Three Major Reasons for Gold in 2016
Presented by: Advantage Gold
This year looks to be another one of increased volatility as the market see-saws in different directions. Here are three compelling reasons why 2016 may be the perfect time to add gold to your portfolio.
1: “Stay the Course”
Financial experts often mention that “buying and holding” stocks through good and bad times is the best way to guarantee returns.
Investors that bought equities before the Financial Crisis have had a 20.2% return up until January 25, 2016. They “stayed the course” and were rewarded with an eventual return.
However, those that held gold during that same time period until today have had a 48.6% return, which is more than double that of the general market. This is even true with gold declining roughly 40% from its peak since late 2011.
Does it make more sense to “stay the course” in 2016 with stocks, or gold?
2: Two-Term Presidents
The last four presidents to serve two terms have had stock markets rise significantly during their tenures.
However, the stock markets also suffered catastrophic losses in each of their final years as president.
For example, during George W. Bush’s tenure, the S&P 500 nearly doubled from a bottom of 801 during the Dotcom bust to a peak of 1,562. Then the Financial Crisis hit at the end of Bush’s second term and the market went down to 677 points.
Obama is now in his last year, and the market is up 178% from its bottom in 2009. Will the trend continue?
3: Oil vs. Gold
Oil and gold have a relatively strong historical relationship. They are hard assets that move similarly in inflationary environments.
However, gold and oil also have some major differences in how supply and demand tends to affect the price.
Oil: Every day the world consumes 93 million barrels of oil. However, over the last two years there has been an excess of supply coupled with weakening demand from China and a slowing world economy. This has led to oil falling from over $100 per barrel to $30. Despite this glut, OPEC continues to produce record amounts of oil to maintain market share. Oil is delivered and consumed, and these fundamentals of supply and demand closely apply. More supply + weakening demand = lower prices.
Gold: Meanwhile, gold miner production is expected to peak in 2015 or 2016, and to decrease from there. Since gold is mostly traded via paper markets and not delivered, the nearly five-year low price point for gold may not fully reflect its supply and demand fundamentals. Gold discoveries are rarer than ever, and the cost and risks to mine are very high. Yet, this declining output is not yet seen in the gold price.
Gold to Oil Ratio
Lastly, the ratio between these two goods helps to explain what is going on in the world. Gold represents a safe haven during times of financial stress, and oil represents the overall health of the economy and industry.
The gold to oil ratio is expressed in the amount of oil barrels that can be bought with 1 oz of gold. A lower ratio means that the economy is doing well. Meanwhile, history shows that whenever the ratio is above 20, there has been some type of market crisis.
Today, this ratio is higher than ever in history at 37.
Would you rather own oil or gold?
The Periodic Table of Endangered Elements
90 different elements form the building blocks for everything on Earth. Some are being used up, and soon could be endangered.
The Periodic Table of Endangered Elements
The building blocks for everything on Earth are made from 90 different naturally occurring elements.
This visualization made by the European Chemical Society (EuChemS), shows a periodic table of these 90 different elements, highlighting which ones are in abundance and which ones are in serious threat as of 2021.
On the graphic, the area of each element relates to its number of atoms on a logarithmic scale. The color-coding shows whether there’s enough of each element, or whether the element is becoming scarce, based on current consumption levels.
|C||Carbon||Plentiful supply / serious threat|
While these elements don’t technically run out and instead transform (except for helium, which rises and escapes from Earth’s atmosphere), some are being used up exceptionally fast, to the point where they may soon become extremely scarce.
One element worth pointing out on the graphic is carbon, which is three different colors: green, red, and dark gray.
- Green, because carbon is in abundance (to a fault) in the form of carbon dioxide
- Red, because it will soon cause a number of cataphoric problems if consumption habits don’t change
- Gray because carbon-based fuels often come from conflict countries
For more elements-related content, check out our channel dedicated to raw materials and the megatrends that drive them, VC Elements.
Mapped: The 10 Largest Gold Mines in the World, by Production
Gold mining companies produced over 3,500 tonnes of gold in 2021. Where in the world are the largest gold mines?
The 10 Largest Gold Mines in the World, by Production
Gold mining is a global business, with hundreds of mining companies digging for the precious metal in dozens of countries.
But where exactly are the largest gold mines in the world?
The above infographic uses data compiled from S&P Global Market Intelligence and company reports to map the top 10 gold-producing mines in 2021.
Editor’s Note: The article uses publicly available global production data from the World Gold Council to calculate the production share of each mine. The percentages slightly differ from those calculated by S&P.
The Top Gold Mines in 2021
The 10 largest gold mines are located across nine different countries in North America, Oceania, Africa, and Asia.
Together, they accounted for around 13 million ounces or 12% of global gold production in 2021.
|Rank||Mine||Location||Production (ounces)||% of global production|
|#1||Nevada Gold Mines||🇺🇸 U.S.||3,311,000||2.9%|
|#5||Pueblo Viejo||🇩🇴 Dominican Republic||814,000||0.7%|
|#6||Kibali||🇨🇩 Democratic Republic of the Congo||812,000||0.7%|
|#8||Lihir||🇵🇬 Papua New Guinea||737,082||0.6%|
|#9||Canadian Malartic||🇨🇦 Canada||714,784||0.6%|
Share of global gold production is based on 3,561 tonnes (114.5 million troy ounces) of 2021 production as per the World Gold Council.
In 2019, the world’s two largest gold miners—Barrick Gold and Newmont Corporation—announced a historic joint venture combining their operations in Nevada. The resulting joint corporation, Nevada Gold Mines, is now the world’s largest gold mining complex with six mines churning out over 3.3 million ounces annually.
Uzbekistan’s state-owned Muruntau mine, one of the world’s deepest open-pit operations, produced just under 3 million ounces, making it the second-largest gold mine. Muruntau represents over 80% of Uzbekistan’s overall gold production.
Only two other mines—Grasberg and Olimpiada—produced more than 1 million ounces of gold in 2021. Grasberg is not only the third-largest gold mine but also one of the largest copper mines in the world. Olimpiada, owned by Russian gold mining giant Polyus, holds around 26 million ounces of gold reserves.
Polyus was also recently crowned the biggest miner in terms of gold reserves globally, holding over 104 million ounces of proven and probable gold between all deposits.
How Profitable is Gold Mining?
The price of gold is up by around 50% since 2016, and it’s hovering near the all-time high of $2,000/oz.
That’s good news for gold miners, who achieved record-high profit margins in 2020. For every ounce of gold produced in 2020, gold miners pocketed $828 on average, significantly higher than the previous high of $666/oz set in 2011.
With inflation rates hitting decade-highs in several countries, gold mining could be a sector to watch, especially given gold’s status as a traditional inflation hedge.
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