According to Barclays plc, the plunge in gold prices has forced world’s top producers to cut fresh mine investments by nearly half. This could result in nearly 1% decline in gold mine production during 2016. The contraction in mine supply may tighten the physical market, noted Barclays.
The gold mine supply during 2014 had totaled 3,114 metric tons. The bullion output may probably rise during 2015 as well, but the increase in production will be the smallest in six years. AngloGold Ashanti Ltd has already announced plans to cut its gold output by 10% in 2015. The mining activity at high cost mines would be halted, they said. As per Metals focus data, the low gold prices have turned nearly 10% of global mine operations unprofitable. Incidentally, Barrick Gold Corp reported net loss of $2.9 billion in 2014, mainly on account of sharp plunge in gold prices and writedowns of Chilean and Zambian mines.
According to data, capital spending by 11 major gold producers has dropped by almost 50% since 2012. Ten of the world’s largest gold producers reported a combined loss of $6.9 billion in 2014, as compared with a combined profit of $11.3 billion posted in 2010. Gold prices have dropped almost 37% from the all-time highs during 2011.
Experts rule out probability of a gold rally, especially on account of easing inflation and strengthening US currency. Gold-backed funds have witnessed a net outflow of nearly 800 tons during the past two years. Analysts predict sharp decline in gold output effective 2017 onwards. The drop in mine production is likely to further influence gold investors’ sentiments.