Gold is one of Papua New Guinea’s oldest export industries. Volumes have been volatile recently but the prospects for the sector look good, according to an expert at the World Gold Council. 

Gold mining is a global business with operations on every continent, except Antarctica, according to the World Gold Council.

The gold industry in Papua New Guinea is a sizeable one in global terms. The World Bank Country Partnership  Framework ranks PNG as the 22nd country in the world for the export of this metal.

And the sector is on the rebound. According to the Bank of Papua New Guinea’s March 2019 Quarterly Economic Bulletin, the volume of gold exported was 17.3 tonnes in the quarter of this year, compared with 13.6 tonnes in the March quarter of 2018.

‘The increase reflected higher production and shipments from the Ok Tedi, Lihir, Porgera, Hidden Valley, Simberi and Kainantu mines,’ the Bulletin said.

Exports were K137.9 million in the March quarter of this year, compared with K134.8 million in the previous corresponding period. 

Global prospects

The international prospects for gold look good. John Mulligan, Director of Member and Market Relations at World Gold Council said there have been big structural changes in the global market. 

‘The vast majority of gold mining takes place a long way from where gold is consumed. Increasingly, we are focused on the investor market. 

‘It is a deeper, and wider, and more liquid market. Gold is currently owned by more people for more purposes than at any time in history.’ 

‘Gold is aligned with government and there is an opening of access to investors. It is seen as a classic safe haven in times of extremes macroeconomic risk.’ 

Supply is on the increase. Mulligan said between 1987 and 2017 global annual production increased from 1733 tonnes to 3293 tonnes.  

‘There are a lot more mines,’ said Mulligan. ‘There has also been a very significant increase in terms of scale and global supply.’ 

Increased demand

Mulligan said global demand has doubled in the last 30 years and its composition has changed. In the late 1990s, 70 per cent of the market was for jewellery, but that has since waned. 

Demand for jewellery in the United States, Japan and Western Europe has fallen by 63 per cent since 1997. Over the same period there has been a 156 per cent increase in demand from investors.  

‘Institutional investment in gold is still very much a peripheral thing. We have spent a lot of time to educate investors to get gold to enter into the mainstream.’ 

‘Gold is aligned with government and there is an opening of access to investors. It is seen as a classic safe haven in times of extremes macroeconomic risk.’ 

Mulligan said China and India now account for 54 per cent of global consumption in gold.  

‘The most significant driver of change has been the emergence of the developing world.’ 

Central banks and gold

Mulligan said central banks are buying gold and consider it a legitimate asset class. Interest from private investors in Europe has also been ‘re-awakened’ and exchange traded funds (ETFs, listed securities backed by gold) have become popular. 

But the biggest market, institutional investors such as insurance companies and pension funds, is yet to take up the precious metal as a significant asset class. 

‘Institutional investment in gold is still very much a peripheral thing. We have spent a lot of time to educate investors to get gold to enter into the mainstream. 

‘Gold is mainstream in China—except for institutional investors.

‘Gold is ruled out by Chinese regulators as an investment asset, even though it is embedded in the central banks.’ 

Mulligan said institutional interest is likely increase as strategists become more familiar with it.