Best of the Week
Most Popular
1. Will Gold Price Breakout? 3 Things to Watch… - Jordan_Roy_Byrne
2.China Invades Saudi Oil Realm: PetroDollar Kill - Jim_Willie_CB
3.Bitcoin Price Trend Forecast, Paypal FUD Fake Cryptocurrency Warning - Nadeem_Walayat
4.The Stock Market Trend is Your Friend ’til the Very End - Rambus_Chartology
5.This Isn’t Your Grandfather’s (1960s) Inflation Scare - F_F_Wiley
6.GDX Gold Mining Stocks Fundamentals - Zeal_LLC
7.US Housing Real Estate Market and Banking Pressures Are Building - Chris_Vermeulen
8.Return of Stock Market Volatility Amidst Political Chaos and Uncertain Economy - Buildadv
9.Can Bitcoin Price Rally Continue After Paypal Fake FUD Attack? - Nadeem_Walayat
10.Warning Economic Implosion on the Horizon - Chris_Vermeulen
Last 7 days
Chaos Capitalists Short Countries - How Chanos Got China Wrong - 24th Apr
Artificial Intelligence Defines the Political News Narrative - 24th Apr 18
Stock Market "Oops, They Did It Again" - 24th Apr 18
Fox in the Henhouse: Why Interest Rates Are Rising - 23rd Apr 18
Stocks and Bonds, This is Not a Market - 23rd Apr 18
Happy Anniversary Silver Investors! - 23rd Apr 18
The Hottest Commodity Play In 2018 - 23rd Apr 18
Stock Market Correction Turns Consolidation - 23rd Apr 18
Silver Squeeze, Gold Fails & GDX Breadth - 23rd Apr 18
US Economy Is Cooked, the Growth Cycle has Peaked - 23rd Apr 18
Inflation, With a Shelf Life - 23rd Apr 18 - Gary_Tanashian
Stock Market Predictive Modeling Is Calling For A Continued Rally - 22nd Apr 18
SWEATCOIN - Get PAID to WALK! Incentive to Burn Fat and Lose Weight - Review - 22nd Apr 18
Sheffield Local Elections 2018 Forecast Results - 22nd Apr 18
How Long Does it take for a 10%+ Stock Market Correction to Make New Highs - 21st Apr 18
Sheffield Ruling Labour Party Could Lose 10 Council Seats at May Local Elections - 21st Apr 18
Crude Oil Price Trend Forecast - Saudi Arabia $80 ARAMCO Stock IPO Target - 21st Apr 18
Gold Price Nearing Bull Market Breakout, Stocks to Follow - 20th Apr 18
What’s Bitcoin Really Worth? - 20th Apr 18
Stock Market May "Let Go" - 20th Apr 18
Overwhelming Evidence Against Near Stock Market Grand Supercycle Top - 20th Apr 18
Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - 20th Apr 18
The Incredible Silver Trade – What You Need to Know - 20th Apr 18
Is War "Hell" for the Stock Market? - 19th Apr 18
Palladium Bullion Surges 17% In 9 Days On Russian Supply Concerns - 19th Apr 18
Breadth Study Suggests that Stock Market Bottom is Already In - 19th Apr 18
Allegory Regarding Investment Decisions Made On Basis Of Government’s Income Statement, Balance Sheet - 19th Apr 18
Gold – A Unique Repeat of the 2007 and How to Profit - 19th Apr 18
Abbeydale Park Rise Cherry Tree's in Blossom - Sheffield Street Tree Protests - 19th Apr 18
The Stock Market “Turn of the Month Effect” Exists in 11 of 11 Countries - 18th Apr 18
Winter is Coming - Coming Storms Will Bring Out the Best and Worst in Humanity - 18th Apr 18
What Does it Take to Create Living Wage Jobs? - 18th Apr 18
Gold and Silver Buy Signals - 18th Apr 18
WINTER IS COMING - The Ongoing Fourth Turning Crisis Part2 - 18th Apr 18
A Stock Market Rally on Low Volume is NOT Bearish - 17th Apr 18
Three Gold Charts, One Big Gold Stocks Opportunity - 17th Apr 18
Crude Oil Price As Bullish as it Seems? - 17th Apr 18
A Good Time to Buy Facebook? - 17th Apr 18
THE Financial Crisis Acronym of 2008 is Sounding Another Alarm - 16th Apr 18
Bombs, Missiles and War – What to Expect Next from the Stock Market - 16th Apr 18
Global Debt Bubble Hits New All Time High – One Quadrillion Reasons To Buy Gold - 16th Apr 18
Will Bitcoin Ever Recover? - 16th Apr 18
Stock Market Futures Bounce, But Stopped at Trendline - 16th Apr 18
How To Profit As Oil Prices Explode - 16th Apr 18
Junior Mining Stocks are Close to Breaking Downtrend - 16th Apr 18
Look Inside a Caravan at UK Holiday Park for Summer 2018 - Hoseasons Cayton Bay Sea Side - 16th Apr 18
Stock Market More Weakness? How Much? - 15th Apr 18
Time for the Gold Bulls to Show their Mettle - 15th Apr 18
Trading Markets Amid Sound of Wars - 15th Apr 18
Sugar Commodity Buying Levels Analysis - 14th Apr 18
The Oil Trade May Be Coming Alive - 14th Apr 18

Market Oracle FREE Newsletter

Trading Lessons

Russia: The Sleeping Giant of Gold Producing Countries

Commodities / Gold and Silver 2013 May 25, 2013 - 03:55 PM GMT

By: Michael_J_Kosares

Commodities

“The more gold a country has, the more sovereignty it will have if there’s a cataclysm with the dollar, the euro, the pound or any other reserve currency.” — Evgeny Fedorov, Russian lawmaker, United Russia Party

As it stands today, the top seven global gold producers, according to the U.S. Geological Survey, are:


1. China (370 Metric Tonnes)
2. Australia (250 MT)
3. United States (230 MT)
4. Russia (205 MT)
5. South Africa (170 MT)
6. Peru (165 MT)
7. Canada (102 MT)

When you take-in this table, it inspires little beyond a shrug until you consider the monetary policies, and the policies toward gold, in the countries listed. China, for example, is the world’s biggest producer of gold, but its production is essentially sequestered, i.e., it stays in the country and forms part of its monetary reserves. The same is true with Russia. Thus 21% (575 tonnes) of the world’s gold production in 2012 did not see the light of day on international markets.

In addition among the countries that still make their gold production available to world markets, four of the top seven are in long-term decline — the United States, South Africa, Australia and Canada, some would say precipitously. Three enjoy rising production — China, Russia and Peru. Among the declining states, South Africa suffered the worst cutbacks, down 52% from production in 2000. U.S. production is down 39% over the same period; Canada is down 38% and Australia, 24%.

So what does this mean with respect to the long-term, overall supply-demand picture?

Obviously there is substantially less gold actually reaching the market today than there was 12 years ago, and by a wide margin when you consider the tonnage sequestered as mentioned above. In 2000, none of the gold production was sequestered by nation states to build monetary reserves (at least none that we know of), now, a significant portion is going into reserves in what might be considered a trend, or the first baby steps, toward a 21st century version of a gold reserve standard. (Think where South Africa would be as a nation state today if it had kept even one-third of its production as a monetary reserve.) The world of gold from a supply perspective has changed remarkably over the past dozen years.

Given the problem of money printing on a global basis, the trend of rising official sector gold reserves is likely to continue as more and more emerging countries see it in their best interest to diversify their monetary reserves. I wouldn’t be surprised to learn at some point down the road that Peru, for example, decided it might be in its best interest to retain production.

—————-

Russia’s gold production is an important piece of the overall supply puzzle in terms of both production and reserves. Few people know (or remember) that in 1980, Russia was the second largest global gold producer at 21% of the total global output (258 metric tonnes) South Africa was number one at 55% of the total global output (675 metric tonnes). With respect to future gold production, Russia is a sleeping giant that could leap-frog the United States and Australia soon.

Reuters quotes Sergei Kashuba, head of the Russian Gold Industrialists’ Union as saying, “If gold prices remain at a high level, gold output in Russia will continue to grow by 4-5 percent per year, which will allow it to become the third largest producer in the world in 2015.”

After the collapse of the old Soviet Union in late 1991, gold production plummeted. In 1995, Russia produced only 133 metric tonnes — 5.9% of the global total output. South Africa, still number one in 1995, produced 524 metric tonnes. Overall production globally more than doubled between 1980 and the present from 1220 MT in 1980 to about 2700 MT today. The United States (with its vast deposits in Nevada), Australia, Peru and Indonesia were primarily responsible for the increases in overall production.

Now Russian gold production is on the mend, and building its gold reserves is part of the Putin government’s attempt to shield Russia from a potential currency war between the yen, yuan, dollar and euro — the first volleys for which we have seen over the past few months. Keep in mind too that in terms of known reserves Russia reports 5000 metric tonnes. It ranks third behind Australia (7400 MT) and South Africa (6000 MT). The United States reports 3000 MT.

Here’s an interesting graph from my old friend Nick Laird over at Sharelynx that shows the effects of Russia’s gold strategy on its reserve position and buttresses the Evgeny Federov quote at the top of this post:

If you like this kind of in-depth commentary, you will probably like our newsletter. It’s free, arrives by e-mail link, and you can opt out at any time.

Sign-up here

By Michael J. Kosares
Michael J. Kosares , founder and president
USAGOLD - Centennial Precious Metals, Denver

Michael Kosares has over 30 years experience in the gold business, and is the author of The ABCs of Gold Investing: How to Protect and Build Your Wealth with Gold, and numerous magazine and internet articles and essays. He is frequently interviewed in the financial press and is well-known for his on-going commentary on the gold market and its economic, political and financial underpinnings.

Disclaimer: Opinions expressed in commentary e do not constitute an offer to buy or sell, or the solicitation of an offer to buy or sell any precious metals product, nor should they be viewed in any way as investment advice or advice to buy, sell or hold. Centennial Precious Metals, Inc. recommends the purchase of physical precious metals for asset preservation purposes, not speculation. Utilization of these opinions for speculative purposes is neither suggested nor advised. Commentary is strictly for educational purposes, and as such USAGOLD - Centennial Precious Metals does not warrant or guarantee the accuracy, timeliness or completeness of the information found here.

Michael J. Kosares Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules