Analysis of Trends and Prospects in the Global Gold Industry

The modern gold industry has its own peculiarities. During stable growth periods for the world’s most economically developed countries, the gold market is mostly influenced by such factors as competition and overproduction. The main regulator of prices during such times is the operational costs of the industry’s leading companies. However, during periods of increased political and economic risk, gold actively becomes an instrument for speculation on the commodities exchanges, which significantly effects the dynamics of pricing. At present, we may all observe such a trend. The increased price for gold is mostly in reaction to the weakening American dollar, the generally unstable political situation in the world, the increasing threat of global terrorism, as well as a number of economic factors – weakness in securities exchange and a decrease of gold stocks held by producers. In the beginning of August 2006, the price of gold reached US$647 per troy ounce, which is hardly a ceiling.
An additional factor contributing to the rapid growth in global gold prices is the breakneck speed of economic development in certain Asian countries, particularly India and China. Although, traditionally the largest gold consumers have been developing Asian nations, which are influenced by cultural and religious customs. The noticeable increase in demand within those countries is explained by a rise in purchasing power. This accounts for the current structure of gold consumption worldwide. 40% of the gold produced goes for jewelry manufacture, 30% is held as national reserves, almost 20% is kept by stacker in the form of bullion and coins, and a mere 10% is used by industry for technical and technological purposes.
Another influence on the situation of the gold market is national banks, which require this precious metal as security for state debt, as well as to secure the liquidity of the country. Therefore, about 33,000 tons of gold are stored in bank’s safes around the planet. Yet, this volume in constantly fluctuating.
Gold producers also place a lot of hope in the high-tech sector, including electronics and space.
With regards to the key players in the gold industry, the top three producers globally include South Africa, Australia, and the United States. These nations have been leading the industry for quite some time, and have on the whole been responsible for an average 36% of gold production. The primacy of these three countries is mostly due to the availability of their own large gold reserves. However, recently these traditional favorites in the market have begun decreasing their production volumes, while second-tier countries are now consistently increasing their own. Primarily, this concerns Russia, the companies of which are aggressively seeking position in the market, and each has quite excellent growth prospects. In 2005, Russia grabbed second place, with production of 269 tons, outdoing Australia and the U.S.
The availability within a country of gold deposits is a serious, but not the only, reason allowing reshuffling of the top positions on the global market. As recent events have proven, traditional favorites are lowering their production. One of the important causes for this trend is a growth in operating expenses. Much depends on the composition of the ore within the deposits. The more gold that the ore contains, the lower the production costs, and vise versa. Operating expenses also depend on the technology utilized during ore processing. Actually, these same factors can be observed in Kazakhstan’s gold industry.
Based on proven gold reserves of approximately 1,900 tons, Kazakhstan ranks 8th in the world. However, as regards production volumes, our country takes only 19th place, which is far from its potential. Nevertheless, the gold mining industry of Kazakhstan has huge prospects. Through the use of advanced technologies, the nation, with its own rich deposits, may become a serious player on the global market for this metal. Taking into account the prognosis of leading analysts, within the next five to ten years demand for gold will outstrip supply, assuring the continuance of current growth levels in price. One may quite easily come to the conclusion that gold production will remain a profitable and socially significant industry.

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