Thomson Reuters GFMS Gold Survey 2014
Thomson Reuters recently published its 2013 gold survey. This is a comprehensive document that researches and reports on the supply and demand of gold yearly. It is very detailed and quite revealing.
The amounts quoted in this blog come directly from this survey which may be found in theaccompanying link.
This is a very comprehensive document that is well written and a must read for all investors who have an interest in gold. Rather than the widely varying quotes one hears in the media about whether there is more or less gold being produced, bought or sold, this document is well researched and reliable.
The Supply of Gold
In 2013, gold production from mining rose 5.6% to a record 3022 tonnes, which continued a decade long trend.
Gold acquired from scrap reversed the trend of the last 4 years and fell 354 tonnes (21%), probably from
reducing offerings due to the drop in the price of gold paid for scrap.
A net total of 4,254 tonnes of gold became available.
The Demand for Gold
The total demand for gold rose to a record 4,957, an increase of 642 tonnes or 14.8%, mostly attributable to jewelry demand which increased 363 tonnes.
This increase in demand was met through a decrease in EFT holdings, probably as the fear of financial meltdown abated, investors shed the security of gold.
Cost of Producing Gold
The “all in” average cost (excluding write downs and write offs) to produce an ounce of gold in 2013 was US$ 1,205. The average total cash cost was US$ 767.
Thanks to Thomas Reuters for the above noted information.
Demand v Supply
Unlike many other commodities, the supply/demand equation for gold does not work on the simplicity of what is supplied v what is demanded. The great balancing act are the vast stores of gold held by governments and private interests around the world, which become more or less available through many factors, some political, some economic.
What is of particular interest is that the supply of gold is growing at a significantly lesser rate, than the demand for gold. As the investing middle class of people grows in number around the world, the demand for gold continues its growth at a substantial rate. Local fears of currency weakness, local government restrictions on the importing or exporting of currency, local political in-fighting, and many other factors all contribute to a permanently increasing demand for the Yellow Metal.
Cost of Producing Gold
In spite of massive deflation in costs around the world, the actual cash cost of producing an ounce of gold, remains constant at $767.
It is not difficult to conclude, that if there is a fall in the price of gold through Wall St manipulation, or some world crisis, it will be a temporary fall. As the cost of obtaining more gold from the ground remains high, the value of an ounce of gold will also remain high over the long term.
While physical gold may, or may not be, the best way to invest (a subject for another time), the long term price of an ounce of gold, seems likely to increase.
How to Invest in Gold
The major gold producing companies around the world have not proven to be good investments. The combination of their depletion of reserves, their massive and bloated overhead structures, and their foolish investments in other gold producing companies, have all contributed to a lack-lustre share price.
The junior producers, or about to be producers, today are bargains. They have been beaten down over the resource meltdown of the last few years, and some are at fire sale prices. CymorFund has highlighted some of these that have great potential such as:
- Lake Shore Gold
- Premier Gold Mines
- Remarco
- Detour
- and others
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