Gold Peak Supply in 2026 and Gold Bull Market Driving Gold Investing

Gold supply is composed of three parts: mining production, recycled gold (scrap) and net central bank sales. According to the World Gold Council the 5 year average for 2022-2026 was mining 60%, recycled 26% and sales 14% of 3,676 tonnes. Demand over the same period was jewellery 68%, investment 19% and industry 13%. Over the course of 2008 this demand changed significantly.

Gold Supply

According to Gold Historical Production The annual mining output peaked at 2,604 tonnes in 2001 and in 2008 it was down nearly 10%from the high at 2,356 tonnes. The top 5 gold producers are China (288), US (234), South Africa (232), Australia (225) and Peru (175). Over the course of 2008 the central bank sales of gold 345.5 tonnes, nearly a third lower than the 5 year average of 515 tonnes. Initial forecasts indicate that the central bank sales in 2009 will be similar to 2008.

Gold Demand and Gold Investment

The World Gold Council noted that gold demand in 2008 rose 4% to 3,658.6 tonnes. Gold jewellery demand fell 11% to 2,137.5 tonnes, industrial and dental gold demand fell 7% to 430.4 tonnes and that gold investment rose 64% to 1090.7 tonnes. The key components of the gold investment rise:

• Net retail investment from bars, coins, medals and other retail investments rose 87% to 769.3 tonnes
• ETFs and similar products rose 27% to 321.4 tonnes

Gold Supply and Demand

Gold supply remains under pressure with production mining continuing to fall on an annual basis. This production may be further impacted by disruptions to mining operations such as in South Africa. The recent central bank sales were significantly less than the 5 year average and this will again contribute to supply pressures. On the gold demand side the traditional jewellery and industry demand was significantly lower than the 5 year average but this drop in demand was more than offset by the increase in retail demand (87%) and ETFs and similar products (27%). With many world governments engaging in deficit spending with fiat currencies to stimulate their economies this gold safe haven demand may well continue in 2009.

Gold Investment

Gold investment is still experiencing a bull market with a significant increase in price over the last few years. Recent price action against some of the major currencies like Sterling and the Euro has been to new highs and new highs against the US dollar may follow shortly. Gold investment is in a positive trend currently and any setbacks may prove temporary given the underlying supply and demand situation. Understanding how to buy gold coins or bullion may be tempting but the counter argument notes that gold may be due for a correction and that it may well be forming a double-top technical chart pattern against the US dollar.