By Anthony Fensom
Gold has performed well in 2024, with the yellow metal hitting new highs following US interest rate cuts and amid geopolitical risks. For Australia, the world’s third‑largest gold producer, record exports are anticipated, along with production growth, as miners capitalise on the precious metal’s rising prices.
The gold price broke through the US$2600 level for the first time on 20 September, following an aggressive half percentage point rate cut by the US Federal Reserve.
The yellow metal has enjoyed a 27 per cent price gain in 2024 – the biggest annual rise since 2010 – boosted by speculation over US rate cuts, and investors’ rush for safety amid conflicts in Europe and the Middle East.
‘In this softer cyclical environment, gold stands out as the commodity where we have the highest confidence in near-term upside,’ say Goldman Sachs strategists Samantha Dart and Lina Thomas.
Goldman Sachs sees the yellow metal topping US$2700 an ounce by early 2025, while Citi expects it to reach US$3000 next year.
Over-the-counter (OTC) gold demand jumped by 50 per cent to 329 tonnes in the second quarter of 2024 – the highest level since the COVID outbreak in 2020, according to Citi. Gold exchange-traded-fund (ETF) holdings also rose for four straight months through to September, with the investment bank saying ‘the stars are aligning’ for the precious metal.
ANZ Research is similarly bullish, pointing to the tailwinds of monetary easing, a weaker US dollar and geopolitical tensions, along with central bank buying and investment demand.
‘The structural drivers of gold’s price – lower yields and a weaker US dollar – will be increasingly supportive after their inverse relationship weakened during the tightening cycle of 2022–23. Macro-economic and geopolitical concerns, US elections and a likely increase in equity market volatility also make a compelling case for increasing investments in gold,’ ANZ Research commodity strategists Daniel Hynes and Soni Kumari said in a 16 September report.
‘Strong central bank purchases and resilient physical demand will be joined by healthy inflows in gold‑backed ETFs. We expect gold prices to move towards US$2700 per ounce in the short term and reach a high of US$2900 per ounce by the end of 2025.’
The World Gold Council’s Gold Demand Trends report showed that global gold demand rose four per cent year‑on‑year to 1258 tonnes in the second quarter of 2024 – the strongest second quarter ever recorded.
‘Increased OTC demand, continued buying from central banks, and a slowdown in ETF outflows drove record-high gold prices in Q2,’ the World Gold Council said in a 30 July announcement.
Gold prices averaged around US$2200 an ounce in the first half of 2024, up 15 per cent year-on-year, and are expected to remain elevated throughout 2024 and 2025, according to the Office of the Chief Economist’s June 2024 Resources and Energy Quarterly.
The Australian Government forecaster anticipates gold export earnings hitting a record $33 billion in fiscal 2024, buoyed by record high prices in Australian-dollar terms. Australian gold exports doubled in the March quarter 2024 to the financial hubs of the United States, Britain, Switzerland, Hong Kong and Singapore, although exports to the consumer markets of China and India fell.
Australian gold production is projected to rise from 288 tonnes in fiscal 2024 to 305 tonnes in fiscal 2026, aided by new projects and mine expansions.
Production is expected to continue ramping up at recently commenced projects, such as Pantaro’s Norseman project and Bellevue Gold’s namesake project. Genesis Minerals’ Ulysses project and Westgold’s Great Fingall project are both expected to achieve first production in 2024.
Further expansions are expected at Northern Star’s Thunderbox mill, while its Super Pit is expected to reach 28 tonnes production in fiscal 2029, up from 13 tonnes in fiscal 2023.
Other new projects include De Grey Mining’s Hemi Gold, expected to become a ‘top five Australian gold mine’ based on planned production.
Environmental shock
The industry suffered a shock in August 2024, however, when federal Environment Minister Tanya Plibersek intervened on Indigenous cultural heritage grounds to block the planned site of a tailings dam for Regis Resources’ $1-billion McPhillamys gold project.
Describing the minister’s decision as making the project ‘unviable’, Regis Resources subsequently wrote down the value of the New South Wales project by $192 million and scrapped its 1.89-million-ounce ore reserve.
The mine had been expected to employ 580 people in construction and create 290 jobs in production. Regis Resources had been working on feasibility studies and approvals since 2017.
The Minerals Council of Australia (MCA) says it was ‘disappointed’ by the government’s decision, ‘particularly as it had the support of the recognised Local Aboriginal Land Council’.
‘In 2022 alone, MCA members engaged 488 Indigenous businesses, spending $949 million, and directly employed 5210 Indigenous people – representing approximately six per cent of our total workforce. These are highly skilled, well-paid jobs that contribute directly to the government’s Closing the Gap outcomes,’ MCA CEO Tania Constable says.
Steaming ahead
Encouraged by higher gold prices, Queensland explorer Superior Resources announced on 16 September a revised scoping study for its Steam Engine gold project, located 210 kilometres west of Townsville, Queensland.
The scoping study revealed a ‘70 per cent increase in the pre-tax net present value (NPV) of the project, while also highlighting the financial viability of a standalone mining and processing scenario,’ according to Superior’s Managing Director, Peter Hwang.
‘We are now confident to progress Steam Engine as a low-capex and near-term revenue-generating operation capable of underpinning a greater Greenvale project copper, gold and nickel development strategy, while also testing the large-scale potential of the project.’
Further US interest rate cuts and continued geopolitical tensions and conflicts should see gold prices remain elevated through 2024 and 2025. For Australia’s miners, that should facilitate greater activity as investors support increased exploration spending and investment.
‘Gold is a safe-haven asset in times of crisis, and with its investment fundamentals looking bright, Australia’s gold industry has an enormous opportunity,’ Superior’s Hwang says.
