Gold 2048 – what do the next 30 years have in store for gold?
18 May 2018
The World Gold Council has published its predictions for the gold industry for the next 30 years. Titled ‘Gold 2048’, the report focuses on the key expectations from industry experts, such as the growth of the middle classes in China and India, the advancement of technology to allow easier investment into gold, and the restructuring of gold mining and production due to environmental impact and the social expectations involved in operating with minimal damage caused.
1 - The Middle Classes:
“Most people expect the rising emerging-market middle class to be the big story of the next quarter century” says George Magnus, a senior economist. The WGC report points to a growth in working age population as being connected positively to economic growth. The two examples given are China and India. China currently is on the cusp of a shrinking working age population because it has a large middle class. India has a higher fertility rate and a rapidly growing labour force – predicted to be as much a growth as the entirety of Western Europe over the next 30 years.
Magnus argues that India’s demographic dividend is just begging to be exploited but warns that the country may not be guaranteed the same success China has experienced. “India is buffeted by headwinds of its own making, such as complex labour laws and a business environment that favours local provision of goods and services, rather than foreign investment.”
The Council quotes Rick Lacaille, Global Chief Investment Officer of State Street Global Advisors, who said: “The EMG6 countries – China, Brazil, India, Mexico, Russia and Turkey – increased their share of global GDP from 6.2% in 1987 to 24.4% in 2016. The share of the G6 countries – the US, the UK, France, Germany, Italy and Japan – has declined from 65% to 45% over the same period.”
2 – Gold in Science & Tech
Lacaille’s input continues, arguing that while gold is very popular in Asia and India in particular, and physical bullion has long been the preferred holding, technology and ease of access will up the demand for notes, certificates, and ETFs. The incentive to switch depends on confidence in both financial markets and governments, but it’s instability where bullion thrives.
It’s not just apps and growing internet access that are going to benefit gold’s demand and price. Dr Trevor Keel, a consultant for the WGC, points to a range of uses, from solar panels, wiring, and smartphones, to medical tools and even antibiotics.
3 – Sustainable Mining & Production
It’s all well and good to have more investor demand and greater industrial need, but if you can’t mine enough gold to meet demand then there’s a problem, and such a shortage drives up prices sharply.
Gold production hit new record highs between 2010 and 2016, according to data from Metals Focus. Growth in the US, Australia and Canada with new tech was boosted by the increased production levels of gold from China and Russia. The problem though is the supply. Mark Fellows, Head of Mine Supply at Metals Focus, pointed to the fact that all gold mined in history is around 190,000t (Metals Focus – Gold Focus 2017), but if current mining rates are maintained for the next 30 years then another 97,000t of gold would be mined by the end of 2048. The problem here is that, as of previous estimates, in-ground reserves are just over 55,000 tonnes. This admittedly doesn’t take into account deep sea gold reserves, nor does it account for the 110,000t of gold within known mineral resources, but these are very tech heavy deposits. The machinery and knowledge involved in accessing these is in its infancy and has a high cost – perhaps too high to warrant investment just yet.
The other deterrent from investment is environmental damage. Michelle Ash, Chief Innovation Officer at Barrick Gold, argues that open put mining won’t be tolerated for much longer as land, water, waste and dust concerns become more widely understood through modern media.
Ash’s solution is below sea mining, stating: “Alluvial gold mining creates many more environmental issues than appropriately conceived marine mining.” She goes on to highlight the other prospect – automation. Mining is a risky business and, despite improved safety, it’s still dangerous. Ash believes that automation and remote use of machines will become the norm in the next 30 years.
The World Gold Council’s report saves one of its best quotes for last, with a section consulting Brent Bergeron, Executive Vice President of Corporate Affairs and Sustainability at Goldcorp. Mr Bergeron advocates environmentally friendly gold mining, especially as society looks for beneficial companies that can be “a force for good” – a positive which in turn attracts government backing. The problem though, as he explains below, is the balance between ambition and reality.
“Our projects are so large and our investments so significant that we tend to stick with what we know rather than consider how we can make new technology and new ideas work for us.”
The next 30 years of gold mining – and the mining of other precious metals – boils down to this: if companies can afford to be more environmentally conscious they will, but they can only do so much whilst still staying in the black. Technology needs to continue its rapid growth in order to make advanced gold mining techniques more cost effective, but an inability to mine what reserves we have in the next 15 years could drive prices up enough to make heavy investment into mining technologies worthwhile. Either way, technology won’t be halted and gold demand won’t diminish.