By Jeff Clark, Senior Analyst for Goldsilver.com and Advisory Board member for Strategic Wealth Preservation
Let’s have some fun…
I grew up in the Johnny Carson era, and saw lots of funny episodes and comedians over the years.
One of my favorite things was when he’d say something like “She is so fat…” and the audience would scream out “how fat is she?”
The Millennial or Gen-Z crowd may hear that setup from other comedians today, but Johnny Carson’s show was the father of it.
Well, as I researched my talk for the Vancouver Resource Investment Conference, I kept coming up with more data on just how small the gold market is. As many of you know, the gold market is tiny compared to the stock and bond markets.
And that small size will have a big impact on the price as we move forward in a bull market, especially if we get the kind of crisis Mike thinks is ahead and investors start crowding in.
Gold Is the Lint on Tim Cook’s Shirt
There are lots of ways to show how small the gold market is, but here’s a couple you probably haven’t seen…
Apple Computer’s market cap is roughly $1.3 trillion. The gold industry is a fraction of that, both the market cap of all gold producers in the world, as well as every ounce of new supply dug up last year by the miners.
Apple’s market cap is 3 times larger than all publicly traded gold producers. That same company has more than 9 times the market value of all the gold mined last year.
To be clear, Apple is a big company. But it’s just one company. And the fact that our entire industry is so much smaller highlights just how it could be impacted once mainstream investors start pouring in.
Here’s a couple more fun comparisons…
Warren Buffet’s company, Berkshire Hathaway, has a market cap that is a whopping 266 times bigger than the value of the gold registered for delivery at the Comex.
I originally had this put in a bar chart, but the gold bar wasn’t visible—it’s only discernable because we switched to a 3-D chart.
A company couldn’t use its market cap to buy gold—but it could use its cash. Here’s the amount of cash Berkshire Hathaway holds vs. that same value of Comex registered gold.
How small? I’m glad you asked…
Warren Buffet could buy every ounce of registered gold at the Comex with 1.6% of his cash!
He’s not going to do that, but this shows just how small—and vulnerable—the gold market really is. And these are just two companies—there are thousands of companies, hundreds of hedge funds, millions of investors, and trillions of currency units.
To be clear, Comex gold holdings are tiny compared to the total amount of above-ground gold. And Indian housewives hold a LOT of gold they could potentially sell if the price gets high enough. But no one knows exactly how much they have, nor would that be within their character. And even if they did all decide to dump all their holdings all at once it still wouldn’t be enough to meet an insatiable level of demand in a major financial crisis.
The point is this:
- It won’t take much cash flooding into our industry to drastically impact the price. Demand can outstrip supply in a meaningful way, very quickly, and drive up prices.
Hey, What About Silver?!
You silver bugs will point out that the silver market is even smaller—and you’re absolutely right. I’ll be demonstrating just how small at the Vancouver Resource Investment Conference next week. And I’d love to meet some of you there.
Come join me in beautiful Vancouver. And you can get free admission by using code CLARK100 at checkout: https://cambridgehouse.com/vancouver-resource-investment-conference
If you make it, be sure to introduce yourself. It’s always great to meet people of like mind, especially since Mike and I are convinced we’ll be on the winning team together over the next few years.
In the meantime, here’s a couple lines for my version of the Johnny Carson show.
The gold market is so small that…
- It could fit in Warren Buffet’s teacup
- It could take a bath in a sink
- Its welcome mat just says Wel
- My kid thought it was a Lego set
Add your best one-liner in the comments below (keep it clean, please) and let’s see who comes up with the best quip.