In 2009 it was hard to buy gold without paying a huge premium. It also took several weeks to delivery. Dealers were frustrated because they couldn’t keep up with demand. It was the start to one of the most powerful bull markets in gold. And now it’s beginning all over again.

You often read things like “There’s plenty of above-ground gold” or “global production is on the rise”, but when reality kicks in, there’s never enough gold when a new crisis emerges. That’s what’s happening right now.

The gold market is small

People tend to forget how small the gold market really is. The Disney market capitalization is equal to a full year gold supply. Exxon Mobil is twice as big, even after the steep fall in its stock price, Apple is three times bigger.

Pension funds and gold

But the real money is to be found at pension funds. A typical pension fund holds 0,30% of its assets in gold (0,15% bullion – 0,15% gold mining shares), that’s like $106 billion invested in the gold market. When global market funds are looking for a safe haven and gold shines like 2009 – 2011 they could easily double their investments.

This means they can buy every single company in the XAU and every share of GDX and GDXJ. A $25 billion extra and they can buy every major gold producer to. And this is only for global pension funds, there are also hedge funds, sovereign wealth funds, insurance companies, mutual funds, ETF’s,… and retail investors.

What about silver?

When you thought gold was a small market, look at silver. There’s only 25 million ounces of silver on the COMEX and that’s worth only $400 million. $8 billion went into gold funds in February, you couldn’t begin to get that into silver in a year. The silver market is really, really tiny.

Some of the world’s largest primary silver producers are reporting record mining years. That’s why silver is lagging gold. But these are “high grading” mines. If you dig out all of the easy product this year that leaves the harder, more expensive stuff next year.