Gold still outshining ‘peak gold’ concerns after first yearly production drop since 2008
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World production of gold declined by 1 per cent on year during 2019 – the first yearly production drop in 11 years – which has led some market experts to suggest that world gold production may have peaked.
Global gold production has continued to decline in 2020 after dipping to 3,531 tonnes last year, according to the World Gold Council.
“Experts talk about the concept of peak gold – when we have mined the most we ever can in one year. Some believe we may have already reached that point,” said Jaspar Crawley, head of distribution for the Asia-Pacific region at the World Gold Council.
Crawley downplayed the concept of peak gold production, however, and said this year’s output decline, albeit only marginal, was due to restrictions around the COVID-19 pandemic.
“We expect production of gold to resume in 2021 and with a rise in gold mining activity,” he said.
Australia is the world’s second largest gold producer after China, according to the US Geological Survey.
The World Gold Council has pinpointed four trends that will continue to cast gold in a favourable light for investors in 2021.
They include, low rates of return on bonds, a strong inflow into exchange-traded funds, economic growth in economies recovering from COVID-19, and responsible gold mining.
“With positive news about COVID-19 vaccines coming in now from three different sources, we see real yields becoming a bit more positive,” said Crawley.
“Gold has had a correction recently but, in the medium to long term, it will continue to remain well supported on the back of high fiscal deficits, low or negative interest rates, low or negative real yields and a weaker dollar,” he said.
Investment inflows into gold exchange-traded funds (ETFs) will push gold ETF holdings to a record of nearly 4,000 tonnes in 2020, said the World Gold Council.
“Volatility and expectations of weaker economic growth may result in softer consumer demand in the near term across regions, while economic growth rebounding in countries like China will support long-term [gold] demand,” said Crawley.
In terms of responsible gold mining, the World Gold Council is supporting the gold industry to make a positive contribution to sustainable development, and to ensure its extraction occurs in a way that does not cause or support civil conflict, or human rights infringements.
The price of gold in Australian currency got all the way up to $2,800 per ounce in August, but, has started to roll downhill and was trading around $2,400/oz this week.
“The combination of high-level uncertainty surrounding COVID-19 and the ultra-low interest rate environment led to investors flocking to invest in gold, making it a strong candidate as both a safe haven and a solid investment opportunity,” said Kanish Chugh, head of distribution at ETF Securities, said.
Chugh said the ETF Securities Gold ETF Fund (ASX:GOLD) follows London Bullion Market guidelines and those from the World Gold Council and Organisation for Economic Cooperation and Development.