Gold

Gold mining companies are active on all continents on earth. This wide geographical distribution in production means that interruptions in any single region due to local political or social matters are unlikely to have a large impact on the global gold supply. Apart from gold production through mining, recycling of gold (which accounts for around a third of the total current supply) adds to production numbers. In addition, central banks can also influence the supply-side when they sell part of their gold reserves. It is worth noting that after two decades of being net sellers, central banks are now effectively net buyers of gold, resulting in a significant decrease in supply and a corresponding, simultaneous increase in demand.

Top Gold Producing Countries in 2014 (estimation):

1. China	465.7
2. Russia	272.0
3. Australia	269.7
4. United States	200.4
5. Peru	169.3
6. South Africa	164.5
7. Canada	153.1
8. Mexico	115.7
9. Indonesia	109.9
10. Ghana	106.1

^{in tons of gold
Source: GFMS}

From 1980 until 2001, a significant increase in global gold production occurred which caused the market to become saturated and resulted in a declining gold price. As production costs began to exceed profits from sales, a decrease in global gold production emerged in the period 2001 to 2008, which subsequently resulted in higher demand and an increasing gold price. For mining industries this was an incentive to start boosting gold production again after 2008. An important factor is that gold is regarded as a safe haven against falling currencies and stocks on the volatile financial markets since 2008. However, a recovering global economic climate in conjunction with increasing global production from 2008 onward, can result in overproduction and thus can cause the gold price to drop.

Gold Price:

Global gold production is forecast to increase in the years ahead but is presumed to decline in ten to twenty years from now due to the reduced number of good quality gold reserves.

Gold in Indonesia

Gold Production in Indonesia

Currently, Indonesia produces around four percent of global gold production, half of which originates from the giant Grasberg mine, the world largest gold mine, on the western half of Papua. This mine, which is believed to contain the world's largest gold reserves (67.4 million ounces), is majority-owned by the American company Freeport-McMoRan Copper & Gold Inc. and makes it the largest taxpayer to the Indonesian government. But much tension surrounds activities in this mine. A string of violent attacks (including assassinations, robberies and sabotage) have been witnessed since the era of Reformasi. Two underlying reasons for this situation are the ongoing quest for independence of Papua by the Free Papua Movement, and the feeling of resentment by Papuans (and other Indonesians) against a foreign company that manages to profit disproportionally from the country's natural resources. Being situated in a province where the rate of relative poverty is among the highest in the country, makes this issue even more sensitive. Problems related to the aforementioned have temporarily disturbed production rates in the past and disruptions will - most likely - occur again in the future as the underlying reasons cannot be solved on the short or middle-long term.

Indonesia's gold production has been rather volatile over the past decade:

Gold Production Indonesia:

	2004	2005	2006	2007	2008	2009	2010	2011	2012	2013	2014F
Production	93	143	85	118	64	104	104	76	75	59	87

^{in tons of gold
Source: Indonesian Ministry of Energy and Mineral Resources}

Indonesia's largest gold mines are located in:

1. Papua
2. Sumbawa
3. East Kalimantan
4. Central Kalimantan

As gold production in Indonesia - by far - outpaces domestic gold demand, most of production is shipped abroad. However, the Indonesian government is currently stimulating the establishment of national processing industries in order to increase profits by exporting products that have added value, while preventing the current over-exploitation of the country's national resources. This 'resource nationalism' promulgated through the 2009 Mining Law, has consequences for foreign investors as it contains an accelerated divestment requirement (within ten years from commercial operations, the mining company should be majority-owned by Indonesian stakeholders).

Updated on 13 October 2015