Mostly: Classical

[amarksp]

You're right, should have specified on what:

Your opinion on this statement:
However, the price of gold is almost completely insensitive to jewelry demand, scrap sales, mine production, producer hedging or central bank sales.
(I disagree, your opinion?)

Your opinion on this statement
Jewelry demand is important to jewelers but it makes no difference to the gold price.
(I disagree, your opinion?)

Yes, this is the what I really desire your comments on:
The bulk of international gold trading occurs through the facilities of the London Bullion Market Association (LBMA) and from their website we learn that the average DAILY volume of gold trading was 513 tonnes during 2005. Now let me explain what that number means. True The LBMA only reports the net amount of gold transferred between its clearing members at the end of the day. Is this True, you seem not to know? So if two members trade 100 tonnes five times during the day (total trading volume is therefore 500 tonnes), and at the end of the day one member owes the other member 200 tonnes of gold (i.e. net position at the end of the day) then only 200 tonnes is reported by the LBMA. The LBMA trading volume reflects the net amount of gold transferred between clearing member accounts at the end of the trading day. Is this True, you seem not to know? It is estimated that the actual volume of gold trading is possibly as much as 4 to 6 times larger than the net positions reported by the LBMA. What does this mean?Remember, these are not derivative trades; these are the settlement numbers for actual gold trades.


I guess if you believe above comments are accurate, then this is logical conclusion:
Now, if the volume of gold trading through the facilities of the LBMA is in the order of 500 tonnes per day, then I am afraid that a 640 tonne annual shortfall between mine production and fabrication demand is totally irrelevant. In fact, the entire 2,736 tonnes of annual jewelry demand are irrelevant: they represent less than 6 days of trading through the LBMA. It makes no difference to the gold price whether India had a good harvest or a poor harvest, even though, again, it is probably important to the jewelers.


Your opinion here (gold is money, commodity or both)?:
Gold is money; it is not a commodity. Its value relative to fiat currencies is purely a function of the relative inflation rates of gold and other currencies. The gold price may fluctuate based on investor psychology, just like the price of any financial asset, but it will always revert back to its fundamental value, which is determined by relative inflation rates.

(I view gold as both a commodity and as money. As a commodity, POG will always trade above its cash costs [maybe not its full production cost but always its cash cost], hence the case as trading as a commodity is a fact IMO)


I do like this analysis (inflation rate of gold vs. inflation rate of currency whereby inflation rate of gold calculated as increase in supply):
Just like the inflation rate of money is the increase in money supply, the inflation rate of gold is the increase in the above-ground stock of gold, i.e. mine production as a percentage of all the gold that has ever been mined. If we know what the inflation rate of a particular currency is we can calculate its relative value to gold, assuming we have a starting point at which we knew what the fair value of the currency was. This can be done for the US dollar. In 1933 the gold price was defined by the fact that a $20 gold coin contained 0.9675 ounces of gold. From this we know that the gold price in US dollars during 1933 was $20.67. If we now take in consideration the inflation rate of the US dollar (as defined by M3 and the Consumer Price Index for those years that M3 did not exist), and the inflation rate of gold (annual mine production) we can calculate that the gold price in US dollars should be around $850 an ounce.