Gold can be defined in different ways. It is both a chemical element (atomic number 79, symbol Au), a precious metal used for its colour and its ductile and soft material unalterable to water and air and a valuable item became a currency in ancient times. These three definitions of gold correspond to the three most important uses of gold:
- The chemical element where the material gold has applications in several industrial sectors;
- The precious metal is essential to the jewellery industry;
- The valuable object is the object of hoarding, investments, financial investments.
The gold market therefore includes several sectors of activity, from the most material (gold mining, processing, industrial use, jewellery) to the more intangible (financial market speculation). The gold market is therefore a very concentrate which is made up of the businesses surrounding the raw material (mining, gold production) but also all the players who derive directly (jewellers, jewellers) or indirectly (stock market speculation) from the underlying asset.
Through the production of gold, the entire gold industry is adapting to changes in the price of an ounce of gold, as it has always been a countercyclical safe haven. Nevertheless, the entire industry must adapt to new rising production costs, which are expected to have a significant impact on market growth. In addition, gold producers are facing the stock speculation (the "paper gold" market) and try to find alternatives in order to maintain price levels that reflect the reality of supply and demand and not the speculation of certain players. The gold production sector is highly concentrated because the barriers to entry are high, especially to operate gold mines. Production costs are increasingly high, forcing players to produce very large volumes to be profitable.
Africa holds 40% of the world's gold reserves. It is therefore a rich continent with great potential. The African gold market is worth more than $65 billion and South Africa is the leading producer country in Africa and the 7th largest in the world, with 140 tons produced in 2016, despite its declining power (it is followed by Ghana, Sudan and Mali). Gold accounts for 70% of Mali's export earnings and the 2nd largest contributor to GDP. The second-largest gold producer in the world behind China and before the United States, Australia is the global leader in industrial mineral resources, with an average annual production of over 270 tonnes of gold, representing 20% of the world's gold production.
In France, several players are positioned on this market. While large-scale players are active in the gold mining segment, more and more players are moving into the segment of gold trading with individuals. In France, for example, players such as Gold by Gold and SMAAP generate most of their turnover in the gold recycling and processing segment. Trading networks, such as Or en Cash or Le Comptoir National de l'Or, are also increasingly present, thanks to a rapidly developing network of franchises.
Despite being a safe haven, the COVID-19 crisis has had a negative impact on the gold market. Indeed, the gold market did not withstand the health crisis: the demand for gold experienced a decline of almost 28% in the fourth quarter of 2019. The gold market has not seen such a large contraction in demand since the 2009 financial crisis, marking the unprecedented nature of the COVID-19 crisis.
1.2 The global gold market: state of play and main characteristics
The world gold market is a central market: indeed, gold constituted the heart of the monetary system and represents today a true safe haven. Thus, the gold market is at the heart of the world economy and the different cycles. Like many commodities, the supply of gold is directly conditioned by ...
1.3 The dynamics of the French gold market
Although France is not one of the main gold producers, it does have, via French Guiana, a number of resources that are still unsurveyed and almost untapped for gold. In mainland France, gold prospecting, which had been abandoned for ** years, has started up again, spurred on by the Exclusive Gold Exploration ...
1.4 The impact of the COVID-19 crisis on the gold market
The COVID-** pandemic has had a devastating effect on the gold market. According to the Word Gold Council, gold demand in the fourth quarter, at ***.* tonnes, was down **% year-on-year, making it the weakest quarter since the middle of the global financial crisis in the second quarter of ****. The coronavirus pandemic, with ...
2.1 The main markets for gold
Gold demand is concentrated globally by a few sectors. Indeed, as we can see from the chart below (***), followed in particular by the creation of coins and medals. In addition, demand from central banks is the third-largest market. Since the financial crisis of ****, central banks have massively replenished their gold stocks ...
2.2 The evolution of the jewellery market in France
The value of French jewellery production over the period ****-**** is quite uneven across the years. However, a clear increase in manufacturers' sales has been observable since ****, rising from an index of ***.* in **** to ***.* in ****. Over the entire period considered (***) is *.*%.
Turnover index of jewellery manufacturers (***) France, ****-****, turnover index base ...
2.3 The integration of gold in the manufacture of electronic components
Gold is a precious metal that is widely used in industrial production. Indeed, given the multiple properties of gold, a conductive mineral, unyielding and very ductile, gold can be transformed into wire, pressed into sheets, integrated to form alloys for the production of integrated circuits and electronic components. The growth of ...
2.4 Gold holdings by central banks
Since the financial crisis of ****, central bank gold holdings have increased steadily. Historically, gold holdings by central banks were intended to reassure investors of the value of their currencies following the end of the gold standard.
Today, gold is a source of diversification for countries with trade surpluses that fear currency ...
3.1 Simplified diagram of the market structure
3.2 Gold production processes in France and around the world
Gold is a highly sought-after precious metal that is mined on the basis of a sophisticated mining process. As such, there are two categories of mines:
Gold pits in place: a lode is mined by digging the rock, then crushing and grinding it. Gold-bearing alluvium: alluvium is separated from the gold ...
3.3 Gold distribution channels in France
Gold can be bought in different forms and from different types of sellers. Gold can be bought in physical form (***). All the banking networks in France, except the postal bank, offer the purchase of gold to their clients. But it is also possible to use a broker approved by the Bank ...
3.4 Gold recycling and processing issues
Secondary gold supply is an important determinant of the gold market. Globally, the recovery of precious metals, including gold, comes from the resale and remelting of jewellery, the recycling of electrical and electronic equipment, the recovery of dental crowns, etc.
Gold recycling and processing fed the gold market to the tune ...
4.1 The evolution of the price of an ounce of gold
The price of an ounce of gold depends on the supply and demand on the market, but also on the economic situation (***). Although the price of gold has fallen to around $*,*** since ****, it remains very high compared to its pre-crisis level. The price variation at the time of the crisis is ...
4.2 The impact of gold price movements on supply
The decline in gold prices since the financial crisis has led to a decline in gold collections from private individuals as purchase prices are less attractive. This is evidenced by the financial results of France's number one gold dealer, Gold by Gold, whose turnover has melted from €***.* million in **** to €**.* million ...
4.3 Gold trading, a sector at the heart of the gold supply but still in the process of being structured
Gold trading, i.e. the purchase and resale of jewellery, coins, etc., is a niche activity in which very few players are established. It is interesting to note that although this activity is central, it remains very unstructured.
Although gold trading has always existed, the emergence of specialized shops is a ...
5.1 Legislation governing gold and precious metals
The mining code was created in **** as a revival of the **** Act. The ordinance ****-** is currently in force. This code obliges an extractor to hold a mining title, which is equivalent to recognition of the real estate rights of its holder. Several permits are required, from research to extraction, and ...
6.1 Business segmentation
Four categories of players can be distinguished. First, we will mention the main gold extractors (***).
- Barrick Gold Corporation
- Newmont Mining Corporation
- Anglogold Ashanti Ltd
- Heimerle + Meule Group
- Gold by Gold
- Lingor Nantes Saint Nazaire
- Groupe Heimerle & Meule (Cookson Métaux précieux)
- Or à Décor
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