Gold price volatility fades as industry matures, says study

The global gold market is “a solid, vital industry” which has reached a mature state, says Metal Market Consultants of Lakewood, Colo., in Gold Situation 1991.

The consulting company, in its fifth annual analysis of the industry, says price volatility has all but disappeared and the market is behaving like a typical commodity metal market for the first time in the metal’s history. “The past three years have seen rationalization and consolidation for the gold mining industry,’ says the report, pointing to the domination by fewer companies and larger producers.

The report examines the 1990 production performance of more than 250 primary gold mines worldwide and the 1990 fiscal year performance of more than 90 mining companies. These mines, it says, accounted for 74% of world production outside of the centrally planned economies, while the companies controlled two-thirds of the production.

Harder times in South Africa led to an increase in the average industry production cost last year; however, Canada and Australia had cost declines and the U.S. retained its position of lowest average cost producer. An increase in mined production was largely the result of expansion at existing mines, the report says. In the U.S., average mine production is more than 30% greater than in 1987; in Australia, the increase is better than 50% since 1988.

Demand and supply are expected to continue to increase but growth in demand will outstrip supply, creating the likelihood of a continuing supply shortfall.

No significant price increase is anticipated for the immediate future. The long-term gold-price projection is that the price will appreciate to more than US$600 per oz. by the year 2000, but will effectively lose ground relative to inflation.

The 1991 report contains separate maps of the major gold-producing areas in South Africa, Canada and the U.S. For more information, contact Metal Market Consultants, P.O. Box 183, CS 27, 8007 W. Colfax Ave., Lakewood, Colo. 80215, U.S.A.