GOLD PRODUCTION WARS: The East Slays the West

Not only is there a battle going on between the East and West when it comes to increasing physical gold reserves, there’s also a gold production war taking place amongst these same nations.

Something quite extraordinary took place in 1997 which very few investors are aware.  This was the year that the West peaked in overall gold production.  Even though the world will hit a new record of global mine supply in 2013, the combined total of the top Western gold producing countries are still way off their highs set in 1997.

It took a great deal of effort and several decades, but the Eastern gold producers have beaten their Western competitors by a wide margin.  If we look at the top 3 Western gold producing countries since 1988, we can see an important trend:

Australian Gold Production 1988-2013 new

Australia, the top Western gold producer peaked in 1997 at 314 mt (metric tons) and declined until it hit a low of 215 mt in 2008.  In the past five years, Australian gold production has steadily increased and is estimated to reach 265 mt in 2013.

The United States has a similar historic production trend with Australia.

U.S. Gold Production

Gold production in the U.S. increased substantially from 201 mt in 1988 to 366 mt in 1998 — the year it peaked.  Just like Australia, domestic gold production in the United States continued to decline after its peak and hit a bottom of 223 mt in 2009.  Its production has risen slightly over the past few years and is forecasted to be 234 mt in 2013.

Canada comes in at number three of the top Western gold producers.  Even though Canada had a higher peak of 177 mt in 1991, its second peak of 169 mt in 1997 is more relevant when we factor the overall peak in the top Western countries.

Canada Gold Production new

After Canada’s recent peak in 1997, its domestic gold production declined significantly to only 91 mt in 2010.  Actually all three Western countries had the same pattern — increase-peak-decline-increase.  Canada has actually increased its production the most of the three from its low in 2010.  Canada is up 37% since 2010, Australia is up 23% since 2009, and the U.S. has increased 5% since 2009 (Note: these percentage gains are based on the estimated production in 2013).

Now that we have seen the top Western gold mining countries, let’s look at the top 2 Eastern gold producers.

There is no surprise that China is ranked as number one in global gold production.  And of course, it’s the top Eastern producer as well.

China Gold Production

China’s gold production has increased a whopping 146% from 78 mt in 1988 to a forecasted 430 mt in 2013.  As we can see, China has not yet peaked in its domestic gold production.  However, at the rate they are currently producing their reserves, I would imagine their peak will more than likely occur within the next several years.

Russia is the second largest Eastern gold producer who like China shows no sign of peaking.

Russia Gold Production

Russia has no production figures prior to 1992 due to the break-up of the Soviet Union.  After the U.S.S.R broke apart, gold production declined to a low of 115 mt in 1997 down from 146 in 1992.  As soon as Russia got back on its feet, it began the long hard task to rebuild and grow its domestic gold mining industry.

In a bizarre irony, Russia’s gold production bottomed the very same year the top 3 Western producers peaked.  Regardless, Russia has continued to increase its gold production and if its present trend continues (first 8 months 2013 = 156 mt) this year, it will reach a whopping 234 mt in 2013 — possibly overtaking the U.S. for the number three spot in the world.

Now that we have seen the gold production figures from each of these countries, this is the result when we divide them by EAST vs WEST:

East vs West Gold Production

The year the top 3 Western gold producers peaked (1997) they had a combined total of 845 metric tons.  However, China and Russia’s mine supply was only 290 mt…. 552 mt less than their Western counterparts.

But, if we look at what is to take place this year, we see a much different picture.  Total gold production from the United States, Australia and Canada is estimated to be 624 mt in 2013, 26% less than their peak in 1997.  On the other hand, China and Russia will actually surpass the West with an estimated 664 mt in 2913 —  a 129% increase compared to 1997.

So, what we have here is two of the top Eastern countries surpassing three of the top Western nations.  The evidence clearly shows the East has now won the war on increasing its gold production over the West by an estimated margin of 40 mt.

It almost seems as if this has been the plan for quite some time.  Not only have China and Russia become the largest Eastern Bloc gold producers, they have also accumulated a great deal of gold in their central bank vaults while the West has exported a large percentage of their gold supply.

The Collapse of the South African Gold Production

I wanted to include two of South Africa’s gold mine supply charts because it provides a sober reality on how geological limits can impact production in a big way.  South Africa is one of those countries that has two political foundations, 1) its Western history of being ruled by the British & Dutch, and 2) its current Eastern relationship as one of the BRICS, a more Eastern organization.

South Africa was the leading gold producer in the world up until the turn of the 21 st century.  However, their one time gold resource bounty has now been exploited and their global production rank has fallen to the fifth spot.

South Africa Gold Production new

South Africa’s gold production has continued to decline from 621 mt in 1988 to only 175 mt (estimated) in 2013.  This turns out to be an amazing 72% fall in gold output in 24 years.

While this does seem like a huge decline during this time period, if we were to look at their production data going back until 1970, it’s even much worse:

South African Long Term Gold Production

In the chart above, we can see that South Africa peaked in global production at a staggering 1,000 mt in 1970.  This is indeed an amazing feat as no other country in the world has come close to producing half this amount in a given year.

Here are the Peak Production Years for these 6 countries:

South Africa (1970) = 1,000 mt

United States (1998) = 366 mt

China (2013 – no peak) = 430 mt

Australia (1997) = 314 mt

Russia (2013 – no peak) = 234 mt

Canada (1991) = 177 mt

The four Western gold producers (USA, Australia, Canada and including South Africa due to its history as being controlled by the British & Dutch) have already peaked in gold production while the top Eastern countries (China & Russia) are still in an upward trend.

The gold story will become more interesting in the future when the global financialization of debt with derivatives comes crashing down.  Those who hold the most gold at this time, will be in much better shape than those who leased it out for a temporary paper gain.

Lastly, I came across this article on Mineweb yesterday that gave me a good laugh.  Not only are there uneconomic oil resources in the world hyped as future supply, it is also true with gold.  A Canadian geologist had this to say this about his own industry and supposed gold resources:

There used to be an old joke in university that geologists were engineers who couldn’t do math. Sometimes I wonder if this isn’t true when I see resource models for gold deposits with grades less than 1 g/t gold (or equivalent grades for other elements) in some inaccessible northern frontier area with no infrastructure or lying under 100 metres or more of till. This isn’t an orebody; it’s a shareholder-funded science project that didn’t work out.

NOTE ON GOLD PRODUCTION FIGURES:  In obtaining these annual gold production figures, I had to access different USGS Gold Year Books.  These figures are revised in newer additions, so there may be small differences in some of the annual production figures — but not much. Furthermore, the USGS only provided data up until 2011, so the figures for the last two years were acquired from various sites.

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20 Comments on "GOLD PRODUCTION WARS: The East Slays the West"

  1. Steve, thank you for another in depth article to do with gold.

    Some other stats which may be of interest to you and your readers, is that the Shanghai gold exchange has delivered 8,655 tons of gold since 2009. The Chinese have consumed somewhere in the neighborhood of 1,700 tons of gold in just the first 8 months of this year! This works out to the Chinese consuming all of the world’s production in one year. This gold has flowed into very strong hands and will not see the shores of the west again for generations to come.

    http://www.ingoldwetrust.ch/alex-stanczyk-physical-supply-never-been-tighter

    Hong Kong and Singapore sign inter-exchange trade agreement.

    http://www.sovereignman.com/finance/yet-another-massive-nail-in-the-dollars-coffin-13241/

  2. Steve, There was an article from King World news two days ago interviewing Stephen Leeb. He suggested that the Chinese were mining some of their gold at all in costs of $2000 – $ 2,500 per ounce. I was wondering if you have an opinion on this. It could almost seem believable considering how much the Chinese produce relative to their gold mining reserves. I guess the point of the article was the Chinese are trying to pull as much gold out of the ground before a financial crisis hits.

    • keith,

      Yeah, member Kansas Crude asked this same question in a previous post. I have not had the chance to listen to Leeb’s KWN interview, but I will shortly. That being said, I do believe the Chinese are mining gold at $2,000-$2,500 an ounce. It makes perfect sense if you ask me.

      The Chinese are trying to produce as much gold as they can before we have the GREAT FIAT MONETARY REVALUATION. I also believe they are probably part of the “precious metal manipulation scheme.” It wouldn’t make sense at all if they weren’t.

      As I mentioned in my prior article on China Running Out of Its Gold Mine Supply, they don’t have a great deal of known reserves. Sure, they could be finding new resources, but I would imagine they are blowing through their AFFORDABLE GRADES and have to resort to mining this expensive stuff due to increased threat of a future revaluation of gold as backing for global trade.

      steve

      • Yes, I can remember your earlier article. Stephen’s statements seem to confirm that, that they’re going through their reserves as fast as they can.

  3. I am fairly new to your site but do enjoy it immensely. SGT Report was actually how I discovered you. Loving the articles but haven’t been around long enough to know what peoples’ opinions (and Steve’s especially) are on Karen Hudes’ contention that there is more gold in existence (500,000 mt to be specific, secreted away in Hawaii) than official figures might suggest (she is either mad, a shill, or has access to limited knowledge).

    As a follow up, it would not be outside the realms of possibility that the Rothschilds (who are supposedly worth untold trillions) have conspired (nothing new) to prop up vanishing gold supplies, as a last ditch measure prior to TSHTF.

    Either way, I like both gold and silver (and as an aside, absolutely loathe 2bitcon with a passion). Brother John recently did an outstanding piece on the significantly historic and humungus suppression of silver by TPTB. If you haven’t caught it, I believe you should.

    Thanks again for a mentally challenging site.

    • Velikovsky,

      Thanks for the comment and its nice to have you checking out the site here. As for this huge stash of hidden gold, gosh anything is possible. Even Jim Willie has written about Yamashita’s hidden gold stash.

      While I believe there is probably more gold hidden that we don’t know about, when you do the math on how much gold has been mined over the past thousands of years, these huge figures of 500,000 metric tons seems unrealistic.

      Even if there was more gold or silver, it is still a fraction of the amount of FIAT MONEY floating around.

      steve

      • Well.. if you think about it, it’s not that unrealistic. Googled up a long term production chart: http://goldratefortoday.org/wp-content/uploads/2011/03/world-gold-production-1900-2010.png

        So since 1900 we already mined somewhere between 100 and 150k tonnes. If you just assume an average of 100 tons a year for the 2000 years prior to that, which I think is not unrealistic, that’s another 200k tonnes right there. A grand total of 500k tonnes doesn’t seem that unlikely.

        Then again, where is it? We can assume a part of it has been lost (small part probably). A grand part is in jewelry, paintings, all kind of art.. but if only 100-150k exists in bar form, that is one whole lot of gold.

        Still, if the Chinese could, they’d probably buy all of it within 5-10 years 😉

        • Markus,

          It would be nice if the world averaged 100 tonnes of gold in gold production. However, our population was much as we go back in time, and the industrial revolution and then oil allowed a great deal more gold to be produced in the past 150 years.

          I would imagine between the collapse of Roman and the middle ages (1400’s), I would be surprised if they mined 10-25 tonnes at the most globally.

          steve

          • Yep, I posted a premature conclusion. After some further thinking I agree with you. Taking population and technology (enabled by energy) into account, I think your estimate will be more accurate.

            Until the 1800s they didn’t even have steam engines. In 1900 they already had combustion engines. Also, at around 1800 world population started to go exponential, from a prior linear rise.

            Here’s another chart that goes back a little further: http://www.darkpolitricks.com/wp-content/plugins/wp-o-matic/cache/45729_httpgoldnews.bullionvault.comfilesgold_mining_production.png

            Shows ~150 tons per year average from 1850 to 1900. Also take into account that the California gold rush had just begun at the beginning of this chart. In 1840, production probably would have been considerably lower.

            So, no 500k tonnes of gold. Probably 200-250k at the most. What do you think Rocco?

          • Markus,

            If you look at the South African chart, you will notice ZERO production before the 1880 period. U.S. Gold production was almost NIL until we moved out west where most of the gold was found. So production from these two countries (not including some very small amount mined by the indigenous tribes) was basically nothing prior to the 1800’s.

            So, if we go back and calculate that most gold production came during the Roman times, fell off after the collapse of Rome, and then did not really pick up until the 1400’s when WHITEY was able to sail across the seven seas and exploit South America and Mexico of its Gold… including other countries.

            I now highly doubt that the world produced even 10 metric tonnes a year during this time period – (400 – 1300’s).

            LASTLY… check out this article by David Zurbuchen on the History of World Gold Production. He provides 4 different estimates, that averages about 4.25 billion oz or approximately 150,000 metric tons.

            http://www.gold-eagle.com/article/worlds-cumulative-gold-and-silver-production

            This makes perfect sens because David also shows World Silver production at about 44.5 billion oz, which gives us that 10.5 gold-silver mined ratio.

            Actually, I will be making a post about this to damper some of the hype on the HUGE HIDDEN GOLD TREASURES.

            steve

          • Great article by Zurbuchen. Seems pretty conclusive. Hehe, it’s just great that all this knowledge is available to us, and can be found and processed so easily. We often take it for granted (I certainly do), but image what kind of effort it would have been to compile all this data just 2, 3 decades ago, when there was no world wide web, and no terabyte size hard disks for 50$.

  4. I’d like to see a comparison of these trends with the the cost of production in the respective countries. By cost I mean in terms of currency, not energy, though I do agree that eventually the former will reflect the latter, if only for a moment. Western countries are high-cost producers – labor is expensive for starters, not to mention the cost of compliance with safety regulations. China has what amounts to a slave workforce – sadly, both cheap and expendable. Russia I suspect is similar, but not quite so extreme. I am not surprised that China and Russia are outgunning the Western countries in gold production but as the gold price increases, I would expect that situation to change. Comments?

  5. China is not only gobbling up their own gold production,but they have made alliances with rich resource countries such as Canada,Australia & Tazania another diamond in the rough. Spendind their dollar reserves wisely the last several years,easily hedging their position in USD’ s. They have also begun port constructionin in Brazil & a canal project in Nicaragua to compete for oil as well.

  6. Awesome article Steve.

    What I have to add is that according to a recent KWN interview (with Steven Leeb I think) China is mining a portion of their gold at a production cost of 2000-2500$ an ounce. I assume only half of what they currently produce is economical at current prices. This just says they don’t care much about fiat conversion values, they want the metal.

  7. What if the game is to get gold and silver prices down and then reset/revalue/whatever to a higher price which is still at or below today’s prices? That would take all of the fun out of it for me as I own both. Kind of like a stock you buy for $100 that drops to $10 and then is bought out with much fanfare by a competitor for a 50% premium. You get a check for $15 and game over. What am I missing?

  8. Jeff,

    Thanks for the reply. You’re not missing much… and yes that’s the idea. There was a huge demarcation line that took place in Nov 2012. After the QE announcement by the FED in Sept 2012 gold and silver shot up. Gold was ready to penetrate $1,800 and silver $35.

    The big bullion banks were sitting on huge short positions. But then all of a sudden, gold & silver were taking down while the broader stock markets were propped up. So, instead of real assets getting the benefit of QE, bubble assets have gotten even bubblier.

    This will end badly… but we just have to be patient.

    steve

  9. I’ve read several articles over the past couple years about China’s exponentially increasing gold imports and how they are stockpiling vast amounts of copper. I find it strange that China has not started building large silver inventories. Maybe I haven’t researched it enough, but their own mine supply no longer meets their silver investment and industrial demand. I know they are investing in mines around the world, but considering silver’s value for industrial use alone you would think it would be a strategic investment for them.

    • Keith,

      You might find this document interesting: http://www.uschina.org/sites/default/files/ChineseSilverMarket2012.pdf

      A paragraph from page 15 states:

      “After carefully analyzing the key elements of the Chinese
      silver supply/demand equation, our estimate shows that
      net government stock sales from China total almost 350
      Moz (10,880 t) from 1998 to 2006, accounting for more
      than 4% of the global silver supply over the same period.
      From 2007 onwards, however, we are confident that the
      PBOC has stopped delivering any material sales to the
      market. In essence, this is due to the fact that, following
      several years of heavy sales, the country’s silver stocks have
      already been reduced significantly from “excessive” levels,
      and remains stocks will play some part in diversifying its
      reserve portfolio away from US dollars.”

    • Silver is being strangely ignored by the powers that be. Probably they realize, universally, that there just isn’t enough of it. So they can’t let it take any other meaning than as an industrial commodity. If they treat it as money, it’s all over – people would start buying it (it has already started to a small degree), shortages would develop, and the price would go to the stratosphere.

      So the power centers have no choice but to ignore silver, and hope that everyone blindly follows.

      The suppression has been hard on gold, but even harder on silver. And you can bet your sweet behind that measures will get more extreme and extreme, as circumstances deteriorate.

      Gold is actually the elite’s darling. It’s just that at the moment, it’s their secret darling. But they don’t dislike it, and they own lots of it. Someday they will acknowledge gold – not silver.

      That’s why I like and buy silver – it’s the only precious metal that in the end is not in their control. Silver is the truly independent precious metal, the people’s precious metal. Gold will never break the back of the elite. Only silver can.

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