WGC: Global Gold Supply Falls In 3Q On Less Recycling; Mine Output Up

                    The world supply of gold in the third quarter fell by 3% year-on-year to 1,145.5 metric tons as a reduction in recycling activity more than offset a modest increase in mine production, said the World Gold Council Thursday.

For the year to date, the supply of gold was 4% lower than the same period of 2012 at 3,196 tons, the organization said in its quarterly report on trends in the market.

Recycling fell year-on-year for the sixth consecutive quarter, the WGC said. This was down 11% from the year-ago period to 385.2 tons in the third quarter.

For the year to date, recycled gold is down by 13%, or 158 tons, compared to the same period in 2012.

“The contribution from industrialized markets fell by almost 13% as supplies of old gold became increasingly scarce, and lower average prices failed to attract sellers,” the WGC said. “In the U.S., recycling is seemingly in terminal decline, having shrunk significantly in recent quarters. Conditions there are less conducive to recycling as economic indicators improve and gold prices remain below their previous peaks.”

India was the only developing nation to experience an increase in recycling. But then, the WGC pointed out, there is a shortage of fresh supply due to the government’s clampdown on imports as a result of a large current-account deficit. As the rupee weakened, gold also became more expensive in the local currency.

Globally, recycling prospects for the fourth quarter are somewhat price dependent. However, the WGC said, “given the shrinking pool of available supplies of old gold -- particularly in Western markets -- and the improving
economic outlook for the U.S., it is likely there will be a notable decline in the full-year supply of recycled gold from this source.”

Meanwhile, mine production rose 4% year-on-year in the third quarter to 772.3 tons. 

“Mine production continued to recover from the restrained conditions of 2012, a year of labor disruptions, operational issues and delays to project start-ups/expansions,” said the WGC report. “The resumption of growth this year has resulted (in) a year-to-date increase in the supply from mine production of almost 70t.”

The report listed producer de-hedging of 12 tons in the third quarter, reflective of an “almost complete lack of gross new hedging activity.”

Rather than hedging in a lower-price environment, producers focused on cutting costs and improving operational efficiencies, the WGC said. - KITCO