Gold: The Most Precious of Metals (Part 3)

Gold: The Most Precious of Metals (Part 3)

Gold production in many countries, especially in developing or emerging markets, has declined in the last few years, as the depressed price level of gold has led many mining operations to shut down or downsize significantly. In part 3 of our series on gold, we begin with a section explaining why the price of gold has been trending upward since the turn of the year. This is followed by a section on the history and news on gold production in each of the top gold producing economies globally in 2015 according to the United States Geological Survey as well as the economic outlook for each according to the FocusEconomics Consensus Forecast.

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Why gold prices are rising

In part 2 of this blog post series, we included a section on how gold is used to preserve wealth. Because of gold's history as a standard of value in monetary systems, it has left a lasting legacy in today's international monetary system. Historically speaking, those that have held gold have been able to survive crises. This is something that still rings true to this day. During times of economic or financial turbulence, individuals and even foreign central banks look to acquire gold for risk aversion because unlike most other commodities and asset classes, gold tends to preserve its value. 

People generally don't lose confidence in gold, but they do lose confidence in economies and currencies. As a result, the price of gold tends to give us an idea of when a financial crisis is about to hit. As uncertainty begins to fester and sentiment begins to turn negative, confidence in currencies is lost and investment in hard assets increases. Gold’s price, unique to most other commodities, is almost exclusively driven by demand - as demand for gold increases, so does the price.

During the global financial crisis the price of gold skyrocketed. The average price of gold per troy ounce in 2007 was USD 696.77 and by 2012 it was USD 1668.69. As global economies began to slowly but surely come out of the crisis the price of gold decreased. In 2015, the average price of gold was USD 1159.8 marking a 30 percent drop in 4 years. However, volatility in stock markets and uncertainty over the health of the world economy since the beginning of 2016 has seen prices creep up once again as safe haven investments have increased. 

According to a Wall Street Journal report, gold tallied its best quarterly gain in over 30 years in Q1, as the global economy grew at its slowest pace in almost three years. Weaknesses that plagued emerging markets in 2015 carried over into this year while dynamics among developed countries remained weak. The global economy expanded 2.5% annually in Q1, which was below the 2.6% expansion tallied in Q4. According to the FocusEconomics Consensus Forecast Commodities, in March of this year the price of gold rose to over USD 1250 per troy ounce, which marked the highest price in over a year after falling to a multi-year low in December. The price hit an over one-year-high at the beginning of this month and on 13 May, gold closed the trading day at USD 1,271 per troy ounce, which was up 1.9% from the same day in April. In addition, the price was 19.6% higher on a year-to-date basis and was up 4.7% from the same day last year. 

Since gold pays nothing to its holders and struggles to beat yield-bearing assets when borrowing costs are high, low interest rates tend to support gold prices. Shifts in the value of the US dollar also tend to influence the price of gold, as it is globally priced in US dollars. After the US Federal Reserve left rates unchanged in April, it was believed that the Fed would hold rates again in June. The value of the US dollar began to fall, making gold cheaper for foreign investors and consequently helped drive up the price of gold. 

Macquarie Group analyst Matthew Turner, as quoted in a Reuter’s report, stated that the increase in the gold price is down to, “the shift in Fed stance, the weaker dollar and the prospect of inflation."

Speculation in the market of late is that the Fed may raise rates in the June after all, which has seen the value of the dollar rise and the price of gold fall slightly. However, Boris Schlossberg of BK Asset Management isn't so sure that the gold price rally is over. It's possible that the the FOMC will decide to adopt a wait and see approach until some time after the Brexit vote in June causing prices to rise farther. Fears over the looming Brexit vote will likely spark safe haven buying and depending on the outcome, demand for gold could increase even more.

Our forecasts project the price coming down slightly later this year, however the higher price should see an uptick in gold production in the coming future. However, as was mentioned previously, if the price continues to rise this could mean a crisis is on the horizon.

With that in mind, let’s take a look at the world’s top-gold-producing economies according to the USGS including history and news on gold production in each country, followed by their current economic outlooks for 2016.

 


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Top Gold Producing Countries 2015 -
History and Economic Outlook

Australia

The discovery of gold played a large role in Australia’s history starting with the Bathhurst Gold Rush in 1851. Gold finds in other parts of Australia following the Bathhurst Gold Rush brought millions of migrants to Australia. In the 1890s gold was found in Western Australia in Coolgardie and Kalgoorlie. According to The Australian Atlas of Mineral Resources, Mines, and Processing Centres, 60% of gold mined in Australia today comes from that region. Gold is also mined in all of the other Australian states as well as the Northern Territory.

Mining is a significant primary industry in Australia and a major contributor to the country’s economic growth. During the commodities super cycle starting last decade, Australia thrived, but since the commodity bubble burst, the economy and specifically the mining sector has suffered considerably. According to The Australia Institute, 22,000 mining positions were axed between 2013 and 2015 and according to the Sidney Morning Herald, a further 2000 were cut earlier this year. The job cuts in the sector give an idea of the state of the mining sector in Australia, and as the country’s third-largest export earner after iron ore and coal, gold mining plays a big part. Australia is the world’s second highest producer of gold, mining an estimated 300 metric tons in 2015 according to the USGS.   

Economic Outlook

In Q4, the Australian economy grew 0.6% over the previous quarter. The print was less than the 1.1% recorded in Q3 2015; however, it beat market expectations of a 0.4% increase. Although Australia’s economy defied expectations in the last quarter of 2015, so far 2016 could be going better Down Under. An economic slowdown has been able to be avoided thanks in part to strong growth in the housing market, which supported the construction industry and lifted consumer sentiment. However, housing price growth slowed in Q1 2016 and homeowners are feeling less optimistic about the future value of their homes. This is evident in weak consumer sentiment, which fell again in April in the most recent reading. Consumers’ confidence is likely to take another hit in the coming months as Prime Minister Malcolm Turnbull stirred economic uncertainty when he stated that he would call for a double dissolution election—an extraordinary measure designed to remove deadlocks in Parliament—which will likely be held on 2 July. The potential for another change of government may have an impact on business and consumer confidence, which could negatively affect business investment and retail sales at a pivotal point in Australia’s economic rebalancing act.

Brazil

Gold mining in Brazil stretches as far back as the 1690s when the Brazilian Gold Rush began. Unlike most gold rushes, the Brazilian Gold Rush lasted over 200 hundred years until the 1900s. Brazil’s gold mining activities, like many other countries, played a large part in the development of the country and its economy. Although gold has been and continues to be a very important driver for the Brazilian economy, the many years of exploitation has exhausted Brazilian gold mines. However, it is still the 11th highest gold producer in the world with an estimated 80 metric tons in 2015.

Economic outlook

Brazil’s economy sank into the deepest recession in recent history last year amid low prices for key exports, soaring inflation and depressed confidence levels. Moreover, as the economy plummeted so did President Dilma Rousseff’s political career. A wide-spread corruption scandal and the economy’s abysmal performance caused approval levels to fall to all-time lows and resulted in the commencement of impeachment proceedings last year. On 12 May, the Senate voted to continue with these proceedings, forcing Rousseff to step down for a maximum of 180 days while a trial is conducted. Vice President Michel Temer took over as interim president and his first task will be to find a way to halt the sinking ship. However, a number of daunting challenges lie in Temer’s path and recent economic data remain poor: retail sales returned to contraction in March and the manufacturing PMI fell to the lowest level in over seven years in April. A change in leadership will not be a magic bullet for Brazil’s economy and FocusEconomics expects the recession to continue throughout this year. 

Canada

Gold in Canada is found all across the Laurentian Plateau, in British Columbia, Nunavut, and Newfound Land. Gold was first discovered in Canada in 1823 along the Chaudiere River in Quebec. Many years later the legendary Klondike Gold Rush in 1896 sparked a massive migration of prospectors to the Yukon River basin in search of gold with the dream of striking it rich. It has been called the last great gold rush. 

Since then, Canada has been a steady eddie in terms of gold output, especially for the last decade, as it has been at the top of the rankings for gold production by country. In 2014 Canada achieved a record for gold output at 152 metric tons, which marked the first time that it caught up to South Africa in annual output. The estimated output for 2015 by the USGS is expected to be slightly lower at 150 metric tons. As for this year, the rally in gold prices has Canadian gold mining shining bright in 2016.

Economic Outlook

Although economic growth in Canada beat market expectations last year, business investment in Canada contracted in 2015 and represented a sizable drag on GDP growth over the year. Collapsing investment is one of the main avenues through which last year’s drop in commodities prices is affecting economic activity. In more recent indicators of growth in Canada, GDP contracted in February after strong growth in January.

However, a recent upswing in the price of oil has provided a glimmer of hope for the economy and lifted the value of the Canadian dollar. Should the rally in oil prices continue, some investment may trickle back into the Oil Patch, which would provide much needed relief for oil dependent provinces. Although the strengthening dollar signals improving confidence in the Canadian economy, it may compromise the gains made by export-oriented industries in recent months, which have grown markedly thanks to the competitive currency as well as a steadily-increasing demand from the U.S.

Canada’s economy is expected to gradually recover, with growth accelerating this year and next as commodity prices pick back up and an expansionary fiscal policy takes hold. The Bank of Canada will also provide support for the economy as it is expected to keep rates at historic lows over the forecast period.

 


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China

China is the number one producer of gold in the world. The USGS estimates that China mined 450 metric tons of gold in 2015. Since gold began to be mined in the 1970s, gold production in China has rapidly increased. China finally overtook South Africa in 2007 as the world’s top gold producer. China’s major gold production regions are generally located in the east of the country, in the eastern provinces of Shandong, Henan, Fujian, and Liaoning. Most of the gold mined in China stays within its border to produce jewelry. The demand for gold in the west over the last decade has decreased while Chinese demand has increased dramatically. In 2014, China was the top gold consumer in the world at 27.9% of global consumption, just ahead of India at 26.5%.

Although China is the world’s top gold producer, it is expected that Chinese mining companies will begin to explore potential acquisitions of international gold producers to meet demand and reduce dependency on international gold producers. China’s insatiable appetite for gold also led to a new price fix in Shanghai a few weeks back in an attempt to start a regional benchmark priced in Yuan to increase its influence in the global gold market.  

Economic outlook

China’s economic slowdown over the last year or so has been well-documented with final 2015 growth falling to a 25-year low. Economic activity has continued to decelerate at the outset of the year, as authorities have begun to promote a more balanced economic model at the expense of weaker short-term growth. The key question regarding China’s economy is whether the economic slowdown is related to structural macroeconomic imbalances or if, on the contrary, it reflects a genuine shift to a more sustainable growth path

In Q1, China’s GDP increased 6.7% annually, which came in marginally below the 6.8% expansion observed in Q4. The print represented the weakest expansion since the height of the global financial crisis in Q1 2009 and was in line with market analysts’ expectations. However, more recent indicators indicate that strong policy support and improved credit conditions fostered growth at the end of Q1 and helped to stabilize economic activity in the first three months of 2016.  Some indicators have signaled recently that China’s gradual transition toward a more sustainable growth path is in the works and a loose monetary stance, rising investment and improved dynamics in the property sector indicate that the pickup observed in March will likely continue in the coming months.

While policy support is expected to shore up the economy in the short term, government-led credit growth presents significant downside risks to China’s outlook from a somewhat longer-term perspective. Particularly, cheap credit has the potential to further exacerbate domestic imbalances.  

Ghana

Ghana has been a major producer and exporter of gold dating all way back to precolonial times when gold was exported from present-day Ghana to Europe via trans-Saharan trade routes. Gold mining was mostly alluvial until the 1860s when modern mining techniques were first implemented to extract gold.

Many years later, Ghana is now Africa’s second largest producer of gold behind South Africa. Southern Ghana is considered to be one of the world’s best regions for gold mining, however, despite still being one of the world’s top gold producers, output of the mineral has dropped significantly in recent years. Much of this has been attributed to the fall in gold prices, as the global economy began to look healthier following the crisis. With the decline in mining activities followed increasing layoffs in mining operations while even illegal gold miners in the country have begun to give up. Nonetheless Ghana is still the 10th largest producer of gold globally, the USGS expects the country to have produced 85 metric tons in 2015.

Economic Outlook

Economic growth in 2015 in Ghana was subdued at 4.1% and significant macroeconomic imbalances persisted even though it was the second year under the IMF’s stabilization and reform program. Sliding commodity prices restrained exports—Ghana principally exports cocoa, gold and oil—and caused the currency to plunge by nearly 20%. On top of this, recurrent power shortages hampered economic activity. While the current account deficit shrank somewhat and the fiscal deficit narrowed due to the government’s fiscal consolidation efforts, elevated public debt and financing costs remain a concern.

Following 2015’s turbulence, GDP growth will likely tick up this year, as private consumption and fixed investment should increase. The opening of new oil fields and developments in the gold sector as the price has begun to rise should also prop up growth. However, external imbalances, the struggling power sector, elevated public debt, tight financing conditions and high inflation remain challenges. Uncertainty surrounding November’s elections adds to the downside risks.     

Indonesia

Indonesia is home to one of the largest gold mines in the world, the Grasberg Mine. It did not technically open until the 1980s, but can trace its origins with the Ertsberg mine, which was first discovered in the early 1900s, but didn’t officially open until 1973. The Mine is thought by some to hold the largest gold reserves in the world and contributes the majority of Indonesia’s gold production. The Grasberg mine has been the site of numerous attacks by the Free Papua movement beginning in the 1970s. Papua, Indonesia’s eastern-most province, has been a hotbed for an independence movement among inhabitants of the province, which has prompted the Free Papua Movement to make numerous attacks on the mine over the years. The mine is owned by a foreign company, which has many Papuans resentful because they believe it profits disproportionally from the region’s natural resources without giving much back. Nonetheless, the mine employs over 19,500 people in the area. Pollution and environmental harm are another source of resentment toward the mine, which many believe is contributing heavily to pollution to surrounding rivers, land surfaces, and groundwater.

Apart from the Grasberg mine, Indonesia is in the midst of a modern gold rush, where it is estimated that, quite remarkably, illegal gold mining is producing more within the borders of the country per year than the estimations of Grasberg’s yearly output. According to a New York Times report, corruption and even more pollution are at the heart of the illegal gold mining in Indonesia. The crucial ingredient in the purification process of the gold by illegal mining operations is mercury, which has environmentalists and other health experts concerned around the world. Many of the small-scale illegal gold mining operations are funded by businesses located in the country’s capital city, Jakarta, which pay local authorities off to allow them to continue the practice. Although illegal gold mining is not taken into account in the USGS survey, Indonesia’s estimated gold output in 2015 by the USGS is thought to be 75 metric tons, making it the 12th highest producer in the world by yearly volume.

Economic Outlook

Indonesia’s economy lost steam last year as rising government spending failed to compensate for falling exports and lackluster private consumption. While surging government consumption should boost growth this year, high-frequency data suggests other economic drivers are stuck in the doldrums. The trade surplus more than halved in March and growth in real retail sales moderated in February. Meanwhile, the government unveiled its 11th economic stimulus package at the end of March. The latest measures to boost growth, including lower taxes on real estate investment and measures to cut red tape at Indonesian ports, should boost the economy this year. 

Mexico

Although Mexico has historically been known for its silver mining, it is also a major player in gold production. Gold has been mined in Mexico for over 500 years, and although the country has a long history of mining for precious metals, there are still large deposits of precious metals that have gone untouched. Recent developments in mining technologies are now making it possible to get to some of those untapped deposits while Mexico’s political environment is largely considered to be favorable to mining activities, meaning that Mexico will likely be one of the top-gold-producing economies for the foreseeable future.

However, gold mining in Mexico has not been without controversy. Many mining corporations that are present in Mexico are foreign, such as McEwen Mining Inc., which recently had a refinery robbed and looted by armed gunmen late last year. This was the 3rd attack of this kind in 2015. Kidnappings are also an issue, with workers disappearing and turning up dead days later. This recent flurry of attacks highlights the perils of mining in Mexico and the security issues may present downside risks to the mining sector in Mexico in the future.

Mexico is still a world leader in gold production with an estimated volume of 120 metric tons in 2015.

Economic Outlook

Mexico’s economy was more resilient to external headwinds at the beginning of the year. Preliminary data show that GDP growth picked up from 2.5% year-on-year in Q4 2015 to 2.7% in Q1. The result, which exceeded expectations, was driven by faster growth in all three of the main sectors of the economy. Agriculture and services expanded robustly in Q1, while growth in the industrial sector was surprisingly faster, considering cutbacks in oil production and a slowdown in the U.S. economy in Q1. Moreover, manufacturing gauges in April suggest that the sector is off to a positive start to Q2. On a negative note, consumer confidence slipped further in April, suggesting that sentiment is losing traction, despite strong consumption fundamentals. In response to Moody’s warning in March that it could decide to downgrade Mexico’s rating, the government announced new expenditure cuts together with the guidelines for next year’s budget.

Economic growth will be supported by strong private consumption this year. However, Mexico is facing a painful adjustment to low oil prices and weak demand for its manufactured exports. 

Peru

There is no question that Peru is a mining country with the country’s mineral deposits having been mined going back over 1000 years. One drawback to Peruvian mining is that many of the mineral deposits are located in the areas that are fairly inaccessible in areas of high elevation in the Andes. Peru’s government is pro-mining and open to foreign investment, playing a limited role in the oversight of the country’s mining industry. Much like the mining industry of Indonesia, pollution is a big concern in Peru, especially from illegal mining, which is rampant. Similar to illegal gold mining and production in Indonesia, the use of mercury is widespread. According to the USGS, Peru is the 7th largest producer of gold annually, having producing an estimated 150 metric tons in 2015.

Economic Outlook

The latest polls for the 5 June runoff presidential elections indicate a nip and tuck race.  Regardless of the winner, policies are expected to remain business-friendly, which both candidates claim to be. Peru’s economy gained steam in the fourth quarter of last year, as the economy weathered external headwinds. More recent data related to the external sector show that the trade deficit improved notably in March due to larger exports of traditional Peruvian shipments. Moreover, business sentiment turned optimistic in April for the first time since July 2015. This upswing in confidence is also likely due to the first round of elections held in April, since the outcome was praised by markets.

Despite continued external headwinds emerging from economic crises in the region, the economy is foreseen maintaining healthy growth this year. 

 


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Russia

Russia is a massive country geographically and consequently, as one might imagine, it has a wealth of natural resources. This includes gold and although the country has been mined for gold going back many centuries, gold production actually hit an all-time low as recently as 1998.

Russia’s economy was in a shambles leading up to and after the breakup of the Soviet Union. After the fall of the Soviet Union, the first President of the Russian Federation, Boris Yeltsin, sought to restore Russia to its former glory by privatizing large parts of the economy and dismantling the economy’s central planning mechanism, which didn't work out too well. The economy plunged into despair, culminating in the 1998 financial crisis and Bank Rossii defaulting on its debt. Yeltsin finally resigned on New Year’s Eve in 1998 and put a man in charge whose name many will probably recognize, Vladimir Putin.

Since Putin has been at the head of the table, Russia’s mining sector has gradually developed, reaching a booming period between 2008 and 2009. In fact, since the late 1990s, Russia’s gold production increased two-fold. Although the Russian mining sector largely contributed to the economic resurgence the country saw during the last decade, it is currently at a loss for foreign investment, something it relied on heavily in the past. Low commodities prices have made the mining industry, especially for gold, less attractive for investors. Geopolitical issues with the west and Ukraine as well as macroeconomic uncertainties have also significantly hurt investment in the sector. Since gold mining is geographically diversified, investors can turn to any number of less risky countries for investment.

Russia is still one of the world leaders in gold production. The USGS estimation of 2015 gold output is 242 metric tons, making it the third top-gold-producer in the world.

Economic Outlook

Following a strong contraction Q4 2015, Russia’s economic activity decreased in Q1, although the drop is expected to be less severe than in the previous quarter. Industrial production took a step back from an incipient recovery in March as output contracted following February’s modest expansion. Moreover, a continuous deterioration in economic conditions prompted unemployment to rise in March. On the external front, weakness in global demand coupled with the country’s deep recession prompted exports to contract at a double-digit rate again in March. Heading into Q2, leading indicators suggest that the economy is still fragile. In April, the manufacturing PMI fell to an eight-month low, while the services PMI continued to improve. These results highlight the diverging performance between Russia’s goods producers and services providers once again. FocusEconomics expects the economy to remain in recession this year. Weak private consumption is expected to be the main drag on growth in 2016 as high inflation, low wages and rising unemployment will continue to hit households’ spending. However, a gradual rise in oil prices and the stabilization of the currency will provide some support to growth.

South Africa

In 1886, when George Harrison stumbled across gold in South Africa, he set off a chain reaction starting with the Witwatersrand Gold Rush that changed South Africa from a largely agricultural society to one of the largest gold producing nations in the world. This was all the more important at the time, as the gold standard was still in its golden age.

So many migrants came to South Africa with the dream of striking it rich that some of South Africa’s biggest cities sprung up as a result of the gold rush, including the capital, Johannesburg. The gold discovery led to the widespread construction of infrastructure like roads, railroads, buildings, towns and made it the richest country on the continent of Africa. Gold has continued to be a massive contributor to South Africa’s economy, and as was mentioned earlier, the country was the king of gold production until China overtook it as the number one gold producing economy just a few years ago.

As is a theme with many commodity-driven economies, the low-commodity-price environment has hurt South Africa’s gold mining industry of late. Although many of South Africa's mines have become depleted of their proven reserves, they are still located on top of possible reserves. Unfortunately, the nature of the low-commodity-price environment has meant that mining for that gold is no longer economically viable. Investment in mining activities has been an issue as it has been in Russia, as macroeconomic issues have left the country in a precarious position. Power outages and drought have hurt the agricultural sector and manufacturing respectively, leading to unemployment and a depreciating rand. South Africa is still a leading producer of gold, producing an estimated 140 metric tons in 2015, the fifth highest mark in the world.

Economic Outlook

Recent data show that South Africa’s economy likely recorded another weak growth rate in Q1. Manufacturing production expanded in February, however, the PMI deteriorated and hit the lowest level in nearly two years in March. The country’s outlook remains fragile as electricity and water supply constraints coupled with low commodity prices will weigh on growth. Moreover, failure of the government to push forward with fiscal consolidation reforms might provoke a downgrade of the country’s credit rating to junk territory.

United States

In 1799, Conrad Reed found a 16-pound gold nugget in a creek that ran through the family farm located in North Carolina. The nugget served as a door stop for three years until a jeweler recognized the rock on Reed's porch and very slyly asked him to name his price. Conrad asked for USD 3.50 for the nugget. Shortly thereafter, the first commercial gold find and subsequent gold rush in the United States began. Following the North Carolina Gold Rush, of course, was the famous California Gold Rush, which led to a massive migration of people from all over the world to the west coast of the United States in search of riches in the form of gold, hastening the settlement of the great wild west of the United States. Over 150 years later, the United States is still a top producer of gold globally with the state of Nevada supplying close to 70% of the country's gold output itself. Gold production in the states has been on the decline since 2000, as demand for gold has decreased within its borders, but the country can still count itself among the elite with an estimated 2o0 metric tons of output in 2015 making it number 4 on the list of top gold producers.

Economic Outlook

An advance estimate showed that the U.S. economy slowed at the outset of the year. In Q1, GDP increased at a seasonally adjusted annualized rate of 0.5%. The result came in below the 1.4% expansion registered in Q4 and reflected weak growth in domestic demand, which was dragged on by a contraction in fixed investment as energy businesses reacted to the renewed slump in oil prices at the beginning of the year. In addition, a strong dollar at the start of the year took a take a heavy toll on exports, which contracted for second consecutive period in Q1. Private consumption, the key engine of the economy, moderated but remained resilient in Q1 despite the heightened financial volatility registered in the first few months of the year.

Despite ongoing challenges at home and abroad, the economy is likely to grow at a steady rate and be one of the major drivers of global growth this year.

Uzbekistan

Mineral mining and especially Gold production plays an important role in the economy of Uzbekistan. Gold is primarily found in the Kyzylkum Desert and is home to the Muruntau Gold Deposit, the largest single open-pit gold mine in the world. The gold deposits were first found in the area in 1958 with the mine opening a few years later. The mine has produced around 1500 metric tons of gold to date and the deposits of gold in the area are expected to last until 2032. Many experts believe that Uzbekistan may be on top of the world’s largest gold reserves with experts quoting figures ranging from 2500 – 5300 metric tons of gold yet to be mined. Uzbekistan is expected to have produced 103 metric tons of gold in 2015 as estimated by the USGS.

Economic Outlook

According to official indicators, Uzbekistan’s economic activity grew by 7.5% in Q1 2016. While the recession in Russia and slowing activity in China, Kazakhstan and Ukraine—all major trading partners—weighed on growth, economic activity was supported by strong public investment. Moreover, a seven-year old feud between Russia’s energy giant Gazprom and Turkmenistan recently culminated with the dissolution of an agreement regarding the delivery of natural gas. Gazprom is set to substitute Turkmen gas with deliveries to Uzbekistan, with contracts already signed amounting to 140 billion cubic feet of natural gas to be delivered in 2016.

As external headwinds continue to weigh on the economy, government spending is set to remain the strongest driver of economic growth.

The Future of Gold

As the demand for gold increases globally, especially as economies in Asia continue to develop, we may have to ask, what does the future of gold look like? Gold is scarce and costly to mine. However, almost all of the world's gold that has ever been mined is somewhere in the world at the moment, but its likely that most of it is locked away in a vault somewhere, as government and individual investors increasingly “bar hoard”. As more sophisticated technologies are developed to detect the presence of gold in areas that were previously thought to not hold gold or to be depleted, the better for top-gold-producing economies. However, environmental concerns over the mining and production of gold will have to be taken into account as these technologies progress. Will gold mining continue at profitable rate ... on Earth? The high demand for gold used for jewelry, risk aversion, and for industrial and technological uses, will probably not be surpassed in the near future by a substitute, leading many scientists to look toward heavens. Asteroids that have passed by Earth have been studied and indications are that there are high deposits of metals and minerals present on them. The question perhaps is, will human’s historic obsession with gold lead to mining it in outer space? How could this affect the price of gold in the future? Who will be the top-gold-producing economies once we start landing on asteroids? Only time will tell.

Hopefully, if you have read all three parts of our series on Gold: The Most Precious of Metals, you will have learned a lot that you didn't know about gold before. If you haven't had a chance to read our other posts on gold, have a look at part 1, Gold | A History of Obsession, in which we detail human kind's history of obsession with the yellow metal going as far back as BC 4000 up through the 1970s, ending with a discussion on the potential viability of the gold standard in today's economy. In part 2, we go through how gold is mined and processed, about the uses of gold other than for jewelry, and about gold's importance to the global economy as both a commodity and monetary asset.

 

Date: May 18, 2016


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