Replies to post #330 on San Gold Corporation (SGRCF)

[futrcash]

The rise in the price of gold continues. What does it signify? In our opinion,
investors are worried about the stability of the global financial system and are
increasingly taking delivery of physical bullion, which could set off a short
squeeze of massive proportions. We have discussed this possibility in the past.
We believe it is real and likely to occur. According to the World Gold Council
(WGC), the value of gold bars and coins purchased in the second quarter rose 37%
to $14.9 billion, reflecting a 9% year-over-year increase in physical demand to 307.7
metric tons.
This increase in physical demand came despite a 37% fall in total investment demand
from 574.2 tons in Q2-2010—the second highest on record—to 359.4 tons last quarter.
Yet ETFs collected an additional 51.7 tons of gold in the second quarter—25% above
the average inflow over the previous 12 quarters. Physical holdings are commanding
a rapidly-growing share of gold investment.
What may be surprising given the debt crises in Europe and the U.S., is that India and
China collectively accounted for 52% of gold bullion and bar investment in the
first half of this year. India?s overall gold demand surged 38% year-over-year in the
second quarter, while Chinese demand rose 25%. WGC expects the growth in physical
demand to continue during the upcoming festival season—supported by the Asian
giants? rising prosperity and high inflation.
Central Banks are also contributing to a physical shortage as they exchange foreign
currency holdings for physical gold reserves. Central Banks collectively
purchased 69.4 tons of gold last quarter—bringing total net official sector
purchases for the first half of the year to nearly 200 tons—nearly 8% of global
annual mine production. Record-high gold prices would usually be expected to
prompt a surge in recycling—especially considering massive advertising efforts on
top of high levels of unemployment. Yet, scrap fell 3.4% year-over-year in the
second quarter—denting supply by another 15 tons.
With the worst of the U.S. debt debate and much of the European debt crisis unfolding after the close of
the second quarter, physical gold could be in short supply as we enter festival season in the nations that
lead the world in gold demand.

[Taken from a proprietary source]

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