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After a record 2020, gold has performed poorly for most of the calendar year.
A big reason is that the Fed has taken a tougher-than-expected stance, which has created an environment of high interest rates and reduced the attractiveness of non-yielding gold bars.
The promise of a higher return on other assets also coincides with the arrival of the novel coronavirus vaccine, a sign of economic recovery, tilting the market towards riskier investments.
As a result, gold prices have fallen 4.9 per cent so far this year (as of December 27, 2021), paving the way for the first annual loss in three years.
Nevertheless, despite gold's lacklustre performance, 2021 is still full of gold-related news for investors to digest before the new year.
# 1 billion dollar mergers and acquisitions
As early as January, analysts at Bank of America predicted that the need to replace gold reserves would be the driver of more mergers and acquisitions this year. In fact, the gold industry has completed a series of deals, some of which involve large companies.
Agnico Eagle and Kirkland Lake Gold made headlines by merging C $13.5 billion to create a new gold giant with a market capitalization of $24 billion and reserves of 4800 million ounces.
Tony Makucci, chief executive of Lake Kirkland, said at a recent seminar in Canadian Mining Magazine that it was "one of the most important mergers in recent memory of the Canadian gold industry".
However, Kerry Smith, mining analyst at Haywood Securities, said the Agnico-Kirkland Lake merger announced in September could be "the last big deal for the Canadian mining giant".
Another notable merger was Newcrest's acquisition of Pretium Resources in early November. The $2.8 billion deal is worth Brucejack assets, about 140km from the Red Chris mine in which the Australian mining company owns a majority stake and operates in the Golden Triangle of British Columbia.
A month later, Kinross also hopes to acquire Great Bear Resources and its flagship Dixie project for $1.4 billion to expand its footprint in the Red Lake District of Ontario, another famous Canadian gold mining area.
# 2 earlier transactions
Although no $1 billion worth of deals have been announced in the first eight months, the possible impact of some early mergers and acquisitions on the industry cannot be ignored.
Agnico had a head start in January by snapping up TMAC Resources after the Canadian government rejected China Shandong Gold's offer for Nunavut mining machines. In the same month, Eldorado Gold acquired QMX Gold, through a friendly merger significantly expanding its land holdings in Quebec.
In March, Newmont moved to buy the rest of GT Gold in an all-cash deal of C $393 million. This will give the world's largest gold miner full control of the Tatogga project, which is also located near the Red Chris mine in British Columbia. Also in March, Australia's Evolution Mining bought Battle North Gold in Red Lake, Ontario, for C $343 million.
In April, Fortuna Silver Mines announced that it would buy Roxgold, which focuses on West Africa, for $884 million to expand its business beyond Latin America.
AngloGold Ashanti is not to be missed. In July, the company offered to buy the rest of Corvus Gold for $370 million to consolidate its land ownership in Nevada.
# 3 Future Mine
2021 is also a landmark year for some of the world's soon-to-be gold mines.
In October, Equinox Gold began construction of the $1.23 billion Greenstone project in Ontario, which is planned to become one of Canada's largest gold mines, producing more than 400000 ounces a year for the first five years.
Ascot Resources, which is developing the Premier gold project in the Golden Triangle, British Columbia, was recently approved to start construction and is expected to start production in the first quarter of 2023.
This year, some mines have also achieved commercial production, and the Segilola mine in Nigeria is the first gold operation in the country's history.
# 4 overseas conflicts
Politics remains the driving force behind miners' decisions on some gold businesses.
In the Dominican Republic, Barrick and Newmont may be forced to terminate their Pueblo Viejo joint venture without having to approve new tailings storage facilities.
B2Gold also reached an impasse with the Malian government over an exploration project near the company's flagship Fekola gold mine.
A new law passed by Kyrgyzstan has also deprived Canada's Centerra Gold of control of its Kumtor mine, which is now the subject of international arbitration proceedings.
# 5 other trends
Production by the world's top gold miners fell 1.1 per cent in the first half of 2021 from last year due to lower ore grades and factory throughput, but production is expected to return to stable production throughout the year in the second half of the year, according to GlobalData, an analyst.
The novel coronavirus epidemic has also intensified gold production, causing many business disruptions. A study released by Standard & Poor's Global Market Intelligence shows that the blockade does not affect emissions from gold mining activities.
On the demand side, the World Gold Council believes that there is a clear trend for investors to look for illiquid assets that previously helped their portfolios. The board said a shift to riskier alternatives would pave the way for gold as it provided the capital and liquidity needed during the market sell-off.
What happens in 2022?
Nevertheless, with inflationary pressures increasing and the possibility of multiple interest rate increases, gold is likely to recover in 2022.
Analysts, including TD Securities, remain optimistic about a potential rebound in gold in the first half of 2022.
Jim Wyckoff, a senior analyst at Kitco Metals, said in the latest report that the outlook for gold in the first quarter of 2022 is optimistic, mainly driven by inflation, which keeps prices at the bottom.
