It’s easy to get caught up in what the Fed will do next, or the latest political brouhaha in Washington D.C. And of course, this stuff matters. But when it comes to gold, you should never lose sight of fundamentals.
Nothing is more fundamental than supply and demand. Based on the GFMS Gold Survey 2017 H1 Update Outlook, the fundamentals for gold are trending in a positive direction. Demand is pushing upward, while supply is falling.
Demand for physical gold rose to 1,895 tons in the first half of 2017, a 17% increase over the same period last year.
We recently reported on declining gold production in China and an overall tightening in supply. It appears this is also a growing squeeze on the silver supply. In 2016, global silver mine production fell for the first time in 14 years.
According to a report by the Silver Institute, silver mine production declined by 0.6% to a total of 885.8 million ounces.
Global silver mine production in 2016 recorded its first decline since 2002, largely the result of lower by-product output from the lead/zinc and gold sectors. Coupled with less silver scrap supply to the market, which posted its lowest level since 1996, as well as a contraction in producer hedging, total silver supply decreased by 32.6 million ounces in 2016.”