Gold Inventory

What is gold inventory? Well, inventory usually means goods available for sale or raw materials used to produce these goods. In other words, it is the goods and materials that companies hold for the ultimate goal of resale. Hence, we could say that all gold held by jewelers, dentists and technology companies is gold inventory. The same applies to gold coins or gold bars held by bullion dealers.

However, we know that most of gold is used not in jewelry or industry, but as a store of wealth, or monetary asset. It means that practically all gold is available for sale, at least for a certain sale. Our point is that gold is the ultimate money, or the source of liquidity. Therefore, it behaves like currency, so the concept of inventory does not strictly apply to gold. Or, we can say that all gold acts as an inventory – this is the idea of currency or the store of wealth, after all. 

But the term “gold inventory” is also used in different senses. First, people say about gold above-ground holdings. Indeed, contrary to other metals, nearly all gold in the world that has ever been mined is still in existence. As of 2014, a total of 183,600 tons of gold was in existence above ground. This is why gold has a comparatively high stock-to-flow ratio. Because of this huge inventory, the mining production is only a tiny fraction of the total gold stock and, thus, does not drive the gold price.

Second, the central banks or the treasuries hold gold reserves to prove their credit worthiness and to have some backup in times of crises. The same apply to other entities: generally, it is recommended to hold a certain percentage of its portfolio in precious metals as a portfolio diversifier and insurance against tail risks.

Third, the gold exchanges, such as Comex, hold some gold in warehouses as inventory needed to secure the settlement of the gold futures, as some of them may call for physical delivery (the bullion held in these warehouses is divided into two categories: eligible and registered gold). All of the analyzed meanings of “gold inventory” are presented in the table below.

_{Table 1: Different meanings of gold inventory}