Gold Supply To Decline; Indian, Chinese Demand To Improve: CEO

By Paul Ploumis (ScrapMonster Author)

April 22, 2016 02:47:29 AM

(Kitco News) - Newmont Mining (NYSE: NEM) chief executive Gary Goldberg looks for both lower global mine supply and improving demand prospects from India and China to bode well for the gold in the medium term.

Nevertheless, he conceded, there is near-term potential for the yellow metal to give back some of its big gains so far in 2016 due to potential for the U.S. dollar to rise.

Goldberg set aside a portion of an earnings webcast Thursday to talk about the outlook for gold. The company late Wednesday reported first-quarter earnings that were down from the year-ago quarter but topped fourth-quarter results, as well as consensus analyst expectations.

“In the near term, we anticipate that a relatively strong U.S. dollar and subdued global economic growth will continue to constrain metals prices,” the CEO said.

Nevertheless, he described gold’s 16% run higher in the first quarter as the strongest upward trend since 1980.

“In the medium term, we expect prices to rise on improved fundamentals,” Goldberg said. “On the supply side, three-year average gold discoveries have dropped by more than 75% between 2007 and 2012, and mine supply is expected to decrease by more than 5% from 2015 to 2020 due to aging ore bodies and slower project development.”

As prices fell back from the record high in 2011, producers have scrambled to cut costs, in many instances scaling back on exploration and capital spending.

“On the demand side, we expect demographic trends in China and India to drive steady growth,” Goldberg said. “Taken together, the two countries represent more than 50% of current consumer gold demand.

“China’s middle class is expected to grow to 500 million by 2020, and India’s middle class is also expected to double and surpass 500 million by 2025.”

Presumably, as denizens of these two nations have more money to spend, they will want to purchase more gold.

Still, Newmont officials are trying to plan for the future cautiously in case gold prices turn down again, Goldberg related. He said “we’re prepared for all scenarios” and “our planning process builds from a gold price of $900 per ounce.”

Courtesy: Kitco News