Aurico Metal Inc. (AMI)

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Bullion Vault-2013
Gold Market Surplus "Set to Shrink" in 2013
Thursday, 9/12/2013 15:32
Leading data providers see slight gold mining rise offset by drop in scrap...

The GLOBAL GOLD market will see the gap between supply and demand shrink "a fair bit" in the back-half of 2013, the Thomson-Reuters GFMS consultancy said Thursday.

Measuring the gold market's surplus as the sum of mining output and scrap supply, minus all fabrication except gold coins, the data and analysis providers have repeatedly noted a growing overhang of gold supply as prices rose over the last decade.

Now "the underlying surplus in the gold market (which has ballooned in recent years) is likely to shrink by a fair amount this year," says GFMS's new Gold Survey 2013 Update.

"This, along with a probable recovery in buy-side interest from professional investors and ongoing central bank purchases, should pave the way for a decent price recovery later this year."

Global gold mining output rose 3% in Jan-July compared with the first half of 2012. So-called scrap supplies, meaning existing gold holdings sold back to the market, fell in contrast by 14%.

Previous GFMS reports showed the gold market surplus swelling from less than 100 tonnes in 2005 to more than 2,500 tonnes in 2011 – the year that gold prices peaked in US Dollar terms.

That slack was picked up by gold investment demand during the financial crisis.

As prices then slumped at their fastest pace in three decades during the first half of 2013, new jewelry fabrication jumped almost 23%, today's report says.

Net of scrap supplies, the growth in jewelry fabrication was "an even more buoyant 42.8%."

But Indian scrap supplies – down 45% between Jan and July on GFMS's analysis – have surged in recent months, according to local press reports. Because a slump in the Rupee, plus strict controls on new gold imports, has seen the world's largest gold-buying and gold-owning nation hit by new all-time record high prices.

Looking at the gold market's likely surplus later this year, GFMS says its assumption is that a return to prices in the mid-$1400s would "not be sufficient to stimulate a wave of recycling."