Gold supply chain shows resilience
The Covid-19 pandemic has disrupted the gold supply chain unlike any other event in modern history. From mining operations to consumption, all elements of the chain have been affected. While this has led to some distortions within parts of the market, it has also allowed the supply chain to demonstrate its resilience.
The gold supply chain is truly global. Gold is mined on every continent except Antarctica, refined into bars and coins in numerous countries, and distributed far and wide. This geographical dispersion not only brings stability to the gold market, it is also necessary to satisfy demand.
Both gold mining and recycling activities were curtailed due to lockdown restrictions in Q1. But the declines were modest in comparison to the scale of the disruption to other industries globally. In addition, we also saw downstream capacity reduced with a small number of refiners halting operations, as well as challenges in transporting physical gold due to the reduction in commercial flights. However, despite all the supply and logistical issues, overall liquidity in the gold market remains robust which clearly highlights the strength of the gold market.
The sudden Covid-19 outbreak also took investor uncertainty to new highs against the existing global backdrop of low and negative interest rates, as well an anaemic growth outlook, fuelling a surge in gold investment demand in Q1.
We find that while gold’s supply chain has not escaped unscathed, it has demonstrated resilience in the face of these challenges, highlighting a key strength of the market. But the onset and scale of the COVID-19 pandemic has caused unprecedented disruption to various parts of the gold supply chain.
In this report, we explore, 1: how the different components across the supply chain have been affected, 2: the impact on the flow of gold through the supply chain, & 3: how the disruption has affected investment demand.
