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How much is being produced ? How much is being 'consumed' ? How is the production shortfall made up ?
Global gold production peaked in 1999 at just over 2,600 tonnes, having risen steadily from a 1980 base of about 1300 tonnes. In 2002 global gold production was running at just under 2,600 tonnes per annum, It is considered that lack of exploration expenditure in the 1990s, coupled with the inherent delays between discovery and production mean than the gold supply will remain inelastic and is likely to reduce slowly over the coming few years.
The geographical breakdown of major global producers (in tonnes) is as follows :-
Country Production South Africa 428.3 United States of America 353.0 Australia 295.7 China 175.0 Canada 153.8 Russia 144.0 Peru 133.0 Indonesia 124.6
Source : http://www.goldsheetlinks.com/goldhist.htm
Gold is not really 'consumed' in the sense that it doesn't get used up, but its demand runs at about 3800 tonnes per year - notably faster than it is being mined (2,600 tonnes).
Gold demand is very much harder to evaluate than production, because while production is concentrated in a relatively small number of mines demand is distributed throughout the world. This makes it difficult for anyone to build a statistically accurate picture. Some of the difficulties are as follows :-
Many buyers of gold are deliberately secretive.
In particular the recycling of scrap does not lend itself to measurement because recycling can utilise scrap supply and meet a demand without going anywhere near a statistician.
Unallocated gold is difficult to measure because it is often notional.
So all figures which report gold demand should be reviewed sceptically.
However, undeniably by far gold's major demand comes from jewellery manufacture [2,727 tonnes in 2002 [source]]. The main other demand comes from retail investment - i.e. from gold's use as a private reserve asset [340 tonnes in 2002]. The amount used in industry, e.g. in electronics and dental surgery combines to a further 340 tonnes.
New potential uses are announced periodically but they suggest an industry PR campaign attempting to persuade people that gold is an industrially valuable commodity. This is not currently true!
The following table summarises six years of global gold demand [tonnes] by usage :-
Uses 1997 1998 1999 2000 2001 2002 Average Jewellery 3311 3181 3151 3187 3064 2727 3103 Retail Investment 459 270 360 156 349 340 322 Industrial 419 392 411 457 357 347 397 Total 4189 3843 3922 3800 3770 3413 3823
The geographical breakdown of demand illustrates its jewellery based nature. Because of its importance in Indian marriage ceremonies India leads the table. The USA is second because of the broad affordability of gold jewellery for a large section of the world's richest society.
Geographical breakdown of the world's gold consumers :
Nations/Regions Consumption 2001 (Tonnes) India 855 USA 409 China 298 SE Asia 285 Europe 260 Saudi Arabia 228 Gulf States 165 South Korea 124 Egypt 120 Turkey 120 Pakistan 119 Japan 109
There is a supply side shortage of gold bullion. Average annual demand over 5 years is about 3800 tonnes and mined supply is a bit less than 2600 tonnes.
With less than 2,600 tonnes supplied from the mines a further 15% [600 tonnes] of annual demand is met from scrap jewellery and bullion and the remaining significant shortage of almost 20% [about 800 tonnes] is being met by sales of central bank gold reserves. More details of the reasoning behind central bank sales follow in the section on gold trading.
Much of the selling is done in relative secret but some of the central banks publish details :-
Germany - sold 12 tonnes of gold in 2001, as commemorative gold coins. [source]
Holland declared a policy of selling 300 tonnes over 5 years from 1999. The Dutch do not advertise their sales in the market as they happen. They have sold 100 tonnes in year 1. 27 tonnes in year 2. 9 tonnes in year 3, and 33 tonnes in year 4 (so far). [source]
Portugal sold 15 tonnes in December 2002 and 30 tonnes in February 2003, apparently as a result of options taken out in 1997/8. [source]
Switzerland plans to sell 1300 tonnes. They have sold annual amounts of 120, 220 and 283 tonnes, project a further 283 tonnes in 2003 and will cease selling after 2004. [source]
The UK has sold 395 tonnes in a public auction programme which finished in March 2002.[source]
Next gold FAQs section - 'Trading Introduction'
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