While nickel and lithium battle headwinds and the price of uranium shoots through the roof, gold keeps on keeping on. Australian Resources & Investment takes a closer look.
Recent months have been marked by soaring highs and arduous lows for some minerals and metals, but through it all, gold has remained strong.
In fact, the precious metal has been consistently trading above the $US1900 per ounce mark for almost six months straight.
The London Bullion Market Association (LBMA) gold price averaged about $US1940 an ounce in 2023 – 7.9 per cent higher than in 2022.
Gold cracked the $US2000 per ounce mark in December and is now trading above $US2350 – a new record high for the commodity.
With so much volatility elsewhere in the market, why is gold enjoying this singular success? The short of it is that gold does well when the world does not.
Consumption
Despite the price of gold rising, global demand decreased 5.3 per cent year-on-year to 4400 tonnes in 2023.
This fall was largely driven by a 15 per decline in investment demand, with central bank demand and technology consumption also lower.
Official sector (central banks and other government financial institutions) buying declined by 4.1 per cent year-on-year to 1037 tonnes in 2023. Despite the fall, this still amounted to the second-highest annual total in the World Gold Council’s records, and so demand was quite strong, relatively speaking.
China was the largest gold buyer in 2023, adding 225 tonnes of gold to its reserves, with the National Bank of Poland coming in second place with 130 tonnes.
Demand for gold rose marginally in the jewellery sector, including by 10 per cent in China.
World gold consumption is expected to grow by 2.7 per cent a year from 2026 to reach 4700 tonnes in 2029. This is expected to be largely driven by rising jewellery consumption and increases in investment demand and high-tech manufacturing.
Cost
According to the Office of the Chief Economist’s latest Resources and Energy Quarterly, gold price strength over the year was driven by strong safe-haven demand, given economic uncertainty, financial stability concerns in the US banking sector and geopolitical risks.
Failing bond yields, a weak US dollar, and declines in US Treasury yields all served to push the price of gold higher.
Also driving up the cost was the US Federal Reserve’s December economic projections surprising markets with rate cuts in 2024.
Prices were also supported by strong central bank buying throughout the year.
The price of gold is expected to hit record highs in 2024 and remain elevated, despite downward pressure from a strengthening US dollar.
“Prices are forecast to remain steady throughout 2024, centred around a scenario where monetary easing commences in the US and other major economies over the second half of the year,” the REQ said.
“Prices are then expected to receive a further boost leading into 2025.
“Prices are forecast to average US$2030 an ounce in 2025, supported by monetary easing and continued strength in demand from both investors and central banks.”
In the long-term, the price of gold is expected to average about $US1950 an ounce in 2029.
Gold production to increase
Australia is well positioned to capitalise on this stubborn metal’s long-term prospects. National gold production is expected to be bolstered by several major mine expansions.
Pantoro is ramping up production at its Norseman project, which has a current mineral resource is 4.8 million ounces of gold with an ore reserve of 973,000 ounces.
Calidus’ Warrawoona project, Genesis Minerals’ Ulysses project, and Bellevue Gold’s namesake project are also on the way.
Westgold’s 1.4-million-tonnes-per-year Great Fingall project continues to be developed and is set to achieve first production in 2024.
Northern Star’s recently expanded Thunderbox mill ramped up to reach nameplate capacity in 2023, resulting in production increasing by 28 per cent year-on-year to 5.9 million tonnes.
And there are many, many more on the way.
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