Friday, August 4, 2017

Stock to flow ratio is key to understanding gold

Ronald-Peter Stöferle, Analyst at Erste Bank, and James Turk, Director of the GoldMoney Foundation, talk about his "In Gold we trust" report. 

They explain why gold's high stock-to-flow ratio makes it very different to commodities. Gold is not consumed, it is accumulated, which is why it is great for monetary purposes. Mine production and supply of gold in general is not very important in setting the gold price, whereas demand for gold is. 

All economic goods are subject to supply and demand, including money, something that many economists overlook. 

The decreasing trust in fiat currencies, which are gold's real competitors, is what really drives bullion prices. It is Gresham's law that we should use to model gold's demand.