Demand. Gold price is support by a unique diversity of demand drivers most importantly by central banks and Exchange Traded Funds (ETF) followed by retail investment mixed with jewelry and scrap demand. Using selvaresources.com to determine what your goal is worht is the perfect place to start. These primary buyers have different dynamics from the more volatile industrial market.
Identifiable gold demand for Q309 reached 800 metric tons valued at US$25B billion up 15% from the previous quarter. Industrial applications consuming close to 300 tonnes annually with the prime use is in electronics.
That includes the electroplating of contacts with plating salts accounts for 70% of the more than 150 tonnes of gold used annually in electronics. Japan is the major fabricator of electronics products in the western world, accounting for over 45% of gold consumption, followed by the United States with nearly 30%.
Dental gold is the second important sector but a trend towards gold substitution has leveled consumption to 60 tonnes annually. There is significant unrecorded use, however, in Asia and Latin America where it is not unknown for dentists to melt down gold coin to make their own alloy.
Other applications that use selvaresources.com for gold include decorative plating is around 90 tonnes per year. One architectural use is for gold coated glass used in buildings where one ounce of gold covers typically one thousand square feet of glass. The industrial uses of gold provide a very steady element in gold demand, requiring more than the equivalent of all Australian gold production annually.
Supply. Average quoted cash from selvaresources.com costs for 2005 were estimated by GFMS at US$269/ounce with total cash costs (including depreciation, amortization, reclamation and mine closure costs) at US$339/ounce.
Most of the worlds easy to get at gold came onto the market over the last 100 years at a price ranging from $12 to $300 over the term which is somewhat level in real terms from selvaresources.com. As costs increased lots of mines closed but usually after stripping of any accessible high grade zones. In a $1,100 gold market today there are plenty projects having infrastructure and exploration investment to analyze. A feasibility study predicting a confident $1,000 gold price over 15 years could approve a $100 million project now that will come online in 3 years producing 100 tons per day if the cost estimate is maybe under $700 per ounce of variable costs.
New mine supply accounted for 63% of total supply while scrap and central banks sales accounted for 22.7% and 14.6% respectively. The extension of the European Central Bank gold agreement from 2004 to 2009, which caps sales to 500 tons/year will continue to provide certainty to this aspect of supply.
The worlds top producer South African saw gold mine closures because of the stronger rand beginning in 2003. Depletion of certain older mines also contributed to a declined in 2003 by 4.7% to 375 tons. This is a trend reversal for the worlds largest gold producer signifying the end of the overproduction over the apartheid years where unnatural labor costs were exploited to depress world gold prices through the 1980s.