The World Gold Council (WGC) has released an essay collection called Gold 2048, which claims that due to an expanding middle class contingent in countries like China and India, demand for gold will rise.
According to a foreword by WGC chief executive officer Aram Shishmanian, “the gold mining industry is going to be challenged to produce as much gold in the next 30 years as it has done during recent years”.
An emergent middle-class population in large countries such as China and India, in combination with broader economic growth, are expected to have a significant impact on gold demand.
Environmental, social and political issues are also expected to prove important in reshaping the gold mining industry; global gold production hit its seventh consecutive all-time record in 2016.
However, while exploration budgets continue to rise, new gold discoveries have actually decreased. Contributor Mark Fellows, head of mine supply at Metals Focus, estimates a consistent gold price of $US1500 per ounce will be required to maintain global production levels at their current standard, subject to certain conditions.
Currently, Canada and Australia possess the world’s largest gold exploration budgets among mining companies, but the industry is expected to become increasingly diversified over the next thirty years.
Shishmanian admitted that some changes, whether it involves the gold mining industry, or the gold industry at large, will be hard to predict.
“The next 30 years will no doubt bring significant changes — some we anticipate, some that none of us predict,” explained Shishmanian. “I am delighted that in Gold 2048 we have brought together a stellar set of contributors — economists, investment managers, leaders in the mining industry, as well as our own specialists — to consider the global trends and dynamics that will drive this fascinating market forward.”
Away from mining, the demands of new technologies too are expected to provide a significant impact on gold demand.
Gold 2048 contributors Chen Daofu and Sun Fei from the Finance Research Institution of the Development Research Centre of the State Council, refer to China’s economics transformation as “one of the most influential global trends of the last 30 years”, and point out that China’s economy is expected to grow by 4.8 per cent per year between 2020 and 2035, with technology likely to account for around half of China’s economic growth by 2030.
In addition, China’s nominal gross domestic product (GDP) will increase to $US160 trillion by 2050, around 30 per cent of gross world product (GWP).
In India, the second-largest consumer of gold in the world after China, the middle-class are expected to become by far the dominant social and economic class by 2048.
Gold 2048 contributor Dr Rajesh Shukla, managing director and chief executive officer of the People Research on India’s Consumer Economy (PRICE) explains in his essay The great Indian middle class: a force to reckon with that India has the potential over the next three decades to become the world’s fastest-growing economy (5–6 per cent annual growth).
According to PRICE research, the current population of deprived and aspiring Indians will fall from the current 1.1 billion to 150 million by the 2040s, a massive increase in the middle classes from around 19 per cent to over 70 per cent of the country.
“Gold is especially popular in India and China, where the average family has more faith in the physical asset as a store of value than financial securities,” explains Rick Lacaille, executive vice president and global chief investment officer of State Street Global Advisors in his report, The investment market in 2048.
“However, the incentive to switch from physical assets to securities will depend on stability and confidence in financial markets, which in turn will depend on broader political stability,” he added.
“We may also see the emergence of new commodities and stores of value, either as components of new products or as cheaper, more effective and resilient materials.”
The full report can be read here (requires registration).