29 October, 2020

Total supply declined 3% y-o-y in Q3 despite growth in gold recycling

  • Total gold supply equalled 1,224t (-3% y-o-y) in Q3
  • Mine production of 884t was 3% lower y-o-y but marks a substantial recovery from Q2
  • Recycled gold rose 6% in Q3, to its highest quarterly level since Q4 2012.
Tonnes Q3'19 Q3'20 YoY
Total supply 1,265.6 1,223.6 -3%
Mine production 915.3 883.8 -3%
Net producer hedging -4.2 -36.2    -
Recycled gold 354.5 376.1 6%

Total supply fell 3% y-o-y in Q3 to 1,223.6t. Mine production was 3% lower y-o-y as the industry continued to feel the effects of the H1 COVID-19 restrictions. Recycled gold supply increased 6% y-o-y, with recycling channels reopening as consumers and retailers emerged from lockdown. On a y-t-d basis, total supply remained 5% lower than the same period last year due to the disruption caused by the pandemic.

Mine production

Mine production continued to lag behind last year’s levels in Q3, despite activity resuming at many operations affected by widespread suspensions during H1. Mine production totalled 883.8t, 3% below the 915.3t supplied to the market in Q3’19. But this represents a swift recovery in production from the 10% y-o-y drop witnessed in Q2, as the industry heads back towards pre-lockdown levels. Y-t-d, mine production has totalled 2,477.4t, 5% lower y-o-y, highlighting the resilience the industry has shown in the face of the pandemic.

While many economies have gradually emerged from their full lockdowns, COVID-19 restrictions continued to exert some influence on mining activity during the quarter. 

Some of the most heavily affected mining regions in Q2 staged a recovery in Q3. US production was 12% higher y-o-y due to greater output from existing projects such as Nevada Gold Mines. In West Africa, mine production in Burkino Faso jumped 29% y-o-y, as the ramp up of the Sanbrado and Wahgnion projects boosted aggregate output. Ghana’s production was 1% higher y-o-y in Q3 due to output from Obuasi, which restarted production in December 2019. In Tanzania, the 5% y-o-y rise in production was primarily due to North Mara, where for much of Q3’19, operations at the mine were suspended following a prohibition notice relating to the mine’s tailing facility.


Most regions saw a quarterly recovery in mine production in Q3

Most regions saw a quarterly recovery in mine production in Q3

Data as of

Sources: Metals Focus, World Gold Council; Disclaimer


Most Q3 declines in production were unrelated to COVID. Papua New Guinea output fell 40% y-o-y in Q3; production at Porgera, the country’s second largest gold mine and which produces ~600koz annually, has been suspended since April.1 Chinese gold production registered another decline in Q3, down 3% y-o-y. Continued implementation of stricter environmental policies, which first came into effect in 2017, and consolidation in the industry are the primary drivers of these declines. Production in Russia was 13% lower y-o-y in Q3, largely due to lower grades and the comparison with record-high production levels in Q3’19. And despite COVID-19 mining restrictions being lifted in June, South African production was 12% lower y-o-y in Q3 as underground mines required additional time to return to full production.

As we noted in Gold Demand Trends Q2 2020, the disruption caused by COVID will likely lead to a fall in annual gold production in 2020. But with most of the affected operations now having returned to normal production levels, the pandemic is not expected to have a significant impact going forward.

Net producer hedging

After shifting to net de-hedging in Q2, gold producers are estimated to have reduced the global hedge book by an additional 36.2t in Q3. The recent two-quarter de-hedging now outweighs the net hedging seen in Q1 by 27.8t.

While the US dollar gold price hit an all-time high during Q3, prices were already at record levels in many key producer currencies. As prices have risen throughout the year, miners have wanted to fully benefit, prompting accelerated deliveries and the winding up of some hedge books.

Recycled gold

Recycled gold supply rose by 6% y-o-y in Q3, to 376.1t. This is the highest quarterly total since Q4 2012 (394.2t), when recycling jumped due to the economic impact of the GFC and the gold price hitting a then-record high of US$1,895/oz. Interestingly, however, on a y-t-d basis recycled gold now stands at 944.5t, virtually flat y-o-y and, thus far, remains significantly below the levels seen between 2009 and 2012. 


Recycling escalated in Q3 as lockdowns eased and the gold price rose

Recycling escalated in Q3 as lockdowns eased and the gold price rose

Data as of

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


But it is the difference in recycling between Q2 and Q3 which is the most telling story. Recycling activity increased across all regions in Q3, causing the global volume to jump 31% q-o-q and highlighting the change to a more recycling-conducive environment. The rise in recycling during Q3 was primarily driven, we believe, by three key factors:

  • Easing of restrictions. As economies across the world gradually emerged from lockdown, normal recycling channels were re-established. Consumers were able to leave their homes and retailers were permitted to resume business, albeit under stricter social distancing guidelines. This enabled the release of pent up supply that likely built during the first half of the year.
  • Weak economic environment. The economic distress caused to economies around the world by the pandemic also fuelled some selling back. Consumers, understandably concerned with the current and future economic picture, looked to use gold to access liquidity where required. Weaker jewellery demand in markets such as India also led to higher levels of unsold inventory being recycled by jewellery retailers.
  • High and rising gold prices. Recycled gold is highly sensitive to the gold price, and high and rising gold prices during the quarter supported the increase in recycling. Some consumers saw this as an opportune time to lock in profits on their gold holdings. 

Recycling rose in some markets while remaining subdued in others. India saw higher recycling y-o-y in Q3, although distress selling was not a major contributing factor. Since lockdown restrictions have eased Indian consumers have increasingly opted to pledge gold to obtain loans, reducing the need to sell. Elsewhere in Asia, Thailand continued to witness significantly higher recycling volumes due to the higher gold price and the weak state of the economy. In China, higher gold prices were the key driver to recycling growth.

In the Middle East, Turkey saw a y-o-y decline in recycling as concerns around the depreciation of the lira, negative interest rates and lingering political uncertainty generated a reluctance to sell gold assets. In Iran, distress selling due to economic hardship saw recycling rise y-o-y, while in Egypt selling back rose in response to the increasing gold price.

In North America, a marginal 2% y-o-y decline in recycling masked a 32% jump in q-o-q activity. The emergence from lockdown later than other markets, which coincided with record gold prices, meant the initial wave of selling back fell in Q3. In Europe, higher prices were again the key driver of higher recycling, +9% y-o-y.

It should be noted that, in certain markets, consumer price expectations remained positive despite the increases already seen this year. This may signal that not all near-market supplies have been fully exhausted and may be elicited in the future if the positive price trend continues. 

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