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SIMON BROWN: I’m chatting with Krishan Gopaul from the World Gold Council. Krishan, I appreciate the time today. The second-quarter report [for 2023] has just been published… In short, production is up, especially in South Africa, although the base of it there [is] because of a local gold miner strike last year. And Ghana is really looking good as they brought some new mines on stream.
KRISHAN GOPAUL: Absolutely. So in the second quarter of the year, we saw gold supply overall rise 7% year on year and mine production was a large part of that. In fact, it was up 5% year on year in the quarter. If you look at the first-half total, that was up 3% year on year to an all-time record in our series back to 2000.
So yes, incredibly strong. And you’re right to mention South Africa; that was up 29% year on year.
Again – you mentioned it – there was strike action in the same quarter last year, which impacted the overall picture.
And then we had Ghana this year as well up 20% year on year in Q2. Again, big ramp-ups in two major mines, Bibiani and Obuasi. So again a very strong picture when you’re looking at mine production.
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SIMON BROWN: We’re halfway through the year so maybe it’s a hard call to make, but are we on track for a record year in terms of production?
KRISHAN GOPAUL: I think certainly we’ve seen incredibly strong production so far this year, and that has led us to revise our outlook for the full-year picture. I think, based on what we’ve seen so far, the ramp ups, the mild weather that we’ve seen in certain parts of the world – and again assuming that we don’t see any unforeseen shutdowns – it’s likely that we may well see a new annual record from mine production this year.
SIMON BROWN: Of course, production is mostly new gold coming out of the ground. Some of it is recycling. How much is recycling perhaps sensitive to price? Gold’s been at or around the $2 000/oz level for a while now, but if it weakened would recycling perhaps decrease, or is there still value even at lower prices?
KRISHAN GOPAUL: I think the recycling – you’re absolutely right to point it out – is sensitive to gold prices; not just the level that they’re at, but also the direction in which they’re going. So we saw some recycling in the second quarter that was up 3% quarter on quarter and 13% year on year. That was the strongest level we’ve seen since the end of 2020.
Now some of that is down to increases in certain markets; India and China are particularly of note and that’s likely driven by the higher prices that we’ve seen so far this year. But prices alone aren’t the issue. We’ve also seen the overall economic impact, the uncertainty around the outlook for markets across the world, the impact of inflation and the squeezes on disposable incomes.
So there are a number of reasons we’ve seen (gold) recycling pick up.
But again, overall levels I would describe as still quite modest compared to maybe other episodes we’ve seen, such as during or following the global financial crisis back about 10, 15 years ago.
SIMON BROWN: You mentioned India there. It’s typically a very price-sensitive market but demand is still looking good, notwithstanding the higher prices and notwithstanding perhaps India sort of taking a little less, because of the prices.
KRISHAN GOPAUL: That’s right, absolutely. Indian consumption for jewellery did fall 8% year on year in the second quarter. Again, it was undermined, as you said, by those record high gold prices that we saw in rupees.
I think it just impacted the affordability of jewellery, [which was] obviously incredibly price sensitive, incredibly sensitive to incomes.
And on that, actually, one offsetting factor was the fact that there was a supportive economic backdrop in India with GDP growth forecast to increase around 6% this year – again that supportive factor from potentially higher incomes offsetting the headwind of slightly higher prices that we’ve seen so far this year.
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SIMON BROWN: I spoke to your colleague about the Q1 report, [where] central bank buying stood out. He said that you expected it to come down a bit. It has, but Turkey’s also been a seller there. Central banks are still out there and buying, perhaps at a lower level than in previous quarters but certainly more than five or 10 years ago.
KRISHAN GOPAUL: Absolutely. I think the trend that we’ve seen in place for central banks since the global financial crisis is very much still intact. It’s absolutely right that 103 tonnes of demand we’ve seen from central banks in Q2 is lower quarter on quarter and year on year. However, a lot of the factors that led to that were very, very specific and very tactical.
If you look at the underlying trend, if you look at the broad-based buying that we’re seeing from central banks, that’s still very much intact.
As a result, we remain very optimistic on central bank demand. A recent survey that we’ve run showed central banks remained very, very positive towards gold.
So we still see demand likely to remain positive in the second half of the year, albeit maybe not at the same levels as in H2 last year, because that really saw exceptional levels of demand.
SIMON BROWN: It absolutely was. The last question is around ETFs. A little modest here, but you mentioned in the report – and it makes perfect sense – a stronger than expected US economy, great equity markets in the US. Truthfully everywhere, even Europe and the like, had really good equity markets, and I suppose therefore investors can look elsewhere, not necessarily at gold. So the ETF demand is not as strong.
KRISHAN GOPAUL: Absolutely. I think one of the reasons that many investors look to gold is that hedge against uncertainty, and event risk. Those certainly are still factors in the market. But if you have a look, at the moment you are absolutely right to pinpoint stronger equity-market performance.
The resilience that we appear to be seeing in economies such as the US, and the trajectory and interest-rate expectations that we’re seeing from major central banks around the world, have all contributed to the performance of ETFs. And while they were down or we saw outflows of 21 tonnes in Q2, that actually was an improved performance on Q2 of last year, where we saw 42 tonnes of outflow. So still outflows, still a fall in… but marginally better performance year on year.
SIMON BROWN: We’ll leave it there. Krishan Gopaul of the World Gold Council was talking there about the Gold Report for Q2 2023. Krishan, I appreciate the time.
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