There have been a lot of changes within the gold industry as of the past decade. From the technology used in the mining process, to the gold market itself, or to the technologies used in recycling gold, and everything in between. During the previous two years, COVID-19 has had several impacts on the global gold market, including disruptions to the supply chain during 2020, and record high prices for gold.
Different sections of the gold industry had their own ups and downs during this time. Due to market lockdowns, a time of economic slowdown, and decreased demand, gold jewelry had its lowest annual level seen in years. As well, during 2020, the technology demand was low but recovered quickly as the demand for new technology increased significantly when working from home became more common.
There were a lot of challenges that the gold market faced as a result of COVID-19. As the world is slowly recovering from the economic challenges that were caused by COVID-19, the gold market is slowly recovering as well. As of 2021, investors should be receiving more for their money.
In 2020, the total supply of gold fell by 4% y-o-y to 4633t, which is the largest annual decline the gold supply chain has seen since 2013. The drop in supply was caused primarily due to COVID-19. The restrictions that occurred during lockdowns for COVID-19 impeded consumers' sell back abilities, forcing lower and lower buy-back prices.
There were several factors that combined to negatively impact mine production, but COVID-19 lockdown restrictions were the main factor. During 2020 mine production hit a low that had not been seen in five years. The impacts of COVID-19 varied over time and geographical location but were disruptive to the entire industry.
The Americas production was hit the hardest in Q2. Looking at individual countries in South America, Peru had the biggest decline at -28% (down 40t), then Papu New Guinea at -27% (down 20t), followed by Argentina at -18% (down 9t), and Chile at -15% (down 6t). There are several other countries that saw large declines in productions, though these were the largest.
In Q4 the impact that COVID-19 had was smaller compared to previous years, though there are other factors that impacted the decline of mine production. Papua New Guinea, for example, saw a large decline due to their government’s decision not to renew the mining lease on the Porgera operation. COVID-19 was the principal factor in the fall of production only in Peru, where the production fell 13% y-o-y.
This may seem like a lot of bad news, and a lot to take in all at once. Though as we turn to look to 2021, we’ll see that the interruptions to mine productions that occurred during the pandemic will diminish slowly.
The demand in 2021 increased significantly from 2020, which recouped much of the losses that were sustained in 2020 due to COVID-19. In the jewelry and technology sectors, the demand for gold recovered over 2021 while the investment demand was a mix in the environment. Inflation rates were extremely high and had to compete with rising yields.
Gold ETF holdings declined by 173t in 2021, compared to an increase of 874t in 2020. Compared to Q4 2020, Q4 2019 outflows of just 18t were a fraction of those seen in Q4 2020.
An eight-year high of 1,180t was achieved by bar and coin investments, which jumped 31%. During Q4 2021, demand reached 318t, the highest since 2016.
In 2021, central banks accumulated 463t of gold, 82% more than in 2020. During the second half, buying slowed, declining 22% y-o-y in Q4.
In 2021, gold used in technology reached 330t, a three-year high. In Q4 2020, y-o-y growth in the sector slowed to 2%, highlighting the sector's rapid recovery.
As a result of the chaos that engulfed markets and economies worldwide during 2020, gold demand in the electronics sector was expected to decline.To comply with national lockdowns, many manufacturing facilities were forced to suspend their operations to comply, causing an impact in the supply chain from top to bottom. On top of this, there was an increase in consumer demand for ‘big ticket items’. Lockdowns forced everyone to shift from working in person to working from home which caused an increased demand for electronics, laptops specifically.
With the increase in laptop and other electronic purchases, you may be wondering what happens to the electronics that are being replaced. Some may be handed down to a family member, or sold to a new owner. But what happens to the other electronics that no longer function properly?
Recycled gold is gold that is sourced from products that no longer function properly. The gold is taken from these products and refined back into bullion, ready to use for another product. Around 10% of recycled gold is recovered from electronics such as cellphones, laptops, and circuit boards. The other 90% is largely sourced from jewelry.
Although only 2% of the total electronic waste will be used in the gold recycling program, that is 2% of electronic waste that is being kept out of landfills. With the growing amount of electronic waste, there are more and more opportunities for learning how to recycle electronic waste in a sustainable way.
Due to COVID-19 there have been disruptions to the supply chain for gold, as there has been for many other industries. Fortunately the gold industry was able to recover rather quickly as we are seeing the demand for gold increase and surpassing sales of previous years. As well, new processes and technologies are being developed to increase the amount of gold that can be recycled. With all of this in mind, we are looking at a sustainable and profitable gold industry today, and in the near future.