JOHANNESBURG (miningweekly.com) – Despite the lower gold price, global mine production continued to grow last year, increasing 2% to an all-time high of 3 109 t, the latest survey by GFMS showed.
However, total physical demand fell 19% in 2014 as all areas, with the exception of official sector purchases, registered declines.
GFMS attributed the growth in output to production strategies aimed at reducing unit costs and production growth from large projects – the “legacy of investments” made during high-price periods – brought online or ramped up.
Global scrap supply declined almost 11% last year to an estimated 1 122 t – in line with the 10.3% fall in the dollar gold price – with East Asia bucking the trend with growth of 4%.
“Jewellery scrap from India declined 26% year-on-year, while total recycling in the Middle East retreated 14% largely as a result of the weaker price profile,” the GFMS survey showed.
Meanwhile, restrained demand in China, and to some extent, East Asia and the Middle East, had dragged jewellery fabrication, which fell 11% to an estimated 2 133 t in 2014.
The survey revealed that jewellery fabrication in the rest of the world, excluding China, increased 3% following a 14% surge in demand to a record high of 690 t from India and a modest recovery in some parts of the developed world.
North America experienced a 3% year-on-year increase in jewellery fabrication last year, driven by a modest 3% increase in demand in the US, which accounted for over 80% of the region’s total.
GFMS noted that industrial demand had also declined, falling 5% to an estimated 389 t during the year under review, owing to continued substitution in the electronics industry and weak economic recovery in some regions.
The survey’s total identifiable investment, defined as the sum of physical bar investment, all coins and exchange-traded fund (ETF) inventory changes, recorded a 2% rise to 905 t, owing to a slower pace of ETF outflows from 880 t in 2013 to 152 t in 2014.
“Retail purchases of bars and coins contracted by 40%, as speculative interest from key Asian markets was largely absent last year. Despite such a dramatic drop, last year’s demand, at 1 057 t, was still the fifth highest on record,” GFMS said.
While gold prices in 2015 were expected to drop, with a first-half average of $1 180/oz, demand from the retail investment sector, namely physical bar and coin purchases, would remain muted, with an expected 4.2% decline during the year.
“Matching this, we expect continued redemptions from ETF holdings as gold and, more generally, commodities remain out of favour with many in the Western investment community. Likewise, investment grade high-carat jewellery will also suffer, with a forecast decline in jewellery demand of 1.3% for the first half of 2015,” the research report outlined.
A combination of lower scrap and higher mine output were forecast to see 2 053 t of supply enter the market in the first half of 2015, while a surplus of 97 t for the first six months was expected. Including ETF redemptions, this would reach 172 t.