by Thomas Paterson, Gold Made Simple News
After the tales of silver shortages over the past few weeks – the Canadian Mint reporting that “silver is becoming very difficult to source” – and the ongoing silver backwardation, is it now the turn of gold supply to become tight?
News out of Egypt over the weekend is that it has just banned all gold exports for at least the next four months. The purpose of the ban is to try an attempt members from the former regime stealing any of the people’s gold on the way out of the door.
Remember that when Tunisia fell Ben Ali’s wife was sent to their central bank and picked up 1.5 tonnes of the people’s gold (about 1/3 of all the nation’s gold) and flew it out of the country on on a private jet – note they didn’t waste any time on picking up fiat currency, they wanted things that were real and tangible, they wanted gold.
Clearly the concern in Egypt is very real with a freeze of all the former dictator’s assets from within Egypt. This is an attempt by the Egyptian people to claim its wealth back. They also slapped a travel ban on Mubarak for good measure.
According to Hossam Isssa, head of the “Judicial committee to recover wealth” in the past few days Mubarak has been siphoning off vast amounts of his wealth to other nations (possibly Saudi Arabia and Israel). He also went on to say that Hussein Salem, a business man with very close ties to Mubarak “fled from Cairo airport at the start of the revolution before a travel ban could be put in place with a huge amount of precious metals, gold and also cash”.
Although the ban on gold exports is not designed to affect mining exports, the market is less certain this will be the case. Centamin, a gold mining company in Egypt listed on the FTSE 250 fell today in this mornings trading amidst concerns that the export ban will inevitably have ramifications for the gold miners in Egypt.
Are we about to see restriction on gold exports become commonplace thought the Arabian Peninsula and North Africa? With protests and violent reactions stretching from Morocco in the East all the way to Yemen in the south west it is certainly a possibility.
According to Wikipedia and US Geological Survey the gold production of the countries with significant production where revolutions have already occurred or it’s possible they may occur – Algeria, Iran, Morocco, Saudi Arabia Sudan and Oman – adds up to a little over 1.3 tonnes, a seemingly small amount in the grand scheme of world annual production of 1500 tonnes. But in a world where physical demand is growing and supply is tight, even small falls in the amount of production could have large affects on price.
However, more important than the possible negative effect on the gold production are the asset freezes we are now beginning to see with Egypt and Libya leading the charge. It would seem unlikely that these will be the only asset freezes in this cycle of revolutions as the people try to claw back their capital. These freezes could stop physical and paper gold finding their way onto the open market.
It’s worth bearing in mind that protesters in Saudi Arabia are planning to start demonstrations on March 20th. As we mentioned earlier Saudi Arabia is where vast amounts of precious metals might have been flown just as the revolution in Egypt was kicking off. If Saudi ‘does an Egypt’ and we see asset freezes there, then all bets will be off on just how disruptive this might be on the price of gold.
Tom is the Chief Economist at Gold Made Simple, one of the worlds leading gold bullion services. He is head of editorial and research. Tom previously worked as a Broker on a Futures and Options desk at a main brokerage in Canary Wharf and was responsible for the production of “The Economissed” , a research paper tracking Macro themes and trade ideas. Tom is a keen student of the Austrian School of Economics – or as he refers to it ‘real’ economics – and feels very passionate about the lessons that can be gained by all that understand its guiding principals.
