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According to initial estimates from Thomson Reuters GFMS, published in the organization's fourth quarter update to its annual Gold Survey, world new-mined gold production totaled 3,126 metric tons (mt) last year, only marginally changed from the 3,120 mt reported for 2014. Total supply, which includes reprocessed scrap and net hedging, was 4,274 mt, compared with 4,375 mt the previous year, largely the result of what GMFS described as "a shift to net de-hedging." Looked at on a quarterly basis, total gold supply fell by 7% during the last three months of 2015, GFMS said, with the quarter "marking six of the past seven in which the gold market was in surplus." Mine supply was down 4% on a year-on- year basis, representing the largest quarter- ly drop since 2008. "Tied to this backdrop, it is hardly surprising that the bear market continued," the organization added. The GFMS data suggest that supply out- stripped demand by some 370 mt last year, almost exactly the same as in 2014, once physical demand and the effect of invento- ry building on exchanges and exchange- traded funds (ETFs) had been taken into account. Consumer demand within the two countries that have acted as sponges for surplus gold in recent years—China and India—marked time during much of 2015, although there was a noticeable upturn in interest later in the year. China increased the value of its gold reserves to 1,762 mt by the end of December, worth $56.7 bil- lion, with the addition of 104 mt during the second half of the year. Meanwhile, Indian imports totaled more than 900 mt of gold worth some $35 billion in 2015, with 105 mt of imports in December alone. In tonnage terms, the total was 25% higher than in 2014, while the lower average dollar price during last year value meant that the cost of these imports was up about 12% year-on-year. GFMS believes that a little more than 700 mt of these imports were intended to remain in India, with the remainder brought in as duty-free for re-export after value addition in the jewelry sector. On the producer side, the main focus worldwide has been on cutting costs. Most of the major producers were successful in this respect, with GFMS noting that total cash costs reported by the industry for the first nine months of 2015 fell by 7% on an annualized basis, to $680/oz. In addition to internal cost- cutting programs, much of the industry bene- fitted to some extent from favorable ex- change-rate movements, while the fall in the price of oil helped producers across the world as diesel costs came down as well. And while the dollar price of gold carried on slipping, with The Bullion Vault reporting spot prices having fallen 10% from $1,231 to $1,104/oz between January 2015 and January 2016, the strength of the U.S. dollar meant that the gold-price decline was not as marked in some other currencies. For exam- ple, in euros, the daily price fell from 1,044 to 1,013/oz over the same period, or just 3%, while producers with costs in Australian dollars saw the value of their output increase from A$1,512 to A$1,589/oz as their cur- rency depreciated against the U.S. dollar. It was even better for producers in countries such as South Africa and Russia, where local currency value per ounce rose by 20% and 13%, respectively, as the rand and the ruble slid. For fuel costs, the New York spot price for diesel fell from $1.77 to $1 per U.S. gallon during 2015, according to figures from the U.S. EIA, although it has been common comment that the decrease in oil products, such as diesel, has not tracked the reduction in the crude oil price that consumers might have wished to see. In addition, remote mines have had less in the way of a benefit than might otherwise have been the case, given the cost of trans- port as a proportion of their final fuel bill. Projecting ahead from confirmed third- quarter data, in its January Gold Survey update, GFMS predicted no changes in the relative rankings of the world's top five gold- producing countries, with China still firmly at the top of the pile. Here, the organization estimated that production will have risen slightly year-on-year, a position mirrored to a lesser extent by Australia at No. 2 in the list. By contrast, Russian output is likely to have fallen below the 262.2 mt produced in 2014, with higher costs and the closure of some uneconomic alluvial mining opera- tions largely responsible. Indeed, the Russian gold sector has been subject to some unwelcome influences over the past year or so, as the devaluation of the 30 E&MJ; • MARCH 2016 www.e-mj.com G O L D M A R K E T Gold Marks Time While mine production mostly remained stable throughout 2015, other factors were in play in the gold market. E&MJ; looks at the influences on supply and demand, and the developing trends. By Simon Walker, European Editor Demand for gold remained resilient during 2015, especially in the second half of the year. (Photo: World Gold Council)