Closing Mines in Africa due to Ebola Could Cause Gold and Silver to Move Rocket Higher

There is already a shortage of gold and silver in the markets without a corresponding increase in the price. I wrote an open letter to the World Gold Council questioning its data on China. If you believe the Shanghai Gold Exchange data, China consumes more than 2,000 tons (2 Kt). In 2011, it consumed only about 1 Kt. In the last two years, China has bought an extra 1 Kt gold—25% of a 4 Kt market. If any country came in and bought 25% of the oil market, the wheat market or the orange juice market, the commodity price would not go down. Obviously, the physical gold market is not manifesting itself in the price changes.

We also see that in silver. Last year, Indians bought an extra 18% of the silver market, yet the silver price declined. That's because the price is being run by someone who has avoided the physicality of the market. I hope the U.S. Mint will announce that it has to stop selling 2014 silver because the demand has picked up so much. That's what I expect the Mint to do if it's running out of silver. It would be interesting if some of these futures players were to stand up and demand delivery, because I don't think the Mint could deliver.

Closing mines in Africa would just exacerbate the supply problem and cause things to finally change dramatically to the upside in prices as people publicly acknowledge the fundamentals.

I'm really focusing on the impact of Ebola on the demand side. The numbers suggest that Ebola will be difficult to contain. The death rate is incredibly high and it is highly contagious. It has already spread to Spain and the U.S. Unfortunately, the powers that be at the Centers for Disease Control (CDC) and the World Health Organization (WHO) have totally misunderstood and understated what's going on. Four weeks ago the U.S. government magnanimously announced it will spend $22 million to build a 25-bed facility in Liberia. What would 25 beds possibly do in Liberia? Sierra Leone has already given up trying to treat people in hospitals. The country could have 100,000 cases in just a few months. The CDC estimated that we could see between 550,000 and 1.4 million cases by Jan. 20 in just those two countries. There aren't enough hospitals or healthcare workers there to deal with those numbers.

Eric Sprott via The Gold Report