International.—China’s gold prices have risen 32% since the Shanghai Gold Exchange opened on October 30, 2002. Prices were reported to be driven by a rise in world gold prices, growing Chinese demand for gold, and an uncertain global political and economic outlook. In addition, China’s gold jewelry, which represents 90% of China’s gold consumption, has been selling at an annual price increase of 15%. The value of jewelry trade in China is expected to grow 10-fold in the next 10 years. At this rate, China would become a major manufacturer of gold jewelry by 2010. Currently, China consumes about 200,000 kg of gold per year and produces 180,000 kg. China has about 800 gold mines, but 80% are small, backward in technology and management, and inefficient, which makes the mines uncompetitive and costly (Platts Metals Week, 2004a).
Peru could become the world’s fifth-leading gold producer in 2005, overtaking Indonesia and Russia. The increase in gold output would result from the 2005 start-up of the Alto Chicama and La Zanja projects, and the expansion of the Aruntani Mine. Gold production in 2004 is expected to be relatively small as expansions of the Yanacocha Mine and other small gold mines in southern Peru are offset by an anticipated 30% decline in output at the Pierina Mine. Pierina’s gold output decline is a result of an expected decline in reserves (American Metal Market, 2004c).
The London Bullion Market Association (LBMA) report of gold ounces transferred rose 4.5% in December in comparison with those of November, rising to 445,000 kg (14.3 million ounces). In comparison with those of December 2002, ounces transferred were 19% lower. The number of gold transfers fell 4% in December compared with those of November, but the number of gold transfers increased 2% over the number of transfers in December 2002 (Platts Metals Week, 2004e).
GoldFields Mineral Services Ltd. (GFMS) reported that an increase of about 20,000 kg (640,000 troy ounces) in Australian gold production, the first increase in 5 years, was primarily responsible for a 9,000-kg (290,000-ounce) growth in 2003 global gold output. GFMS also noted an 8% increase in Peru’s gold output, attributed to higher output at the Yanacocha Mine. China was also reported to have increased its gold output for the tenth successive year. GFMS estimated that world jewelry fabrication demand fell by 7.1% to its lowest level since 1991. The decline was concentrated in Italy and East Asia, with noticeably lower fabrication in the Arab Middle East and the United States. Net gold sales from official sources, largely central banks, rose 5% to the highest level since 1992. Most of the rise came from non-Central Bank Gold Agreement countries. Recycling of gold scrap rose 13%, with India, Indonesia, and Thailand providing the greatest volumes (Platts Metals Week, 2004b).
Despite the rally in gold prices denominated in U.S. dollars, gold bullion denominated in most other currencies fell. Only in 2 currencies, the U.S. dollar and Japanese yen, did the gold price rise in 2003. Due to the strengthening of local currencies, the gold price actually declined in Australian dollars (down 10.8%), Canadian dollars (down 1.7%), the South African rand (down 6.7%), and the euro (down 0.4%) (Platts Metals Week, 2004d).
Gold Bullion Securities (GBS) reported that it held 35,066 kg (1,127,411 ounces) of gold on behalf of security holders for both United Kingdom and Australian products. The average daily trading volume for GBS since it listed was 573,000 securities per day. GBS was first listed in Australia in March 2003. In December 2003, the gold bullion-backed securities were listed on the London Stock Exchange (Platts Metals Week, 2004c).