Gold Demand Trends Q3 2024

Q3 saw strength across all components of supply. Mine production reached 990t – an all-time third quarter high in our records back to 2000 – and recycling increased 11% y/y to 323t. Preliminary estimates also suggest the net producer hedge book was virtually unchanged in Q3.¹

Mine Production

Mine production continued its strong run in Q3: up 6% y/y to hit another record. With each of the first three quarters of 2024 being new records for their respective quarters, y-t-d mine production has eclipsed the previous Q1–Q3 record set in 2018.

On a q/q basis, production increased by 9%, due primarily to normal seasonal fluctuations. Global gold production shows modest seasonality: in the 10 years to 2023 first-half mine production averaged 48% of the annual total. H1 mine production is affected by Christmas and Easter holidays in many producing countries, along with very cold temperatures at some operations, which restrict alluvial and some other surface operations.

In Q3, mine production from four countries drove the increase in global output:

• Canada (26% y/y): output was boosted by ramp-ups at the Coté and Greenstone Mines and production increases at existing mines including Brucejack and Detour Lake
• Mexico (24% y/y): production increases were driven mostly by the resumption of operations at Newmont’s Peñasquito mine following last year’s strike
• Indonesia (14% y/y): output rose as higher grade ore was accessed from Phase 7 of the Batu Hijau mine
• Russia (5% y/y): high output from three operations drove the increase: Gross, where capacity was expanded; higher grade mining at Natalka; and a production ramp up at Malyutka.

Operations in some countries were hit by a mix of lower grades and production suspension:

• Turkey (-17% y/y): production declined following the suspension of SSR Mining’s Çöpler after the failure of the heap leach pad. The suspension will be ongoing until third-party review of the design and operation of the mine has been completed
• Burkina Faso (-11% y/y): lower output y/y due to expected lower production across multiple operations
• D.R. Congo (-7% y/y): the expected fall in production was due to lower grades and volumes at the vast Kibali operation owned by Barrick and AngloGold Ashanti
• China (-3% y/y): fall resulting from lower grade mining at several operations.

Supply is expected to have increased in most regions in Q3’24, with North America posting the highest increase, +16%, followed by Oceania and Central & South America each with a 7% y/y gain.

Bucking the trend, lower production at a number of mines, including planned lower grade mining from Dundee Precious Metals’ Ada Tepe in Bulgaria saw European mining supply fall 5% y/y.

Mining costs have continued to increase in 2024. In Q2’24 – the latest quarter for which we have data – all-in sustaining costs increased by 6% y/y to reach a record quarterly high of US$1,388/oz. Although this is still higher than broad-based inflation, mining cost inflation has slowed over the past 12 months and should benefit from steady oil prices and other energy input costs.

As 2024 progresses – and based on information from Metals Focus – it is increasingly likely that mine production will hit a new all-time high, surpassing the prior record of 3,658t set in 2018.

Net producer hedging

Initial estimates suggest that producer hedging made an insignificant contribution to supply in the third quarter. We estimate that the global aggregate producer hedge book will be unchanged in Q3’24, but as usual this will be subject to revisions once mining companies report third quarter results over the next month or so.

In Q2’24, the latest quarter for which we have comprehensive disclosure, the global delta-adjusted producer hedge book rose by 9t to 222t. Y-t-d we estimate that the hedge book has declined by 16t.

Recycling

Third quarter gold recycling increased to 323t. Record high gold prices (in all currencies) triggered the y/y increase in recycling supply that was seen in all regions. The q/q fall was rather surprising, considering the strong performance of gold during the quarter. Two regions reported q/q increases, the Middle East and South Asia, but these were more than offset by quarterly declines in the other regions, especially East Asia and Europe, both of which had seen strong q/q increases in the second quarter.

Based on conversations with the recycling industry, the q/q decline can be at least partly explained by the initial shock of the Q2 rapid price increase to record highs wearing off somewhat. While the gold price increased by a larger extent in Q3, consumers were slightly less surprised by the price reaching fresh record levels during the quarter. It is entirely possible that recycling also subsided during Q3 as investors anticipated being able to sell in future at yet higher prices. The slashed import duty further contained recycling in India, effectively reducing the domestic price.

One of the regions that saw a q/q increase in recycling volumes was the Middle East. Turkey was a major contributor to this result, as a relatively stable Turkish lira and very high interest rates appear to have prompted some gold holders to sell jewellery and invest the proceeds at interest rates up to 50%. Ongoing conflict in the wider Middle Eastern region triggered some distress selling during Q3’24, something that appears likely to continue.

In India, the unexpected and material cut in gold import duty in early July prompted lower recycling volumes than would have been expected looking at the US dollar gold price. This goes hand in hand with the stronger jewellery purchases seen during the quarter. Another consequence of the duty cut was selling by gold loan companies, which auctioned some holdings following the rupee-denominated fall in gold in order to limit losses from non-performing loans.

In China, recycling volumes increased y/y but fell approximately 9% q/q. One factor behind the q/q decline was heavy trade-inventory liquidation in Q2. Sales of weighty pieces slumped as the price jumped during the second quarter, so retailers and wholesalers were quick to recycle them and buy lightweight jewellery lines instead.

Overall, we were somewhat surprised by weak recycling supply in many Western markets in Q3’24, as we had expected slowing economies to trigger more distress selling. But recycling volumes in Western markets remain below long-term averages, suggesting that near-market stocks are quite depleted and there is little evidence of widespread consumer distress.