Gold Derivatives: Gold Derivatives: - World Gold Council

60.00
The Real Price of Gold 1900-2000
in 1900 $
50.00
40.00
30.00
20.00
10.00
0.00
1900
1907
1914
1921
1928
1935
1942
1949
1956
1963
1970
1977
1984
1991
1998
Source: Bannock Consulting, World Gold Council
The rise in the gold price to $35 per oz in 1934 caused a surge in production
until the disruption of the Second World War. Production grew slowly during the
1950s and 1960s but with the price fixed at $35 per oz growth was restrained
once again by a decline in the real price. The consequent lack of exploration
meant that output fell during the 1970s, despite the price explosion, as existing
mines were exhausted; while exploration was resumed the time lag between exploration
and production meant that it was not until the 1980s that this was
reflected in a rise in output. During the 1980s and 1990s output was on a largely
uninterrupted rising trend. In addition to the results of the renewed round of
exploration in the 1970s, this was spurred by two other factors. There were substantial
improvements in exploration, drilling and mining techniques with the
most important innovation being heap leaching. This permitted economic extraction
of gold from low grades of ore which would previously have been considered
as waste. In addition a more welcoming attitude of many developing countries
to foreign direct investment, coupled with improved economic management,
meant that they started to offer a viable operating environment for international
mining companies enabling their gold and other mineral reserves to be exploited.
Together the innovations in technology and the improved operating environments
in many countries meant that over recent decades the number of gold producing
countries has expanded significantly. In 1970 South African output reached its
peak level of 1,000 tonnes which accounted for 79% of non-communist output.
In 1981 it was responsible for 658 tonnes out of a global figure of 1,302 tonnes,
just over 50%. In 1999 it was still the largest producer but relatively high costs
and the mining out of earlier discoveries had reduced output to 450 tonnes, 17%
of (much increased) world production. In contrast the next larger producers saw
substantial increases in production between 1981 and 1999: US output up 677%;
Australian up 1545% Canadian up 198% and Chinese up 195%. There has also
been rising output from developing countries as the business environment in
many of these improved.
Gold Derivatives: The market impact 17