5 November, 2019

Total supply rose 4% in Q3, boosted by the highest level of recycling since 2016

  • Mine production softened 1% y-o-y in Q3, flat y-o-y on y-t-d basis 
  • The June to September price rally encouraged higher levels of net producer hedging in 2019
  • Recycled gold volumes reached 354t in Q3, the highest quarterly total since Q1 2016
Tonnes Q3'18 Q3'19 YoY
Total supply 1,179.7 1,222.3 4%
Mine production 883.3 877.8 -1%
Net producer hedging -24.1 -9.2    -
Recycled gold 320.6 353.7 10%

Mine production

Mine production was fractionally lower at 877.8t in Q3 (-1% y-o-y). This is comfortably above the five-year quarterly average of 851.9t. On a y-t-d basis, mine production now amounts to 2,583.4t, virtually unchanged from the same period in 2018. 


Y-t-d mine production is virtually unchanged from 2018

Y-t-d mine production is virtually unchanged from 2018

Sources: Metals Focus, World Gold Council; Disclaimer

Gold output in Mexico saw an 11% increase y-o-y in Q3. Output was boosted as operations resumed at Peñasquito, having been suspended due to a dispute between local communities and contractors. However, the dispute does not seem to be over; operations were suspended again towards the end of the quarter as talks broke down. Gold production in Australia rose 7% y-o-y, boosted by incremental increases at several mines, while Ghanaian gold production (4%) benefitted from scheduled output increases at both Ahafo and Akyem. And while Russian Q3 mine production was flat y-o-y, we continue to see a ramp up of several projects in the country – particularly in the Far East region.

Chinese gold production suffered another quarter of y-o-y declines (-4%) as the industry continues to be impacted by the strict environmental regulations introduced in 2017. In the US, mine production was marginally weaker (-1%) due to lower scheduled output from several Nevada mines – including Cortez and Goldstrike. South African gold output (-6%) was impacted by the tail end of industrial action, which hampered production significantly in H1. Peru’s 12% decline in mine production was a consequence of falling grades due to mine scheduling. Indonesian output saw the largest y-o-y decline in Q3 – down 41%. This was due to the exhaustion of higher-grade ore at Grasberg and transitions from open pit to underground mining, as well as output constraints at Batu Hijau (phase seven open pit expansion, as well as copper concentrate limits and a lack of local smelting capacity).

Slight increase in costs has not dented margins significantly. Despite many key producer currencies remaining weak against the US dollar – which helps reduce costs at operations outside of the US – global average all-in sustaining costs (AISC) increased during Q2 (the latest data available). This rise was reflective of ongoing operational issues, such as industrial action and mine plan transitions. Despite this, all-in sustaining margins remained very healthy, thanks in large part to the significant increase in the gold price. There appears to be little indication that the industry has begun mining lower grade ore in response to the higher margins.

Producer hedging

In Q3, early estimates indicate that gold miners reduced the global hedge book by 9.2t.1 This follows net hedging of 47.5t in H1, which brought the global hedge book to 265.8t at the end of June, its highest level since Q1 2018.  

Tactical opportunity for more hedging. Hedging activity in 2019 has been a direct response to the impressive rise in the gold price. Y-t-d, the international gold price has risen by more than US$200/oz (+16%), but this has been eclipsed by the price rise in many key producers’ currencies. The price is at, or near, record highs in Australian dollars, Russian rubles and Canadian dollars, among others. However, while the higher gold price has encouraged some miners to enter fresh positions, some may have used it as opportunity to restructure existing positions.


Recycled gold supply grew 10% in Q3, to 353.7t. On a y-t-d basis, gold recycling totals 963.1t, over 8% higher y-o-y. This is the highest level since 2016, when a higher price environment prompted a wave of selling back in the first three quarters. In fact, Q3 2019 is the highest level of quarterly recycling since Q1 2016, and significantly above the five-year quarterly average.


Recycled gold levels responded strongly to the price rally in Q3

Recycled gold levels responded strongly to the price rally in Q3

Sources: ICE Benchmark Administration, Metals Focus, World Gold Council; Disclaimer

Note: Five-year quarterly average covers Q3'14 to Q2'19.

As in 2016, growth in gold recycling was primarily driven by a significant rise in the gold price. In Q3, the international gold price – in US$/oz – rose by 5%, following a rise of 9% in Q2. But this was bettered by the local gold price in many key markets. This, coupled with the global economic slowdown, resulted in consumers continuing to part with some of their gold holdings. 

In the Middle East, Turkey and Iran bucked the trend. While most markets in the region saw an increase in recycling during Q3, recycling declined in Turkey and Iran. In Turkey, the y-o-y change was impacted by the high levels of recycling seen in Q3’18 when the local price soared, flushing out near-market supplies. But as the price remains near record highs more recycled supply may be coaxed out during Q4. In Iran, consumer sentiment was affected by the relatively low level of the gold price – around 20% down from its peak due to the strengthening rial.

Recycled gold in India saw a dramatic increase in Q3, as the gold price hit multiple record highs. The gold price rose sharply in August, to around Rs38,795/10g, before going on to break the Rs39,000/10g level at the beginning of September, 24% higher than at the start of the year. At such record price levels consumers’ focus remained on selling rather than buying. Recycled gold supply in Q3 was similar to Q2 when the price rally began. China, too, saw noticeably higher gold recycling levels in Q3 owing to the higher gold price.

Following the modest increase in Q2, recycling in the western markets of North America and Europe continued to rise during Q3. In Europe, record prices in both euros and pounds sterling lead to higher levels of selling back.


  1. All figures are provisional so may be revised when more data is made available.

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