Gold supply

The annual total supply of gold has averaged around 4,000t over the last 10 years. While many will be aware that gold is sourced from the earth through mining, this is not the only way in which gold is supplied to the market. Total mine supply – which is the sum of mine production and net producer hedging – accounts for two thirds of total supply. Recycled gold accounts for the remaining third.

Gold supply chart - 66% Mined - 34% Recycled

Mine production
The sources of mine production have become as geographically diverse as gold demand.

China was the largest producer in the world in 2015, accounting for around 14 per cent of total production. Asia as a whole produces 23 per cent of all newly-mined gold. Central and South America produce around 17 per cent of the total, with North America supplying around 16 per cent. Around 19 per cent of production comes from Africa and 14 per cent from the CIS region.

Producer hedging
There are times when gold producers will want to lock in a future price for their gold – for example, so that they can ensure a return appropriate to their current production costs. The gold sold into the market adds to supply in the short term. It brings metal on to the active market – and allows mining companies to sell metal ahead of their production schedules.

Recycled gold
Because gold is virtually indestructible, all the gold ever mined still exists, apart from a small amount which has been lost. At the end of 2015, there were 186,700 tonnes of stocks in existence above ground

It is recoverable from most of its uses and capable of being melted down, re-refined and reused. Recycled gold therefore plays an important part in the dynamics of the gold market. While gold mine production is relatively inelastic, the gold recycling industry provides an easily-traded supply of gold when it is needed, thereby helping to stabilise the gold price.