The World Gold Council said that in the second quarter of 2015, demand dropped 12% to a six-year low of 914.9t tonnes and supply was down by 5% year on year. The jewellery sector recorded the biggest drop in demand, with the second quarter 81.1t down, the fall mainly caused by the weakness in the key markets of India and China.
But the council notes that prospects for the remainder of the year are more encouraging, with consumers responding to the softening prices.
This is encouraging for the world’s second largest gold producer, Australia, which recorded a rise in output in the June quarter.
Production was 72 tonnes, a rise of nearly 3t (or 4%) over the March 2015 quarter, according to Australian gold guru Sandra Close of Surbiton Associates.
First gold pours
As the Australian dollar dropped against the US currency, so did the outlook for gold producers rise.
The Australian calendar has also been peppered with “first gold pour” stories throughout 2015:
March: Hanking Gold Mining achieved production at its Western Australian Southern Cross operations after pouring first gold at the Cornishman. The inaugural pour produced two gold bars of 14kg and 6kg – both of which were sold and taken to the Perth Mint on the day.
March: A1 Consolidated Minerals announced that the Maldon gold treatment plant had poured its first gold – since coming under the management of the junior gold exploration company – on March 25. The first gold doré bar, weighing 146.3oz (4.552kg), was produced from processed low-grade stockpiled ore.
The company aims to start producing at a rate of 30,000oz per annum.
June: ABM Resources achieved its first gold pour in mid-June at the Old Pirate gold deposit in the Northern Territory. Ore from the deposit, part of the Twin Bonanza project, was processed through the Coyote gold plant, leased from Tanami Gold. Old Pirate contains 640,000oz gold at 11.7 grams per tonne gold and the company says it expects to produce 50,000-60,000oz gold at low all-in sustaining costs of $A750-870 an ounce.
September: Pacific Niugini poured its first gold from the Nicolsons mine near Halls Creek in Western Australia following the retrieval of 110 ounces from the gravity circuit during the first week of the month.
September: Kidman Resources poured its first gold at the Burbanks mine near Coolgardie in Western Australia, a project which it had acquired earlier in the year. It may have been a first for Kidman, but the project has been around for 123 years following its discovery by prospector Arthur Bayley discovered it – igniting one of the country’s biggest gold rushes.
September: Australian Securities Exchange-listed Sumatra Copper and Gold poured its first gold at its Tembang gold project in southern Sumatra, Indonesia, towards the end of the month. The maiden gold bar weighed in at 3703.3g (119oz) comprising gold and silver recovered from the leach circuit. The gold was sourced predominantly from low-grade ore feed as part of the commissioning process to test the crushing and CIL circuit.
October: MetalsX poured its first gold before the end of October from the Bluebird plant at its Central Murchison gold project.
Soft dollar ‘a blessing’
Surbiton’s Close makes the point, in her August 30 report, that despite lower gold prices in US dollar terms, the depreciation of the Australian dollar is proving “a blessing” for Australian gold producers, Close said. “Although the gold price averaged $US1192 per ounce in the June quarter, the Australian dollar gold price averaged $A1,532 per ounce. It’s reminiscent of what happened in 2008.”
In 2008, gold prices fell from more than $US1000 per ounce in March to less than $US730 per ounce in November. However, the Australian dollar exchange rate benefited Australian producers when it fell by more than US 21c to US 61c over the same period. The overall effect was that the gold price in Australian dollar terms was little changed.
Close goes on: “I often wonder why local investors place so much importance on the US dollar gold price. It is the Australian dollar gold price that matters to local producers as their costs are mostly in Australian dollars. Focus [should be] on the margin. I find it quite bizarre to see the share prices of Australian-domiciled gold producers fall in response to a decline in the US dollar gold price when, due to a change in the exchange rate, the Australian dollar gold price has actually risen.”
Pipeline has shrunk
However, the World Gold Council notes that while mine production might have edged higher “pipeline” activity has shrunk.
“Mine production increased by 3% to 786.6t in the second quarter and growth was scattered around the globe as mines in a number of countries were able to generate minor increases in output.” Indonesia made the largest contribution to the growth in mine production and there was increased production from Goldstrike and Twin Creeks mines in Nevada.
“In Africa, continued ramping up of the Kibali mine (Democratic Republic of Congo) and Otjikoto (Namibia) were positive for those countries.”
Ghana was down due to a decline in output from Newont’s Ahafo mine.
Pressure will remain
Some experts are less bullish and predict that the gold is set to remain under pressure.
Increased supply, weakening demand and uncertainty over US interest rates is expected to keep gold below $US1100 an ounce in the current quarter.
According to Thomson Reuters’ GFMS Gold Survey for the September quarter, the timing of the first US rate rise in a decade has weighed on sentiment for gold, despite broader global volatility.
Gold is tipped to trade below $1100/oz in the current quarter for an average of $1159/oz for the year
“Gold is set to remain under pressure until there is more clarity on the timing and the scale of US rates normalisation,” GFMS said.
“Among other bearish factors are low inflation expectations and generally weak investor sentiment towards precious metals.
“Gold may draw some support from a seasonal uptick in physical demand towards year-end, and the prospects look brighter for the next year.”
GFMS noted that exchange-traded fund gold holdings dropped by 61 tonnes in the September quarter, though buying had picked up this month.
Physical gold demand increased by 7% year-on-year in the quarter, due to an increase in net official sector buying and a high level of retail purchases of bars and coins.
Chinese demand increased to 196t for the quarter due to safe haven buying after stock market volatility, seasonal demand, the depreciation of the yuan, and central bank acquisitions.
India remains the largest consumer of gold, with jewellery consumption up 5% to 193t in the September quarter.
Mine production was flat, but scrap supply rose by 3%, leading to a slight rise in supply.
GFMS puts the third quarter surplus at 51t.
Total global consumption for the first nine months was 642t gold.
Meanwhile, Australia’s oldest gold refinery has united with the gold industry’s newest association to promote the critical role the precious metal sector plays in the Western Australian economy.
Perth Mint chief operating officer David Woodford said the Perth Mint was proud to partner with the Gold Industry Group representing the interests of gold producers, explorers, prospectors and suppliers to the trade.
“We welcome this opportunity to partner with the Gold Industry Group to further the understanding of the broader gold industry, the drivers of demand for physical gold, and the forces shaping the current market,” Woodford said.
“Refining gold since 1899, the Perth Mint is one of the world’s leading precious metals businesses and is a reminder of the State’s golden beginnings and the continuing importance of gold,” Woodford said.
Gold Industry Group chairman Norman Moore said he was delighted to welcome the Perth Mint as a major partner.
“We are looking forward to working with the Perth Mint to strengthen our efforts to build a united voice for the gold industry in Western Australia,” Moore said.
“Together, we can really make a difference to promote the social and economic contribution the sector makes and ensure the long term sustainability of the industry.”
Western Australia’s gold mines produce more than 70% of Australia’s gold, and the industry directly employs more than 20,000 Western Australians.
In 2014 gold was the second most valuable mineral in Western Australia with production sales of 8.7 billion accounting for 85% of all mineral sales.
Gold is WA’s third largest export industry, totalling $13 billion in exports last year.
More than 70% of Australian gold royalties are paid to the government of Western Australia and in 2014 more than $300 million in state royalties and taxes were paid.
The Gold Industry Group is a single commodity, member-based, independent industry body governed by a board of directors.
The group represents the “interests of gold producers, explorers, prospectors and suppliers in Australia to achieve a united voice for the gold industry”.
LEADERSHIP
Forget the greenback, Aussie dollar gold looks good
GOLD UPDATE
The World Gold Council said that in the second quarter of 2015, demand dropped 12% to a six-year low of 914.9t tonnes and supply was down by 5% year on year. The jewellery sector recorded the biggest drop in demand, with the second quarter 81.1t down, the fall mainly caused by the weakness in the key markets of India and China.
But the council notes that prospects for the remainder of the year are more encouraging, with consumers responding to the softening prices.
This is encouraging for the world’s second largest gold producer, Australia, which recorded a rise in output in the June quarter.
Production was 72 tonnes, a rise of nearly 3t (or 4%) over the March 2015 quarter, according to Australian gold guru Sandra Close of Surbiton Associates.
First gold pours
As the Australian dollar dropped against the US currency, so did the outlook for gold producers rise.
The Australian calendar has also been peppered with “first gold pour” stories throughout 2015:
March: Hanking Gold Mining achieved production at its Western Australian Southern Cross operations after pouring first gold at the Cornishman. The inaugural pour produced two gold bars of 14kg and 6kg – both of which were sold and taken to the Perth Mint on the day.
March: A1 Consolidated Minerals announced that the Maldon gold treatment plant had poured its first gold – since coming under the management of the junior gold exploration company – on March 25. The first gold doré bar, weighing 146.3oz (4.552kg), was produced from processed low-grade stockpiled ore.
The company aims to start producing at a rate of 30,000oz per annum.
June: ABM Resources achieved its first gold pour in mid-June at the Old Pirate gold deposit in the Northern Territory. Ore from the deposit, part of the Twin Bonanza project, was processed through the Coyote gold plant, leased from Tanami Gold. Old Pirate contains 640,000oz gold at 11.7 grams per tonne gold and the company says it expects to produce 50,000-60,000oz gold at low all-in sustaining costs of $A750-870 an ounce.
September: Pacific Niugini poured its first gold from the Nicolsons mine near Halls Creek in Western Australia following the retrieval of 110 ounces from the gravity circuit during the first week of the month.
September: Kidman Resources poured its first gold at the Burbanks mine near Coolgardie in Western Australia, a project which it had acquired earlier in the year. It may have been a first for Kidman, but the project has been around for 123 years following its discovery by prospector Arthur Bayley discovered it – igniting one of the country’s biggest gold rushes.
September: Australian Securities Exchange-listed Sumatra Copper and Gold poured its first gold at its Tembang gold project in southern Sumatra, Indonesia, towards the end of the month. The maiden gold bar weighed in at 3703.3g (119oz) comprising gold and silver recovered from the leach circuit. The gold was sourced predominantly from low-grade ore feed as part of the commissioning process to test the crushing and CIL circuit.
October: MetalsX poured its first gold before the end of October from the Bluebird plant at its Central Murchison gold project.
Soft dollar ‘a blessing’
Surbiton’s Close makes the point, in her August 30 report, that despite lower gold prices in US dollar terms, the depreciation of the Australian dollar is proving “a blessing” for Australian gold producers, Close said. “Although the gold price averaged $US1192 per ounce in the June quarter, the Australian dollar gold price averaged $A1,532 per ounce. It’s reminiscent of what happened in 2008.”
In 2008, gold prices fell from more than $US1000 per ounce in March to less than $US730 per ounce in November. However, the Australian dollar exchange rate benefited Australian producers when it fell by more than US 21c to US 61c over the same period. The overall effect was that the gold price in Australian dollar terms was little changed.
Close goes on: “I often wonder why local investors place so much importance on the US dollar gold price. It is the Australian dollar gold price that matters to local producers as their costs are mostly in Australian dollars. Focus [should be] on the margin. I find it quite bizarre to see the share prices of Australian-domiciled gold producers fall in response to a decline in the US dollar gold price when, due to a change in the exchange rate, the Australian dollar gold price has actually risen.”
Pipeline has shrunk
However, the World Gold Council notes that while mine production might have edged higher “pipeline” activity has shrunk.
“Mine production increased by 3% to 786.6t in the second quarter and growth was scattered around the globe as mines in a number of countries were able to generate minor increases in output.” Indonesia made the largest contribution to the growth in mine production and there was increased production from Goldstrike and Twin Creeks mines in Nevada.
“In Africa, continued ramping up of the Kibali mine (Democratic Republic of Congo) and Otjikoto (Namibia) were positive for those countries.”
Ghana was down due to a decline in output from Newont’s Ahafo mine.
Pressure will remain
Some experts are less bullish and predict that the gold is set to remain under pressure.
Increased supply, weakening demand and uncertainty over US interest rates is expected to keep gold below $US1100 an ounce in the current quarter.
According to Thomson Reuters’ GFMS Gold Survey for the September quarter, the timing of the first US rate rise in a decade has weighed on sentiment for gold, despite broader global volatility.
Gold is tipped to trade below $1100/oz in the current quarter for an average of $1159/oz for the year
“Gold is set to remain under pressure until there is more clarity on the timing and the scale of US rates normalisation,” GFMS said.
“Among other bearish factors are low inflation expectations and generally weak investor sentiment towards precious metals.
“Gold may draw some support from a seasonal uptick in physical demand towards year-end, and the prospects look brighter for the next year.”
GFMS noted that exchange-traded fund gold holdings dropped by 61 tonnes in the September quarter, though buying had picked up this month.
Physical gold demand increased by 7% year-on-year in the quarter, due to an increase in net official sector buying and a high level of retail purchases of bars and coins.
Chinese demand increased to 196t for the quarter due to safe haven buying after stock market volatility, seasonal demand, the depreciation of the yuan, and central bank acquisitions.
India remains the largest consumer of gold, with jewellery consumption up 5% to 193t in the September quarter.
Mine production was flat, but scrap supply rose by 3%, leading to a slight rise in supply.
GFMS puts the third quarter surplus at 51t.
Total global consumption for the first nine months was 642t gold.
Meanwhile, Australia’s oldest gold refinery has united with the gold industry’s newest association to promote the critical role the precious metal sector plays in the Western Australian economy.
Perth Mint chief operating officer David Woodford said the Perth Mint was proud to partner with the Gold Industry Group representing the interests of gold producers, explorers, prospectors and suppliers to the trade.
“We welcome this opportunity to partner with the Gold Industry Group to further the understanding of the broader gold industry, the drivers of demand for physical gold, and the forces shaping the current market,” Woodford said.
“Refining gold since 1899, the Perth Mint is one of the world’s leading precious metals businesses and is a reminder of the State’s golden beginnings and the continuing importance of gold,” Woodford said.
Gold Industry Group chairman Norman Moore said he was delighted to welcome the Perth Mint as a major partner.
“We are looking forward to working with the Perth Mint to strengthen our efforts to build a united voice for the gold industry in Western Australia,” Moore said.
“Together, we can really make a difference to promote the social and economic contribution the sector makes and ensure the long term sustainability of the industry.”
Western Australia’s gold mines produce more than 70% of Australia’s gold, and the industry directly employs more than 20,000 Western Australians.
In 2014 gold was the second most valuable mineral in Western Australia with production sales of 8.7 billion accounting for 85% of all mineral sales.
Gold is WA’s third largest export industry, totalling $13 billion in exports last year.
More than 70% of Australian gold royalties are paid to the government of Western Australia and in 2014 more than $300 million in state royalties and taxes were paid.
The Gold Industry Group is a single commodity, member-based, independent industry body governed by a board of directors.
The group represents the “interests of gold producers, explorers, prospectors and suppliers in Australia to achieve a united voice for the gold industry”.
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