Performance of Gold in 2020 is the highest since 2010
Mining of the precious metal called gold is a lucrative business with operations spread across the various continents with the exception of Antarctica (Metals Focus & World Gold Council, 2020).
In 2019, forty-three (43) countries produced 3,272.7 metric tonnes of gold. Stability in the price of gold per ounce has been a major concern to some investment analysts in the global market in recent years.
The inflation-adjusted prices per ounce recorded for gold in recent years are as follows: 2010 = US$1,652.87; 2011 = US$1,748.40; 2012 = US$1,861.37; 2013 = US$1,332.18; 2014 = US$1,324.19; 2015 = US$1,165.48; 2016 = US$1,230.02; 2017 = 1,356.14; 2018 = US$1,314.97; 2019 = US$1,527.57; and 2020 = US$2,034.45.
The foregoing figures reflect closing prices. That is, the price of gold per ounce as at December 2010 through December 2019. However, the figure for 2020 (US$2,034.45) reflects the gold price per ounce as at August 7, 2020.
The price per ounce and the performance of gold in 2020 are unequalled since 2010. Stated differently, the performance of gold in terms of price per ounce in 2020 is the highest since 2010. We observe about 38.18% hikes in price of gold per ounce between December 31, 2019 and August 7, 2020.
This exceeds the respective annual percentage increases recorded in 2019 (16.17%), 2017 (10.25%), 2012 (6.46%), 2011 (5.78%), and 2016 (5.54%).
The data depict fluctuations in gold prices between periods, with stable and consistent price increases from 2010 through 2012; between 2016 and 2017; and between 2019 and the current financial year.
Monthly Price of Gold
Available monthly data for 2020 indicate the inflation-adjusted price of gold per ounce in January 2020 was US$1,579.27.
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This was about 3.39% more than the closing price (US$1,527.57) in December 2019, and US$42.20 short of the price (US$1,621.47) recorded in February 2020. The other prices are: March (US$1,603.05); April (US$1,725.33); May (US$1,734.28); June (US$1,770.70); July (US$1,974.70); and August (US$2,034.45). Overall, the statistical values depict steady increase in gold prices over the eight-month period, save the price (US$1,603.05) in March 2020. So far, the most significant percentage increases in price (11.52% and 7.63%) in the current year were recorded between June (US$1,770.70) and July (US$1,974.70); and between March (US$1,603.05) and April (US$1,725.33) respectively.
Some market analysts have predicted the average closing price for gold in the current financial year will be over US$1,900.00 per ounce. Indeed, gold has proven to be a major source of investment in times of both volatility and stability in the global equity markets in particular and in the global financial markets in general.
Leading Gold Producing Countries
Available statistics on the world’s leading producers of gold in 2019 revealed China is the leading producer of gold. China’s total production volume of 383.20 metric tonnes affirmed her leadership in global gold production.
The contribution of the People’s Republic of China to global total gold production during the period was equivalent to 12% (World Gold Council, 2020).
The total production capacity (329.50 metric tonnes) of the Russian Federation was 129.30 metric tonnes more than that of the United States.
This affirmed their respective 2nd and 4th rankings during the period. Ghana’s total volume of gold production in 2019 was estimated at 142.40 metric tonnes, and equivalent to 4.35% of global total gold production.
It was the 7th highest production volume and compared favourably with the respective total volumes produced by South Africa (118.20 metric tonnes), Mexico (111.40 metric tonnes), Brazil (106.90 metric tonnes), Sudan (76.60 metric tonnes), Mali (61.20), and Colombia (46.30 metric tonnes), among other major gold-producing countries during the period.
Demand / Performance of Gold
The global demand for gold could be categorised into four: gold demand for technology, investment, jewellery, and demand by central banks. Innovations in technology, specifically in electronics are believed to be nucleated around gold and nanotechnology. Scientists describe the latter as the branch of technology which focuses on dimensions and tolerances of less than hundred nanometers, when it comes to the manipulation of molecules and individual atoms.
Gold and nanotechnology play a significant role in innovations introduced in areas such as environmental management, medicine and engineering.
The precious metal plays a crucial role in dentistry and the development of medical equipment for effective drug transfusion into the human body.
Gold has proven to be both counter-cyclical and pro-cyclical. Its performance becomes manifest in periods of uncertainty; it serves as a safe haven for investment and investors in uncertainty periods.
Gold prices in the short and medium-term are strongly influenced by investment factors. Generally, an investment portfolio is enhanced and protected when modest allocations are made to the precious metal.
Expected and unexpected market shocks can increase investment losses, volatilities and reduce purchasing power.
However, the inclusion of gold in portfolios provides strong protection for investments during these periods. The acceptance of gold as reliable investment source and store of value in the long-term are beginning to gain currency among investors.
This is evident in more than 235% increase in annual investment in gold in the last three decades. In spite of the foregoing, the share of gold in global investment portfolios is less than 1% (World Gold Council, 2020).
Demand for gold for production of jewellery accounts for over 50% of global supply annually. By far, it is the sector with the largest demand for gold around the world. Markets in the Middle East and Asia dominate the demand for high-caratage and purer gold.
Indian and Chinese jewellery markets account for about 50% of demand for gold across the globe.
The financial crises of 2008 compelled many central banks to review their respective reserves and behaviour towards gold. Currently, central banks are a major source of demand for gold annually; central banks in emerging markets have increased their demand for gold while European banks are no longer selling.
Central banks are increasingly appreciating gold as a long-term store of national value. Statistics released by the World Gold Council (2020) indicated about 7,853 metric tonnes of gold were sold by central banks between 1987 and 2009; and they purchased about 3,297 metric tonnes between 2010 and 2016. - to be continued next week
The writer is a Chartered Economist/Business Consultant