Gold supply and demand from GFMS report

Gold mine production rose to a record high in 2012, while jewellery fabrication fell 4.2 percent, mainly due to a drop in demand in India along with a fall in the rupee, metals consultancy GFMS said on Thursday. Soaring investment in exchange-traded funds (ETFs) helped cushion the impact of lower off-take for jewellery and falling physical bar buying, it added.
Below are key supply and demand factors in the 2012 gold market. Spot gold was quoted at $1,545.96 an ounce by 1133 GMT on Thursday.

– Jewellery fabrication eased for a second consecutive year to 1,893 tons in 2012 from 1,975 tons in 2011, leading to an overall decline in gold fabrication to 2,613 tons from 2,760. – India’s gold carat jewellery fabrication slipped to 618.20 tons from 667 tons in 2011, a drop of 7.3 percent, while the rupee gold price rose by 24 percent.
– Chinese jewellery consumption edged up by 0.6 percent to a record 498.40 tons.
– Demand from major Western jewellery fabricators declined, with off-take down 8 percent in Italy and 6 percent in the United States.
– World investment in gold, which covers implied net investment, coin and bar buying, eased 2 percent to a four-year low of 1,605 tons. Implied net investment nearly trebled to 294 tons compared with 2011, although remaining well below 2009 record levels of 1,130 tons.
– GFMS attributed the overall drop to lower investment in physical bars, with declines recorded across major markets. Bar hoarding fell 17 percent to 998 tons from a record 1,198 tons in 2011. This was again the largest investment element, but its dominance was reduced to 62 percent of world investment last year, compared with 73 percent in 2011.
– Europe and India saw particularly significant decreases in physical bar investment last year, with buying down 29 percent to 274 tons and 205.90 tons, respectively.
– The futures and over-the-counter markets remained broadly neutral on a net basis last year, with net Comex positions up 77 tons to 587 tons and a small amount of disinvestment on the OTC market.
– Holdings of exchange-traded funds edged higher to reach new record levels, ending the year at around 2,691 tons. Inflows rose 279 tons or 12 percent after a major slowdown in 2011.

– Global gold mine output increased by a modest 22 tons to a record 2,861 tons in a fourth year of growth. China remained the number one producer of mined gold, with output up 42.10 tons to 413.10 tons last year.
– It was followed by Australia, which supplied 250.10 tons, the United States, Russia and Peru, which ousted South Africa as the fifth-biggest producer.
– World cash costs for gold miners rose 12 percent to $738 an ounce in 2012, compared with $643 in 2011. Total production costs, including depreciated capital expenditure, increased to $1,211 an ounce from $809.
– The rise in mine output was more than offset by a decline of 52 tons, or 3 percent, to 1,616 tons in recycled material returning to the market.
– Net central bank purchases jumped by 16 percent to a 48-year high of 532 tons in 2012, boasted by a further drop in sales from signatories to the third Central Bank Gold Agreement (CBGA).

Source: Bullion Bulletin

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