30 July, 2020

Total supply was down 6% in H1 due to coronavirus-related disruption

  • Total H1 supply declined 6% to 2,192t due to disruption caused by the coronavirus outbreak
  • H1 mine production fell 5% to 1,604t – the lowest first half level since 2014 – while recycling saw a similar y-o-y decline to 590t
  • Total supply fell 15% y-o-y in Q2, led by a 10% drop in mine production as many operations remained suspended due to lockdowns.1
Tonnes Q2'19 Q2'20   YoY
Total supply 1,220.8 1,034.4 -15%
Mine production 863.2 776.8 -10%
Net producer hedging 47.0 -28.0 -    -
Recycled gold 310.6 285.7 -8%

During H1, the supply side of the gold market showed significant resilience in the face of ongoing issues stemming from the COVID-19 pandemic. Current estimates put total supply at 2,192.2t, 6% lower than H1 2019. Both mine production and recycled gold registered y-o-y declines of 5% in H1, but these falls were modest by comparison to the scale of disruption caused.

Mine production

Mine production fell 5% y-o-y in H1, to 1,603.6t, its lowest H1 level since 2014. Strict coronavirus lockdowns in key mining nations throughout H1 were the main cause of the decline. Mining operations in China – the world’s largest gold-producing nation – were most affected during February as the country grappled with controlling the spread of the virus; however, the majority of mines returned to full production towards the end of Q1 as the situation eased. This led to an overall decline of 9% y-o-y in Chinese H1 mine production. But in other key producing nations, such as Peru, South Africa and Mexico, lockdowns were imposed much later in Q1 and extended well into Q2. Mine production fell to 776.8t in Q2 from 863.2t in Q2 2019 (-10% y-o-y).


Coronavirus-hit gold mining sector saw H1 slowdown in production

Coronavirus-hit gold mining sector sees H1 slowdown in production

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


Lockdowns had a significant impact on gold mining in Q2. In Mexico, gold mine production fell 62% y-o-y as mining was suspended for 60 days during the quarter, although some operations were granted exemptions. In South Africa, the phased lockdown meant that underground mining, which accounts for most gold production within the country, was prevented from ramping up to full production until 1 June. As a result, South African gold production fell 59% y-o-y. Lockdowns from mid-March meant that gold mining in Peru was suspended until early May, leading to a 45% y-o-y decline in Q2 mine output. In Papua New Guinea, mine production was hit by the suspension at Porgera, the country’s second largest gold mine, following the government’s decision not to renew its mining lease.

While declines in production dominated the picture in Q2, some producers registered increases. In Russia, Q2 mine production grew by 15% y-o-y as production stabilised at projects that have recently come online, such as Natalka and Bystrinsky. In Europe, Finland’s largest mine, Kitilla, saw the largest increase in production in Q2, up 54% y-o-y. But this is primarily due to a low base effect, as the project underwent a planned maintenance shutdown in Q2 2019. In Bulgaria, production rose by 37% y-o-y in Q2, although absolute levels remain low. This increase was due to additional output from the Ada Tepe project, which reached commercial production in August 2019. In West Africa, Burkino Faso gold production rose 10% y-o-y in Q2, as the first pour at the Sanbrado project and continued ramp-up at the Wahgnion project boosted aggregate output.

The impact of the lockdowns not only curtailed production at certain projects, it also increased all-in sustaining costs (AISC). In Q1 – the latest data available – the quarterly average AISC rose to US$980/oz, 4% higher q-o-q and 7% higher y-o-y. Although AISC rose, the larger increase in the gold price allowed higher-cost mining projects to become profitable.

Despite lockdowns gradually being eased, the disruption seen in H1 will likely have a lasting impact on annual production in 2020. As many restrictions on activity have only recently been lifted it will likely take some time before global gold mining returns to full production.

Net producer hedging

It is estimated that gold miners hedged a total of 18.3t in H1 on a net basis. The US dollar gold price rose by 10% during the quarter, climbing to levels not seen since Q3 2012, and the rise was even greater in some currencies – notably Australia – where the local price hit another record high. And revised data shows that the most notable hedges during Q1 occurred in Australia, where several miners extended their US dollar hedge books. Of these, the most prominent came from Saracen Minerals and Northern Star Resources, with both adding to their hedge books during the quarter following their joint acquisition of the Kalgoorlie Super Pit in Q4 2019.

Initial estimates for Q2 show 28t of net de-hedging, however this is subject to future revision as more information is published by mining companies.

Recycled gold

Recycling, like mine production, was impacted by strict lockdowns across the globe. Recycled gold supply amounted to 570.2t in H1, 5% lower y-o-y. In Q2 specifically, gold recycling fell 8% y-o-y, to 285.7t. While this is a relatively small change at the global level, it masks more significant changes at a regional level seen in Q2, once lockdowns began to lift.


Recycling activity was subdued by market lockdowns, despite pockets of growth

Recycling activity subdued by market lockdowns, despite pockets of growth

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


Gold recycling remained subdued, with many key regions still grappling with the outbreak. In South Asia, and India specifically, strict lockdowns continued to prevent significant levels of recycling through the usual channels, as consumers were housebound and retailers were closed. Furthermore, many consumers in India opted to use their gold holdings as collateral to obtain loans for their financing needs, rather than selling. And another important factor is that the rural economy, which accounts for the lion’s share of gold demand in India, has performed strongly this year, reducing the need for distress selling of gold. 

In the US, continued high infection rates, particularly in the key recycling centres of New York and Los Angeles, meant that activity fell significantly below normal levels. Similarly, in the Middle East, lockdowns led to a y-o-y decline in recycled gold in the region. In Iran, which has suffered particularly high infection rates, consumers were reluctant to leave their homes leading to less recycling. Interestingly, in Turkey, expectations of yet further gold price gains were also a factor influencing consumers not to recycle gold in sizeable volumes.

But some regions are seeing recycled gold levels rise. The largest increase in recycling levels was seen in East Asia, particularly in Thailand. The lifting of lockdown restrictions released a wave of selling back, with consumers looking to take advantage of higher prices and fund some day-to-day expenses. This might also be a result of pent-up supply that built during the lockdowns; April saw the highest recycling levels, while May and June remained elevated. In China, with the market returning to normal at the beginning of Q2, recycled gold supply also increased during the quarter as the gold price rose. This was not limited to jewellery consumers; retailers also looked to replace old 24K jewellery inventories with lighter jewellery pieces. Europe was the only other region to see an increase in recycling during the quarter, mostly from Southern European markets as the local gold price reached a new record level.


  1. Due to the challenging environment, data for Q2 is provisional and may be subject to future revisions.

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