughout history. The only differences between “then and now” is that this time around even (and especially) the reserve currency itself is fake, fiat and Ponzified as opposed to periphery currencies. In the old days, the peripheries were the fakes, now even the reserve currency is fake. The problem now is the issuer of the reserve currency is broke and paying out more in interest in one year than was saved in gold over 238 years! I will leave you with a thought, what if the U.S. really has dishoarded their gold in an effort to suppress the price? What if the crazy comparisons I did for you above are really just a rosy scenario and “rosy” by a factor of 10? Or by 100? Or if ALL of the gold has been dishoarded? Then what price in dollars should gold be?
Back when Greece appeared as the poorest of the developed nations, I asked why we don’t divide their debt by all the PM’s they held and use that to set a price at par for all PM’s? Surely, all the hoarded metals would then find a way to market, and we would see the Wild West return as the price naturally finds its’ level?
this thought process will done on a global scale in some form or another.
You are asking the wrong question: “Then what price in dollars should gold be?”. The United States’ FRN is a debt instrument backed by no assets, and gold is an asset. You very successfully demonstrated that the debts of the United States far exceed its assets, therefore the United States is insolvent, and its currencies are valueless.
Currently, the Chinese the Chinese State Administration of Foreign Exchange has announced that today’s USD/CYN ratio is 1:6.1462, and the current value of the U.S. Dollar is then equal to 6.1462 Chinese Renminbi/Yuan. When the Chinese attaches value of their Yuan to the purchasing power of gold’s weight,in grams, and its fixed price will be assigned at least for this century.
For example: if Peoples bank of China announces that one gram of gold will have a fixed price of 300 Renminbi/Yuan and the Chinese State Administration of Foreign Exchange has stated that today’s ratio is 1:6.1462., then gold will be priced at $1,518.18 dollars per ounce today. In the future, if the U.S. CPI increases, then the ratio would be reduced, and if it is reduced to become 1:1, then the price of gold would become $9,331.04 dollars per ounce, and the price of gold would remain at 300 Yuan per gram. Please note that the Shanghai Gold Exchange is denominated in both Renminbi/Yuan and Grams.
yes of course Victor, there is “enough” gold if it is priced properly.
Hi Bill, I don’t really care what the price is. As you say the weight matters. I buy the gold & silver, not the price. I’m not sure if I will ever exchange it in paper. I might pass on to family, decades into the future. I’m not very greedy and I like it this way. That is to say… Nasty “events” are keeping this system afloat. I really wonder if the people that are in charge have any moral left. But let’s leave it at that. I buy everything that I financially can afford and I will only change course if “the event” arrives. Until that day, I do what other people should also do: educate, wake up, stack & enjoy life. People need to understand that the credit game is over. I guess 99% will have to learn the hard way..
As the derivatives and bonds start to unwind and things get overly liquid, so called money will find its way to gold and silver.
Basically the gold price will be irrelevant because who in their right mind will be selling.
I suppose people like Sinclair and Organ could be correct with their stupid $50k an ounce Gold and $200 Silver calls but they should know better. Both Gold and Silver will be in full blown backwardation long before those target prices have any relevance.
SS, you know it’s not about the price. It’s about EVERYTHING. You’re a smart guy, and you know! Names don’t apply in the context. They’re part of the reason why you’re here. Good to know you have thoughts that you want to share.
When Sinclair and Organ gave future prices estimates for gold and silver, I assumed that they were talking about value in today’s dollars. Future dollars will be used to kindle fires, so their numbers will be meaningless.
their numbers may turn out to be hilariously low.
Bill, I value your excellent writing style, and ability
to clearly explain your thoughts. You choose fine
topics, and I really enjoy and look forward to your
Retired High School English Teacher.
thank you Tom! My past English teachers would disagree with you, I even had an English professor offer to correct my writing because it was “irritating” to him. He was irritated by my bad punctuation and run on sentences…oh well, as long as you understand my message…right?
Bill, don’t let “English Professors” attempt to “correct” your writing. Sheesh…if it bothers them, well, no one is forcing them to read it 🙂
You produce great daily work which I have never commented on before, but the reason I am writing now was because today you HIT IT OUT OF THE PARK with this one!
thank you so much Peter. No, I wouldn’t “sound like me” if I let an English professor slice and dice my work would I? It’s the only way I know how.
Great article, Bill!
Could you do another one using Silver instead of gold?
thank you, no because the U.S. has had NO silver for well over 10 years so mathematically in dollars silver would be valued at infinity.
Bill.. excellent commentary.
The actual fact is that “all the gold is still out there”! But the real question is ‘who has possession of it today” and who THINKS they have the rights to that possession? When that battle begins… watch this space, because them that have possession now are not the parties that will own it when the dust-up settles. Then and only then will we see some true valuations. But the battles will be spectacular.
And you are correct. Whatever there is will NOT BE ENOUGH to satisfy all the claimants.
“Or if ALL of the gold has been dishoarded? Then what price in dollars should gold be?”
The prices for various things tend to be set by those who have them and not by those who do not. In the past, it was NY and London who set the world’s gold price because they either had or controlled a vast percentage of the world’s gold… and silver too.
But the gold (and silver) in Western vaults is moving Eastward and in substantial amount. The time will come when the West has sold off all of its gold and the East will be flush with it. THAT will be when the East sets the price and since they will have the bulk of the world’s gold, it will be in their best interest to set the price as high as possible. The only trick in this is that they must be willing to buy AND sell gold at the price they set, so it has to be at least somewhat reasonable. Yes, we do, indeed, live in interesting times!
As to selling gold and silver… well, as a stacker, I am very reluctant to do that. I will do that at some point but not to simply collect a lot of fiat. No, it will be to acquire other things of substantial intrinsic value, such as a nice piece of land with good soil and water on it… and trees… and maybe a nice pond as well. 🙂
Eastern “pricing” is coming.
Timely article. In his latest interview, Bix Weir concedes/professes that there may be as much as 1-2 million tonnes of gold in existence. Karen Hudes, the former World Bank whistlblowers – whom I have no respect for – claims as much as half a million! Have these people gone mad? As for Bix, he claims this is why silver is such a good investment.
1 million tons? Really? Problem is, there are no signs of ancient mining, current mining totals are a known.