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  • How much is being produced ?
  • How much is being 'consumed' ?
  • How is the production shortfall made up ?
  • How much is being produced ?

    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 :-

    South Africa428.3
    United States of America353.0

    Source :

    How much is being consumed?

    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 :-

    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 :-
    Jewellery33113181315131873064 27273103
    Retail Investment459270360156349340322


    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 Consumption2001 (Tonnes)
    SE Asia285
    Saudi Arabia228
    Gulf States165
    South Korea124


    How is the production shortfall made up ?

    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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