The latest update on the gold market by Gold Fields Mineral Services indicates that new records were established in 1995.
On the demand side, fabrication and bar-hoarding accounted for some 3,550 tonnes of offtake, well above the previous level of 3,416 tonnes set in 1992.
The higher level of physical demand is attributed to the continuing growth in jewelry offtake in India, as well as increased fabrication demand in the Middle East.
The increased demand for gold was met neither by scrap recycling nor by mine production (both of which declined modestly), but, rather, by official sector disposals in the first half and by a surge in the sales of borrowed gold as producer-hedging rose to its highest level ever in the second half.
The accelerated supply, resulting from the increase in mining company forward-selling positions, amounted to an estimated 511 tonnes in 1995 (another record). In addition, a net sale of some 135 tonnes of borrowed gold was made, which resulted from the change in the delta hedge against both Central Bank and production option positions.
Focusing on the forward sales element, Gold Fields indicates that the continuous increase in positions since the first quarter of 1994 has not only been substantial, but that the amounts involved in each period indicate a rising trend.
In spite of the record level of demand, the gold price remained within the narrowest trading range recorded (6% of the average price) since the gold market was freed in 1968.
Gold Fields also reported that mine output fell for the second consecutive year. As a result, world production in 1995 was 1% lower, at 2,268 tonnes. Most of the decline occurred in South Africa, where production fell by 10% to 523 tonnes, the lowest annual total in the past 40 years.
The recycling of old gold scrap proceeded at essentially unchanged levels in 1995, the estimated decline in the total being less than 1%.
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