Robert Blumen debunks gold supply & demand misconceptions

Episode 94: GoldMoney’s Alasdair Macleod interviews Robert Blumen – an independent enterprise software consultant based in San Francisco. They talk about Blumen’s recent article titled Misunderstanding Gold Demand, in which he argues that supply and demand schedules are more important than yearly quantities in determining the gold price.

They talk about Blumen’s interview with James Turk regarding the high stock to flow ratio in gold, and therefore the relatively small importance of additional mine supply when looking at the overall supply-side picture for the market. Blumen points out that the demand side consists of people evaluating what price they want to swap currency for gold and vice versa. As gold is not consumed, the price is therefore a determinant of the motivation to hold gold instead of other assets.

Blumen says that his thinking has been influenced by marginal price theory. They talk about opportunity costs and the Dow/gold ratio, and also discuss whether gold is money and how it limits the power of governments.

This podcast was recorded on 22 January 2013.

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Alasdair started his career as a stockbroker in 1970 on the London Stock Exchange. In those days, trainees learned everything: from making the tea, to corporate finance, to evaluating and dealing in equities and bonds. They learned rapidly through experience about things as diverse as mining shares and general economics. It was excellent training, and within nine years Alasdair had risen to become senior partner of his firm. Subsequently, Alasdair held positions at director level in investment management, and worked as a mutual fund manager. He also worked at a bank in Guernsey as an executive director. For most of his 40 years in the finance industry, Alasdair has been de-mystifying macro-economic events for his investing clients. The accumulation of this experience has convinced him that unsound monetary policies are the most destructive weapon governments use against the common man. Accordingly, his mission is to educate and inform the public in layman’s terms what governments do with money and how to protect themselves from the consequences.

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