LAWRIE WILLIAMS: Top 20 Gold mining countries – Russia now No.2

London-based consultancy, Metals Focus, which publishes a suite of reports focused on the precious metals sector, looks as if it has become the go-to organisation for the publication of data on the sector.  For example it now provides data to the World Gold Council which the latter utilises in its quarterly Gold Demand Trends reports and also the data for the Washington, DC-based Silver Institute’s annual silver survey.  Thus Metals Focus’ annual Gold Focus and Silver Focus reports are nowadays very much the prime data sources o the precious metals sector.  The Group also publishes an annual platinum group metals report as well as a number of specialised publications on various  focused aspects of the industry. – See the Metals Focus website for details.

This past week, Metals Focus has released its latest flagship publication – the 2020 Gold Focus report, which covers the supply and demand of the gold sector over the past year in minute detail in a 105=page publication which it launched on Wednesday in special webinar-type presentations with timings and participants aimed at China/Singapore, South Asia/Middle East and Europe/North America.

Metals Focus comments that the COVID-19  crisis has had profound implications for gold.   This is primarily due to a resulting sharp economic contraction with an uncertain outlook encouraging investment in safe haven assets. The monetary and fiscal policy response seen around the world, unprecedented in both magnitude and structure, have also benefited gold, fuelling strong inflows of institutional money. This has added to the positive momentum for gold seen last year after several years of apparent mainstream investor indifference.

The change in US monetary policy was the catalyst for this turnaround. Partly in an effort to mitigate risks to growth from the US-China trade war, the Fed cut interest rates three times in the second half of 2019. That helped gold rally from the mid-$1,200s in early May to its September peak for the year of $1,557. More recently, in May of this year, gold topped $1,765 amid COVID-19 anxieties, its highest level since October 2012.  And in the past week it regained this kind of level after a hiatus period which took it down to below $1,700.  The renewed institutional interest in gold as an asset class has also been demonstrated by record inflows into global gold ETFs so far this year which seems to have more than countered apparent COVID-19 related demand weakness in some of the yellow metal’s traditionally strong markets like China and India a nd a fall in central bank accumulations, primarily due to the Russian central bank halting its gold buying programme.

Metals Focus calculates that gold supply rose in 2019, by around 2% due to an increase in recycled gold, but partly offset by a small downturn of around 0.8% in the supply of global new mined gold.  It is thus interesting to note the consultancy’s estimates of country-ny country production – see table for the top 20 gold mining nations below.

 

Table:  Global Top 20 gold mining nations 2019/2018 (tonnes)

Rank

Country

2019 Output

20 18 Output

%  Change

1

China

383

404

-5.2%

2

Russia

329

295

+11.5%

3

Australia

325

317

+2.6%

4

USA

200

225

-11.0%

5

Canada

183

189

-3.2%

6

Peru

143

158

-9.0%

7

Ghana

142

149

-4.5%

8

South Africa

118

128

--7.7%

9

Mexico

111

118

-5.9%

10

Brazil

107

97

+10.6%

11

Uzbekistan

104

100

+4.0%

12

Indonesia

83

141

-41.6%

13

Kazakhstan

77

68

+12.2%

14

Sudan

77

77

-

15

Papua New Guinea

73

69

+5.9%

16

Mali

71

61

+16.0%

17

Burkina Faso

62

62

-

18

Argentina

53

59

-10.4%

19

Tanzania

48

48

+0.4%

20

Colombia

46

49

+7.5%

 

Others

797

752

+6.0%

 

Total

3,534

3,561

-0.8%

Source: Metals Focus, lawrieongold

 

Particularly of note will have been the further decline in Chinese gold production and the rise of Russian output, overtaking that of Australia, into the No.2 position, although the latter’s gold production also rose in 2019.  At the current rate of Chinese gold output decline and Russian increases, Russia could become the world’s No.1 gold miner within the next few years.  Already reports suggest that Russia’s Q1 2020 gold production was sharply higher year on year, but 2020 gold production figures everywhere will be adversely affected by temporary mine shutdowns due to the COVID-19 virus.  Expect 2020 gold production to decline – but by how much is uncertain.  We will know more as the year progresses.

Metals Focus estimated global gold demand as falling by 9% mainly as a result of declines in physical investment and jewellery, with smaller losses elsewhere.  Again the COVID-19 virus pandemic is likely to lead to further falls in global gold demand in the current year – the big question is whether safe haven investment demand, currently riding high, will counterbalance virus-related demand falls worldwide.  Thus the consultancy takes a fairly cautiously positive view on gold price progress this year and next – somewhat counter to some of the hugely bullish forecasts by some of the more outspoken gold commentators.

Thus Metals Focus sees the gold price average for the current year coming out at $1,700 – below the current level.  But bear in mind this is an average price.  Given the gold price started the year at only around $1,530 the $1.700 average prediction leaves plenty of scope for the spot price to rise to $1,800 or above during the remainder of the year.

The consultancy’s actual comment on the price going forwards is as follows: “Looking ahead we are confident that the macroeconomic backdrop will continue to be positive for gold for the remainder of this year. Even under the most optimistic scenarios for an economic recovery, risks will abound and ultra-loose monetary and fiscal policy will continue. We thus expect professional investors will remain buyers. This is the main assumption behind our forecast that the price will test all-time-highs before the end of the year and the average for 2020 will be 22% higher y/y, at $1,700.”

For a conservative consultancy prediction you can’t get much more bullish than that!

26 Jun 2020

About the author

Lawrence Williams

Lawrence (Lawrie) Williams is a well known London-based writer and commentator on financial and political subjects, but specialising in precious metals news and commentary. He is a qualified and experienced mining engineer having graduated in mining engineering from The Royal School of Mines, a constituent college of Imperial College, London - recently described as the World’s No. 2 University (after MIT).

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