The Asia Miner

JUL-SEP 2019

The ASIA Miner - Reporting Important Issues to Mining Companies in the Asia Pacific Region

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the asia miner • volume 16 • issue 3 31 FEATURE: Gold The Australian dollar gold price reached an all-ঞme high of AU$1,919 per ounce in June, signifying improving condiঞons for the Gold Ore Mining industry. According to industry research company, IBISWorld, the Australian dollar gold price has been driven upwards by several factors, including greater demand for wealth safe havens. "Investors are normally reluctant to hold gold, as it doesn't generate yield compared to stocks or bonds. However, rising concern that the US-China trade war could lead to weakness in financial markets is leading some investors to take this step to reduce risks," said IBISWorld Senior Industry Analyst, Jason Aravanis. Despite the benefit of price growth, the lack of new gold discoveries in Australia over the past decade represents a rising challenge for the industry. Known gold reserves have consistently declined amid high producঞon and low replacement rates, with IBISWorld forecasঞng that Australia will produce 324 tonnes of gold in 2018-19, equivalent to 9.7 per cent of global output. "On current esঞmates, we expect Australia's gold output to fall to 255 tonnes in 2023-24, which represents a slip from being the world's second largest gold producer to fourth place," said Mr Aravanis. WHY ARE PRICES RISING? According to IBISWorld, the price of Australian gold has increased in recent months due to several beneficial trends. Increased gold purchases by central banks has been one of the trends exerঞng upward pressure on prices. "In 2018, governments added 651.5 tonnes of gold to their coffers, represenঞng a 74 per cent increase from the previous year and the highest rate of accumulaঞon since 1971. This is because gold helps foreign banks diversify their foreign-exchange assets, such as US dollars, during ঞmes of heightened poliঞcal instability. We expect central bank gold purchases to increase to over 700 tonnes in 2019-20," said Mr Aravanis. Interest rate cuts in the United States and in Australia have also supported the gold price. According to IBISWorld, interest paid on bank deposits represents an opportunity cost for investors who hold gold. As interest rates have been cut, the relaঞve aracঞveness of gold as an asset has improved. Over the next five years, IBISWorld anঞcipates both rising demand and declining supply to also support the price of gold. "Demand for gold jewellery is expected to rise over the next five years, due to the middle class expanding in India, China and South-East Asia. At the same ঞme, global gold IBIS World predicts lack of new discoveries to affect industry Fool's gold: Lack of new gold discoveries to affect industry

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