Gold Demand Trends Q1 2022

Total gold supply increased by 4% y-o-y. This was driven by strong mine production of 856t – an all-time Q1 high in our records, which date back to 2000 – and resurgent recycling, which jumped 15% y-o-y to 310t, itself the largest first quarter recycling tally since 2016.

Owing to the timing of this publication, supply data is subject to potential revisions once most mining companies have released their quarterly reports. Consequently, most estimates are provisional. For example, Metals Focus recently increased its estimate for 2021 full-year mine production by about 20t, primarily due to a reassessment of small scale and artisanal mining in Bolivia and Peru.

Mine production

Early data suggests that mine production increased 3% y-o-y to a little more than 856t, representing the strongest ever first quarter production level since 2000, narrowly beating the previous record (a shade under 856t) set in Q1 2016. 

On a q-o-q basis, production fell by 8%, due primarily to seasonal fluctuations: open pit and alluvial operations reduce or halt in some very cold climates, especially in Russia and other countries in the former Soviet Union. Meanwhile, South Africa’s gold mining industry is subject to reduced output during the long summer holidays over Christmas and the New Year.

Mine production increased in Q1 due to three factors:

• the ongoing ramp-up of brownfield expansions
• higher grades at some existing mines
• a return to production for mines in China’s Shandong province, which had previously been halted due to safety investigations

While the coronavirus pandemic had virtually no impact on the volume of mine production in Q1’22 (although COVID-19 precautions continue to weigh upon gold mine costs), other unusual factors hit mine supply. The suspension of Kinross’s Kupol mine in Russia as a reaction to the invasion of Ukraine contributed to most of the decline in that country’s output.

Regionally, output from Asia and Oceania increased the most, both 6t higher y-o-y due to increased production in China and Australia respectively. In China – up 5% y-o-y – production at most mines in the Shandong province resumed in the first quarter after operations had been halted for safety inspections due to a number of accidents at the start of 2021. Australia saw mine production increase 6% y-o-y as grades at a number of major mines improved. The large y-o-y jump was also assisted by particularly weak production in the corresponding period last year. 

In Africa, Mauritania saw a 54% increase y-o-y as the first phase of the Tasiast expansion project was ramping up through the quarter. Further y-o-y growth is likely as a mill fire at Tasiast last year cut output from Q2’21. Burkina Faso’s mine production fell 5% y-oy due to lower grades at many of the county’s operations. In North and Central America, production increased by 4% y-o-y in the United States due to higher grades and an increased proportion of underground ore being mined in the Carlin mines of Nevada. The Dominican Republic saw mine production fall 17% due to grade declines at its largest mine, which are expected to continue throughout the year according to company guidance. Mexico also saw grade-related production declines of 5% y-o-y.

All regions are expected to increase production compared to 2021, with the exception of the former CIS, where a fall in Russian output offset modest growth in other countries. Russia saw production fall by an estimated 3% following the suspension of Kinross’s Kupol mine in response to the invasion of Ukraine. 

Although it is too early to precisely forecast full year mine production for 2022, many of the trends evident in the first quarter suggest that production will remain strong. Please see the Review and Outlook section for more details.

Net producer hedging

Provisional estimates put de-hedging at 11t in Q1 after examining the maturity profile of outstanding positions. But this is subject to change as we await more information from gold producers. For example, we would not be surprised if some Australian or South African companies took advantage of high local currency gold prices during the quarter. 

This follows an unexpected 3t of hedging in Q4’21 after a revision to our data series.¹ For the full year 2021 saw net de-hedging of 20t, the second consecutive year that the global hedge book fell: the aggregate hedge book has fallen in four of the past five years, and by a total of 98t over that period. 

Recycled gold

Gold recycling increased to 301t (+4% q-o-q, +15% y-o-y) in response to higher gold prices. This was the strongest first quarter level of recycled supply since 2016.

We have argued previously that it is more useful to use the q-o-q picture in order to judge consumer recycling behaviour, especially considering the disruptions to recycling activities that took place during the pandemic in 2020 and 2021. Also, our economic modelling suggests that changes in the gold price have an immediate, but temporary, effect on recycling and the jump in gold prices this year appear to have prompted higher sales, although economic hardship in some markets also likely played a role. The q-o-q increase would have been larger if it were not for slower y-o-y sales in China, detailed below; excluding China, the rest of the world saw a 10% q-o-q increase in recycling supply. 

In Asia, Chinese recycling activity was healthy in January and February, but fell in March as the resurgence of COVID-19 triggered lockdowns in various important regions including Shanghai and Shenzhen. India was comparatively unaffected by the pandemic during the quarter and saw higher recycling volumes triggered by a firm gold price, assisted by some gold loan defaults and pawnbroker sales. East Asia, aside from China, Vietnam and Thailand, saw strong q-o-q increases but remains at much lower volumes than the peak supply during the pandemic. 

In the Middle East recycling supply was higher q-o-q, with strong volumes from Lebanon due to ongoing economic turmoil. Western recycling supply saw price-related growth: Europe posted a greater increase due to euro weakness pushing up local currency prices, while US recycling rose during the quarter despite the lack of a similar currency benefit.

Gold prices and the looming squeeze on consumers from inflation, especially in higher food and energy prices, will drive consumer recycling supply in 2022. Read the Review and Outlook section for more details.