To have a little fun with it, I thought I'd summarize what I read in the form of a quiz. See how many you can get correct. Regardless of your score, I'm sure you'll agree with the ramifications each point makes for the gold market.
I'll start off easy. . .
1. The main driver behind rising gold prices over the past decade:
- Increased jewelry demand in India;
- greater industrial uses of the metal; and
- investment demand.
Five exchanges began trading gold contracts for the first time in 2010 and three more introduced mini contracts, collectively the largest number launched since the early '80s. There are now 24 gold vending machines in seven countries, with three more countries adding machines this year. Households in developing countries are now moving away from gold jewelry and buying coins and bars for their savings. I could go on, but suffice it to say that investment demand will continue to be very strong.
2. True or false: Recovery from gold scrap was lower in 2010 than 2009? Scrap rose three consecutive years in a row—until last year. Gold supply from scrap fell 2.1%, to 42.2 Moz.
This is significant because gold prices were higher, which would normally increase the amount of scrap coming to market. One of the primary reasons scrap dropped is because investors are holding on to their metal, reportedly because they believe prices are headed higher. Isn't that one reason you're holding on to your bullion?
3. There are many reasons investors have been buying gold over the past 10 years, but what's the #1 reason?
- Safe-haven asset;
- gold coins and bars have become more intricate, widespread and beautiful; and
- supply and demand imbalance.
If you got all three answers correct, you're an investor who understands the basic reasons for owning gold and that those reasons are still in play.
Now let's step it up a little. . .
4. Gold represented what percent of global financial assets at the end of 2010?
- 1.6%; and
5. How many central banks increased their gold holdings in 2010?
- 15; and
6. Compared to 2009, U.S. Mint gold coin sales in 2010 were:
- Down 12%;
- Up 8%
- Up 5%; and
- Up 3%.
7. CPM estimates that the fiscal and monetary imbalances, especially in developed countries, could take how long to resolve?
- 1 year;
- 5 years; or
- 2 years?
If you got these four questions correct, I think it means you're an astute investor who doesn't worry about day-to-day price fluctuations and instead focuses on owning enough ounces to protect your assets from the huge and intractable fiscal problems that still have to be faced.
Now, here are some questions for those of you who love gold stocks:
8. What was the industry-average cash cost to produce 1 ounce of gold last year?
- $544; or
We've got some of the most profitable companies in BIG GOLD, along with a number of producers that have big growth coming online over the next one and two years. Buy these stocks before that growth happens; if you shell out the bargain basement price of $79 now, I think your portfolio will be very happy when it comes time to renew.
9. The average grade of gold mined on a worldwide basis last year was how much?
- 5.11 grams/ton;
- 3.54 g/t;
- 2.96 g/t; or
- 1.83 g/t?
10. The most popular region for exploration spending is where?
- Latin America;
- Nevada; or
If you got these three questions correct, you're well in touch with the gold stock market and I hope you're taking advantage of the picks we offer in BIG GOLD and International Speculator.
This data clarifies and confirms why many investors own gold and continue buying it. It paints a decidedly bullish picture for the metal, in spite of record price levels. Monetary issues are far from over, won't be easily resolved and will take years to play out. Banks continue buying and investors aren't selling. The U.S. Mint can't keep up with demand and yet gold is under-owned versus other major asset classes. Costs are rising for the producers, but margins are rising faster for the better-run companies.
When looking at the big picture for gold, I for one draw comfort from knowing I've got some ounces tucked away. I hope you, too, see gold for what it is—protection against unsustainable fiscal imbalances and massive currency debasement and a profit center for years to come.