Dynamics of gold value
Historically, the dynamics of gold value has a tendency to increase. And it is worth noting that an expected price correction is observed in the gold market during the last few years. Each tide of market growth is followed by a correction market fall, and then an upward trend comes back.
That is exactly why it is now one of the most favorable moments for entering this market.
Gold value flow chart
Reduction of gold mining costs
Bloomberg, an information and analysis company, reports the following important statistic: "The capital expenses of gold-mining companies are consistently decreasing since 2012 (expenses for mineral prospecting are not included)".
This fact is also confirmed by industry experts – even at rock bottom prices of December 2015, the mining companies had a huge operating income margin. In a table below, companies making 98,6% of the Market Vectors Gold Miners ETF (GDX) index of silver- and gold-mining companies are included. The companies listed in the table make about 45% of the world's mining volume.
The average cash costs (СС) makes 587 $/oz that is less than the result of the 3Q15 (618 $/oz) by 5%. Operating income margin at a conditional price of 1060 would made 45 % of the cash flow in December.
The average all-in sustainable costs (AISC) made 836 $/oz with the cost of corporate management and capital expenses included, and this is less than the result of the 3Q15 by 3.5%. Then, the conditional EBITDA would make at least 21%, but actually it is greater, as the capital expenses are gradually depreciable.
Table of average cash costs of gold-mining companies
Reduction of capital expenses results in increase of gold-mining companys' margin.
Gold mining volume
The statistics shows that the gold mining volumes are growing since 2005. In 2005, the mined volume made 2,470 metric tons, and in 2015, it made 3,000 metric tons.
If we'll look at the dynamics of gold mining since 1900, it will be clear that the stable growth of gold stimulates the growth of mining:
Gold mining graph since 1900
Gold demand dynamics
In 2016, the investors are buying gold at a record pace. During the first half year, the demand almost reached the historical maximum of 2.355 thousand tons. This data is provided in a report of World Gold Council (WGC).
This figure is only slightly inferior to the peak values of 2009. Compared to the last year, the demand increased by 18%.
During half-year, the investors bought two thirds of the total world's volume of mined metal (about 1.55 thousand tons). At that, the industrial and jewelry demand declined due to the price increase.
The demand is heightened by the investors. For example, the exchange traded funds (ETF) have bought 579 tons of gold.
The volume of investment demand for gold increased up to the record-breaking amount of 1.064 thousand tons. As compared with the first six months of 2015, the demand has grown by 2.3 times. In terms of money, gold consumption increased by 22%, up to $42.53 billion.
Dynamics of gold demand as per industries within the last two years (Source: World Gold Council)