Are we in a perfect storm for gold buyers

In order to provide some insight into the inequality in supply and demand for gold we should first start by examining the supply of gold through mining.

Supply - Gold Mining Production Analysis

According to CRU gold and base metals asset analyst Oliver Blagden we are going to reach a production high this year at 3,250 tones and Blagden goes on to say the factors driving down this production high. This decline is due to reserve depletion, declining ore grades, and aging mine closures.

• Even with all planned projects coming online, production could drop by up to 17% by 2030.
• China, the world's largest gold producer, faces potential supply bottlenecks due to modest reserves relative to its production rate.
• Russia's production expansion is tempered by geopolitical pressures and diminishing ore quality.
• Resource nationalism in West Africa, such as in Mali and Burkina Faso, is deterring foreign investment.
• Despite challenges, the gold mining industry remains highly profitable, with 97% of producers operating with positive margins.
• There's a concerning deficit in new greenfield projects despite high profitability.
• High gold prices have not spurred enough investment in exploration, as high-grade, well-located deposits are harder to find.
• Miners are urged to invest in strategic acquisitions, brownfield expansions, and exploration to extend mine life and ensure future supply.

Demand - A unique market

Whilst the forecast for a dwindling supply is looking fairly certain, the other side of the coin, demand is also providing strong evidence of growing and in all directions.

• Central bank gold purchases are at record levels, supporting prices.
• The Chinese are buying and its not just the government. Its unlikely that the Chinese Government buying is short-termism on their part. The indication of that is how they have encouraged their banking system and the funds that they collaborate with to follow suit. This has now trickled down to the Chinese people who are also being encouraged to buy. For more detail on this you can see my previous post which a in-depth look at this market dynamic https://shorturl.at/YdPgc.
• Buying in India has reached record highs.

• The inequality in the paper investment in gold is at record level at a ration of 1 physical oz to 127 paper oz sold.

• Other factors include lowering inflation, increasing geo-political tensions and investor sentiment is high.

Taking advantage of this market

One of the ways in which investors can take advantage of this market and at the same time hedge against any reversal in the market is by investing in high quality low cost gold mining assets.

Tucano Gold is one of a very few gold mining companies that is ready to turn back on and start producing 100,000oz per annum.

For more information on how to invest in a mine that is ready to turn back on, please email [email protected]