Global gold supply will increase by 1% this year

According to Mining Weekly, precious metals consultancy Metals Focus (MF) stated in its latest report, Gold Focus 2025, that growth in gold production will drive a 1% increase in global gold supply this year.

The annual report, released last week, provides in-depth analysis of the global gold market, including historical supply and demand data from 2016 to 2024, as well as detailed forecasts for the current year.

The report projects a 9% decline in total demand this year, primarily due to a double-digit drop in jewelry consumption.

Gold prices are expected to reach new all-time highs later this year, driven by economic uncertainty stemming from US policies and geopolitical tensions, portfolio diversification, growing concerns about US debt, and robust central bank demand for gold.

The average gold price in 2025 is expected to surge by 35% to a record level of $3,210 per ounce.

According to MF's data, official net purchases of gold reached 1,086 mt in 2024, a historic high. This trend is attributed to "de-dollarization," prompting central banks to increase their gold reserves.

Total sales also declined significantly last year, partly due to the absence of large-scale disposals like those seen in Turkey in 2023. MF found that macroeconomic uncertainty will keep central bank gold purchases at elevated levels, with net purchases projected at 1,000 mt in 2025.

Mine production is also a key factor in supply changes. Global gold production from mines reached 3,661 mt in 2024, a 0.6% increase and a new record high. Growth was primarily driven by Mexico, Canada, and Ghana.

The increase in production was accompanied by rising costs, with global all-in sustaining costs (AISC) increasing by 8% to $1,399 per ounce. This is attributed to inflationary pressures from rising gold prices and increased royalty fees. This year, mine gold production is expected to grow by 1% to 3,694 mt, thanks to the commissioning of new mining projects.

Gold recycling surged to 1,368 mt in 2024, an 11% increase and a 12-year high. The vast majority of this growth came from China, which saw a 26% increase.

Most regions experienced double-digit growth, driven by rising prices. However, India saw a decline in gold scrap production due to increased gold credit availability. In other regions, limited near-market stocks, widespread risk aversion, and persistent bullish price expectations constrained growth.

MF expects gold recycling volumes to remain flat in 2025, as the factors that limited growth in 2024 are expected to persist despite rising gold prices.

Jewelry demand is expected to decline significantly, with global manufacturing gold use falling by 9% in 2024. This is mainly due to weak demand in China. Excluding China, demand only fell by 1%, indicating resilience in other regions despite the increase in average prices.

Net demand for gold in the jewelry industry dropped significantly by 34%, primarily due to an 11% increase in recycling volume. In 2025, it is expected that the decline in manufacturing usage will widen to 16% as rising gold prices exert severe pressure on price-sensitive markets such as India.

In terms of investment, institutional demand continued to grow in 2024. This was driven by expectations of interest rate cuts and actual interest rate reductions, while heightened geopolitical instability, concerns over US debt, and the strong performance of the US stock market all supported continued portfolio diversification into gold.

Overall, retail investment remained stable, with growth in demand from Asian investors offsetting significant declines in Western markets, as rising prices led to reduced consumption.

Industrial gold demand showed mixed results, with gold demand in electronics increasing by 9% in 2024, mainly due to a rebound in electronic goods deliveries, manufacturing expansion, and growing demand for AI-related technologies.

MF forecasts a further 3% increase in gold demand for electronics this year, despite facing tariff challenges. In 2024, demand for decorative and other industrial uses contracted by 1%, with declines observed in major markets such as India and Italy.

Affected by structural adjustments in the industry, dental gold demand continued its long-term downward trend, declining by 5%.

MF concludes that the fundamentals of gold were robust in 2024. This was supported by strong central bank gold-buying intentions, growth in mine production, increased recycling, and the resilience of Asian retail investment.

Although jewelry demand declined, after adjusting for the extent of price increases, it still indicated ongoing consumer interest. Meanwhile, manufacturing gold demand continued to grow, driven by the electronics sector.

Looking ahead, MF analyzed the risk factors and trends supporting gold prices in 2025. These include the trade policies of the current US administration, concerns over trade wars, fiscal uncertainty in the US, and expectations of further monetary easing by the US Fed.

MF forecasts that gold prices will reach new highs this year, supported by investor caution and rising interest from government sectors.

Company manager Philip Newman emphasized that central banks are turning to gold to hedge against geopolitical and currency risks. He also highlighted regional differences in bar and coin investment, the resilience of Asian retail demand, and the overall potential of gold as a non-yielding safe-haven asset.

Newman stated that despite potential market volatility and corrections, the outlook remains generally optimistic, with an average price forecast of $3,210 per ounce this year, a level that will surpass the inflation-adjusted peak of 1980.