Gold prices will fall as the economy recovers, causing revenue to grow slightly through 2017
Los Angeles, CA (PRWEB) June 08, 2012
In 2011, US production of mined gold and silver ore reached its lowest point in almost twenty years, but the US Gold and Silver Ore Mining industry achieved record-high revenue. This apparent contradiction reflects the power precious metal prices, which are traded on world financial markets, have on industry performance. Over the five years to 2012, gold prices and industry revenue are projected to climb at annualized rates of 18.6% and 16.2%, respectively. According to IBISWorld industry analyst Brian Bueno, the increase has been driven by growing global demand from investors seeking a safe investment after the recent economic downturn. In 2012, revenue is expected to jump an additional 6.3% to $14.1 billion as prices climb due to recessionary conditions in Europe and continued disappointment in the US economic recovery. On the other hand, demand from jewelry manufacturing, the industry's primary domestic market segment, has decreased in recent years because of price increases and declining consumer demand. In fact, jewelry's domestic share of industry revenue is currently 56.1%, down from 68.0% in 2009. However, investment demand has grown tremendously, especially in the global market, where investment demand in gold is almost 40.0%.
As demand grows domestically and internationally, producers are attempting to boost production to take advantage of high prices. However, a lack of investment in exploration and mine development in the 1990s and early 2000s has made it difficult for producers to catch up. Gold production dropped consistently from 2001 to 2009, but managed to increase over 2010 and 2011 because of recent investments in production, says Bueno. Concentration in the Gold and Silver Ore Mining industry is high. The four largest producers include Barrick Gold Corporation, Newmont Mining Corporation, the Rio Tinto Group and Kincross Gold Corporation. The high level of industry concentration reflects the relatively small amount of mineral resource locations, where a few large companies control the largest and highest-producing mines, and multiple firms often operate at the same mine establishments. Additionally, producers have an incentive to merge due to the cost benefits of having larger operations. Large producers also have greater capital avail to invest in mine exploration and development. All these factors give major players an advantage, making it difficult for smaller firms to compete. Most mergers and acquisitions in the industry occurred in the early 2000s, with small fluctuations in total enterprises occurring in the past five years. Concentration has increased in recent years due to merger activity and increased production at some of the industry's largest mines. The largest industry player, Barrick Gold Corporation, acquired Placer Dome Inc in 2006, resulting in the company's control of four additional mines in the United States.
Over 2012, US gold production is expected to jump a further 3.2% to 245 metric tons. Silver production is expected to remain relatively stable after resource depletion caused significant drops in the late 1990s. Large firms have invested in mine-expansion projects to reap the benefits of high gold and silver prices. Over the five years to 2017, US economic growth is expected to ramp up, thereby easing some of the upward pressure on gold and silver prices. As a result, industry growth is projected to slow. For more information, visit IBISWorld’s Gold and Silver Ore Mining in the US industry report page.
Follow IBISWorld on Twitter: https://twitter.com/#!/IBISWorld
Friend IBISWorld on Facebook: http://www.facebook.com/pages/IBISWorld/121347533189
IBISWorld industry Report Key Topics
Firms in this industry mine gold and silver bearing ores. Mining includes the development of mine sites and the on-site processing of ore into a concentrate or bullion. Firms typically retain ownership of the semi-processed gold or silver product and pay for further refining on a toll-charge basis. The refining process is included as part of the copper, zinc and lead refining industry (IBISWorld report 33141).
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.