2 May, 2019

Total supply was largely unchanged in Q1: modest growth in mine production and recycling were offset by a decline in net hedging

  • Mine production grew fractionally to 852.4t, a new first quarter record
  • Gold recycling grew 5% to 287.6t as the higher price encouraged selling 
  • The hedge book grew by just 10t in Q1 
Tonnes Q1'18 Q1'19 YoY
Total supply 1,153.1 1,150.0 0%
Mine production 843.3 852.4 1%
Net producer hedging 35.2 10.0 -72
Recycled gold 274.6 287.6 5%

Total supply was virtually flat at 1,150t (-0.3% y-o-y). Modest growth in mine production (1%) and recycling (5%) was supported by a second consecutive quarter of net hedging (10t).

Mine production

In Q1, mine production grew marginally to 852.4t (+1% y-o-y), the highest level of Q1 output on record. Given the seasonality in gold production – where output in the first quarter is typically the weakest – this represents a strong start to the year.

The continued ramp-up of significant projects in key gold mining jurisdictions supported growth in Q1. In Canada, the fifth-largest producing nation in 2018, the continued ramp-up in production at Brucejack, Rainy River and Moose River, as well Meliadine coming online, boosted output by 9% y-o-y. Russia production grew by 4% y-o-y in Q1, primarily due to the ramp-up of the Natalka open-pit mine. This was also supported by growth at several other projects, particularly in the far east of the country. Australian output rose by 3% y-o-y, thanks to the ramp-up of Mount Morgans and Cadia Valley. Kazakhstan mine production grew by 26% y-o-y, driven mostly by the ramp-up at the Kyzyl project. Aggregate Q1 production in Papua New Guinea gained 11% y-o-y, with output from Lihir, Porgera and Hidden Valley rising.

But some producing nations saw notable declines. In China, the impact of stringent environmental regulations was more muted: national gold production fell 2% y-o-y in Q1, compared with y-o-y declines of up to 8% since 2016.1 Most of the major mining companies within the country are now compliant with the regulations after a tough adjustment period. Argentinian gold output fell by 7% y-o-y, due to a combination of lower production at Veladero and the shutdown of Alumbrera.2 The largest Q1 y-o-y decline was in Indonesia, where production slumped 45%. This was primarily due to the exhaustion of higher-grade ore from the final phase of the Grasberg open pit, and not entirely unexpected as Grasberg transitions to underground operations.

Artisanal and small-scale mining (ASM) has become a larger part of annual mine production.3 Given the nature of ASM activity, reliable data are extremely difficult to come by. There are several estimates regarding the scale of ASM, with most suggesting now accounts for somewhere between 15% and 20% of global annual gold mine production. This growth has been prompted by a few key factors: higher gold prices, population growth, the lack of economic opportunity and the spread of mining expertise have boosted ASM output, most prominently in Africa. 

This lack of reliable data not only increases the chances that estimates can be inaccurate, but also heightens the need to constantly review the quality of the data we do have. Following an extensive reassessment of the scale of ASM, during which new information came to light, Metals Focus – our primary gold demand and supply data provider – concluded that previous estimates significantly understated ASM output. Global mine production data have been revised upwards as a result, which has impacted our mine production data series back to 2010.


Growth in ASM has led to a revision in our mine production series

Growth in ASM has led to a revision in our mine production series

Sources: Metals Focus, Refinitiv GFMS, World Gold Council; Disclaimer


Net producer hedging

Net producer hedging amounted to just 10t in Q1, 72% lower y-o-y, as some miners took advantage of the rising gold price. The international price rose by 9% in US dollars between the start of Q4’18 and the end of Q1’19, as concern over the global macroeconomic and political landscape swelled. But the impact was even more noticeable on gold priced in key producer currencies. Over the same period, gains in the gold price in Australian dollars (11%), Russian rubles (9%) and South African rand (11%) created further incentives to lock-in prices.

Australian producers have dominated the hedge book in recent quarters and Q1 was no exception. With the local gold price hitting several successive record highs in Q1 – most recently in February at A$1,920/oz – many have opted to secure cash flow for portions of their output. Goldfields, the second largest producer in Australia, added 456koz (14t) of options on top of renewed existing positions of 456koz. This covers the entirety of the company’s production for 2019.

Despite more sustained activity in Australia, hedging remained sporadic elsewhere. Tactical motives still drive most hedging activity and hedging volumes remain well short of the record levels seen two decades ago.

Recycled gold

The supply of recycled gold reached 287.6t in Q1 (+5% y-o-y), largely due to recent strength in the local gold price across many markets. 


Recycled gold supply grew 5% y-o-y, the highest first quarter since 2016

Recycled gold supply grew 5% y-o-y, the highest first quarter since 2016

Sources: Metals Focus, Refinitiv GFMS, World Gold Council; Disclaimer

In western markets, the recycling picture was somewhat muted. Despite elevated levels of global uncertainty, a combination of depleted near-market supplies and a lack of distress selling kept consumers on the side-lines. The largest growth in recycling was seen in the UK. Brexit wrangling continued to exert pressure on the pound in Q1, helping to push up the local gold price further and tempting some to cash in.

In the Middle East, Iran saw a doubling of recycling levels y-o-y during Q1. A much higher local price in Iran was the primary driver of this increase, as consumers continue to face deteriorating economic prospects. In other key markets, the picture was more mixed. Turkish recycling registered a decline y-o-y as political tensions, a struggling economy and artificially-low interest rates dissuaded consumers from selling. In Egypt, the continued normalisation of the market led to another y-o-y decline in Q1.

In India, both gold-for-cash and gold-for-gold recycling levels were boosted by the rise in gold price to a peak of over Rs33,700/10g by mid-February. Recycling of old inventory by local retailers also rose slightly during Q1, as concerns over a price correction mounted. Similarly, China saw a greater level of recycling among retailers as they switched to higher-margin products. 


  1. In August 2016, a revision to the “The Hazadous Waste List” allowed for significant fines to be imposed should the discharge of mine tailings contain cyanide.

  2. An underground extension to Alumbrera is expected to commence production in late 2019, and an agreement has been signed to amalgamate the project with Agua Rica.

  3. A differentiation should be made between potentially illegal or conflict-related ASM and informal but legal ASM. This distinction is important since ASM may have a long history in some countries and can be a significant employer in developing countries.

Important disclaimers and disclosures [+]Important disclaimers and disclosures [-]