PwC has recently completed an analysis on the direct economic and fiscal contribution of gold in the world’s major gold producing and consuming countries. The key measure that was used is gross value added (GVA), which measures the contribution to gross domestic product (GDP), employment and taxes paid.
The report reveals that global gold supply reached 4,477 tonnes in last year with approximately two thirds coming from mining and one third from the recycling of gold. The 15 largest gold producing countries, which accounted for around three quarters of global output, directly generated US$78.4 billion of GVA in 2012.
China is estimated to derive the largest economic contribution directly from gold mining at US$12.6 billion, although this is only a small proportion of its total economic output (0.2%). The direct GVA from gold mining is also estimated to be over US$8 billion in the US, Australia, Russia and Peru.
The total direct employment in gold mining across the 15 largest gold mining countries is estimated to be over 500,000. Three countries stand out: South Africa has an estimated 145,600 gold mining employees, Russia 138,000 and China is estimated to have 98,200 employees.
The United States, Russia and Peru are estimated to have relatively productive mining sectors. The average GVA per worker varies from US$841,800 in the United States to US$39,600 in South Africa, where much of the mining takes place deep underground.
The supply of gold from recycling has increased by 60% since 2007: from 1,005 to 1,616 tonnes. This supply response has been far more significant than in mine production, where development lead times and other barriers limit rapid responses. The estimated GVA of global gold recycling is approximately US$25 billion. The GVA per tonne of recycled gold is approximately US$16 million compared with approximately US$36 million for gold produced from mines.
Investment demand (consisting of bar and coin and gold-backed exchange traded funds accounted for 35% of global gold demand, central bank gold purchases accounted for 12%, jewellery accounted for 43% and use in technology/manufacturing accounted for around 10% of gold demand.
The direct GVA associated with the fabrication of small bar and coin is estimated to be US$13.3 billion across the top 13 consuming countries whilst the direct GVA associated with consumption is estimated to be US$38.3 billion. Bar and coin demand has surged following the financial crisis: it has grown by 188% since 2007, and accounts for the largest proportion of total investment demand (82%). This reflects the value of physical bars and coins of gold as a key investment asset for many.
Overall, the GVA associated with the supply of and demand for gold is estimated to be in excess of US$210 billion.