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July 23, 2004

Is Gold in Short Supply?
by Paul Tustain

A question :- If all the gold ever produced in the world was formed into a single block how long would its edge be?

The length of a tennis court [22 metres] ?
The length of a football pitch [100 metres] ?
The length of a golf shot [200 metres] ?

In fact at 19 metres it's quite a bit shorter than a tennis court, and that includes all the privately held coins, bars and jewellery in the world - some 75% of the total. The world's monetary gold reserve is a block of only one quarter that volume, and America's reserve is only one quarter of that. Fort Knox hides only a modest hole in the ground.

There's not much gold left elsewhere in the ground either. Approximately 50,000 tonnes (about a third of what is already out) remains un-mined and will cost in excess of $300 an ounce to extract. Meanwhile - after steadily more detailed worldwide surveys - the mining industry consensus is that large mineral deposit discoveries are now a thing of the past.

Gold is - as it always has been - extremely scarce.

Here is a table of gold amounts and values. Take a deep breath before the last few lines.

Kilograms	Value @ 390$ / Oz	Litres	How much
0.008	$100	0.00041	A British sovereign coin
0.031	$390	0.00161	US Eagle / Canadian Maple coin
0.100	$1,254	0.00518
0.500	$6,269	0.02591
1	$12,539	0.0518	1 kilo - a golf ball sized sphere
2	$25,077	0.1036
3	$37,616	0.1554
4	$50,154	0.2073
5	$62,693	0.2591
6	$75,231	0.311	A can of 'Coke'
7	$87,770	0.363
8	$100,309	0.415
9	$112,847	0.466
10	$125,386	0.518
12	$156,000	0.645	A standard 400 oz bullion bar
20	$250,772	1.04	A litre bottle of water
50	$626,929	2.59
100	$1,253,858	5	A good sized deposit box
1,000	$12,538,580	52
10,000	$125,385,802	518	Half a cubic metre - fits in a corner of a small bank vault.
100,000	$1,253,858,025	5,181
1,000,000	$12,538,580,000	51,813	A small living room - and more than twice Britain's gold reserve.
8,139,000	$102,051,504,000	421,710	The US gold reserve fits into a town house.
30,000,000	$376,163,190,000	1,554,404	The world's total financial reserve of gold (central banks + significant global financial institutions like International Monetary Fund and Bank for International Settlements)
100,000,000	$1,253,858,024,000	5,181,347	The approximate total of all privately held jewellery, bullion and coin
140,000,000	$1,755,401,234,000	7,253,886	All the gold in the world - A block with edges 3 metres short of a standard sized tennis court.
	$7,000,000,000,000		The approximate value of US sovereign debt (which excludes future welfare obligations, none of which have been reserved in the public accounts [see below - generational debt])
	$25,000,000,000,000		The approximate value of the world's nominal sovereign debt.
	$44,000,000,000,000		The approximate value of the US generational debt - the cost of providing to the current working population what it believes itself entitled to in future welfare. i.e. the extent to which the US government has failed to reserve assets to pay for implied promises.

Of the US sovereign debt some 40% is owed to foreigners; a lot to the Japanese. They've been holding on to US Treasury bonds which they bought with the dollars they took in payment for all those Toyotas.

But now they are unhappy at losing their savings to the falling dollar. Their finance minister recently decided to convert some of their dollars into gold.

And the Chinese too are an inscrutable lot. What a thought that their colossal accumulated dollar reserve could - almost at the whim of a senior Chinese bureaucrat - open a long gold futures position and run it to delivery on our own markets, and thereby convert a large slice of their dollar reserves into bullion.

We'd better be very polite in all those discussions about trade and human rights.

Enjoy learning about the history of gold's role in money and international trade and make your own comparison to the world around you. Articles in the series include :-

Regards,
Paul Tustain
BullionVault

Paul Tustain is the founder of BullionVault.com - with 13,000 customers and $600m in gold bars, now the world's largest store of privately-owned investment gold bullion.

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events - and must be verified elsewhere - should you choose to act on it.