As the year unfolds, there has naturally been much focus on the newly resurgent price of gold. But the underlying supply numbers are equally as enticing and suggest the long spoken-of era of “Peak Gold” has finally arrived, and could bolster gold prices going forward.
The World Gold Council’s latest Gold Demand Trends: Full Year 2015 report compiling the latest demand and supply data is full of nuggets to warm a gold bug’s heart.
The fourth quarter of 2015 saw global gold mine production drop 2% to 824.8 tonnes (26.5 million oz.) from 841.2 tonnes (27 million oz.) in the fourth quarter of 2014, or similarly off 2% compared to the third quarter’s 840.9 tonnes (27 million oz.).
The all-time quarterly record for mine production was set in the fourth quarter of 2014 at 841.2 tonnes, a sum almost reached in the third quarter of 2015, prompting GFMS to comment that it expects the new quarterly mine output record will stand “for several years to come.”
Full-year gold mine production in 2015 hit a record 3,186.2 tonnes (102.4 million oz.), up only 1.4% from the previous record of 3,140.5 tonnes (101 million oz.) achieved by the world’s gold miners in 2014.
Remarkably, the fall in mine production in the fourth quarter of 2015 was the first quarterly year-over-year decline since the third quarter of 2008, and the annual growth rate was the weakest since 2008, during the depths of the global recession.
With Papua New Guinea and Brazil being only two of a handful of countries that achieved sizable mine production growth in the fourth quarter, the World Gold Council predicts global mine production will fall further this year as gains are “comfortably countered by numerous declines.”
For instance, China — the world’s largest gold producer — saw its domestic production decline slightly in 2015, with by-product gold from the nation’s copper mines taking a hit as copper output was curbed as copper prices retreated.
Most of the world’s biggest gold mines saw lower output in 2015 in the wake of cost-cutting, lower grades, mechanical failures, and reduced exploration and development: Yanacocha (Newmont–Buenaventura) and Lagunas Norte (Barrick) in Peru; Kumtor (Centerra) in Kyrgyzstan; Pueblo Viejo (Barrick–Goldcorp) in the Dominican Republic; Oyu Tolgoi (Rio Tinto) in Mongolia; Veladero (Barrick) in Argentina; and Ahafo (Newmont) and Obuasi (AngloGold) in Ghana.
Similar, widely reported cutbacks at the majors’ development projects are further narrowing the project pipeline in the coming decade.
With recycled gold shrinking as a supply factor — dropping 12% year-over-year and hitting its lowest level since 2007 — and central banks continuing as net buyers, overall gold supply appears constrained in the years ahead.