Good news on the supply side of our market
October 6, 2006
Two more pieces of good news today on the supply side of our market. SA
gold production is expected to continue falling over the next 5 years and might
never possibly recover, sending the world's largest supply of gold on a country
by country basis down considerably. Also, Germany's central bank has announced
that they will sell no gold into the market in 2007. Supply from Central
Bank selling is continuing to dwindle.
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SA gold production declining 5% annually
Tessa Kruger
'09-OCT-06 10:00'
JOHANNESBURG (Mineweb.com) -- South African gold production
fell from 430 tonnes in 2000 to 295 tonnes in 2005 as lower grades of ore are
mined and reserves are seen to be being depleted, and the country is soon likely
to be overtaken as the world’s largest producer of the yellow metal.
Production will see an annual decrease of 5% over the next few years as
new projects will not succeed in replacing continued falling production at
existing mines, says Alex Conradie, chief economist of gold and platinum group
metals at the Department of Minerals and Energy.
The biggest recent drop in South African gold production took place from
2004 to 2005 when output fell by 12%.
The majority of gold mines in South Africa are projected to cease producing
gold over the next 10 to 20 years, while the ultra-deep South Deep mine on
the West Rand of Johannesburg has the longest projected life span of 60 years.
Lower gold production will have an impact on all the economic benefits that
gold brings to the country, affecting sectors dependent on the gold mining
industry and mining workers and their dependants. However, increased exports
of platinum metals and coal could substitute income lost through lower gold
production, says Conradie.
But gold production in South Africa may eventually dwindle away, as most
significant unworked reserves are located too deep to be mined economically
at current estimated prices. “The gold price would not only have to increase, but
the price and exchange rate will have to remain stable for a few months to a
year, before decisions on projects of this nature could be taken,” Conradie
says.
* * *
Bundesbank boosts sentiment for gold market
By Chris Flood
Published: October 5 2006 20:11 | Last updated: October 5 2006 20:11
Germany’s Bundesbank said on Thursday that it does not plan to sell any
gold from its reserves for a third year, giving a significant boost to sentiment
in the gold market after recent sharp falls in prices.
This news means that European central banks are unlikely to reach
the 500 tonne Central Bank Gold Agreement sales quota for a second year in
succession as they re-evaluate the importance of gold’s role in their
foreign exchange reserves.
“We are perhaps on the threshold of
an era of more moderate net official sector selling,” says Philip Klapwijk,
executive chairman of GFMS, the precious metals consultancy.
The Bundesbank’s announcement comes at the start of the third year
in the second five-year pact governing European Central Bank gold sales.
As Germany holds 3,423.5 tonnes of gold exchange reserves, it had been expected
to be one of the largest sellers of bullion under the pact.
Italy, another large holder of gold reserves, as well as Ireland and Luxembourg
have also not sold any gold over the last two years.
With gold prices down by more than 10 per cent since the start of September
and more than 20 below their 26-year peak in May, much of the recent weakness
was put down to uncertainty over how much gold central banks would sell before
the end of the second year of the CBGA on September 26.
In 2004, 15 of Europe’s central banks agreed to limit gold sales to 2,500
tonnes over the next five years at a maximum rate of 500 tonnes a year.
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