Man since antediluvian times has lecherousness for the gold. In the yesteryear it has been used as both for cosmetic intent as jewelry and for existent currency. Now in modern times although the gold is non considered as currency in any portion of the universe, its popularity has remains the same because of its still continued usage in jewelry concern and besides new position it has received as most popular investment trade good ( Investopedia, n.d. ) .
In this research Global gold industry would be analyzed by first of all supplying a brief description of the industry and besides placing who are the cardinal participants in the production of gold.
Then the Porter ‘s 5-forces model will be utilized to execute an industry analysis. Furthermore PESTLE Analysis will be done to find what external macro-environmental factors affect the industry.
Besides Industry “ life-cycle ” theoretical account will be applied to understand the phases through which gold houses advancement. Finally utilizing the old research 3 possible hereafter scenarios for the industry would be proposed and the most likely scenario would be identified.
Brief Description of the Gold Industry
Gold Mining industry involves mining and treating gold from the land and so selling it in the universe market. Gold is one of the most popular trade goods, since last century universe production of gold has increased more than 5 times.
Figure 1: Gold Production Timeline
Beginning: hypertext transfer protocol: //www.dani2989.com/pdf/worldprod13gb.pdf
The demand of gold is ever higher than the universe ‘s production capacity. Even though the production has remained about same but the planetary market value has more than doubled in last 5 old ages.
Figure 2: Global Market Value & A ; Volume
Currently America and Asia-Pacific are universe ‘s largest planetary market and generates more than half of the planetary market gross.
Figure 3: Market Cleavage
Besides the Industry is extremely disconnected, with top 4 companies Barrick Gold, Newmont Mining, AngloGold Ashanti and Gold Fields amounting less than 30 % of entire market portion. Rest all portion is taken by legion little excavation companies.
Figure 4: Prominent Players
1.1 Key Players nowadays in Gold Industry.
Barrick Gold is the universe ‘s largest pure gold excavation company headquartered at Toronto, Canada. It operates 26 mines present in all 5 major continents. Barrick Gold is the industry leader with 2009 one-year production 0f 7.4 million ounces ( Moz ) . It besides has the largest gold militias of approximately 139.8 Moz ( Barrick Gold, 2010 ) .
Newmont Mining Corporation:
Newmont Mining based in Colorado, USA is besides one the universe ‘s largest gold bring forthing company with major mines in 8 states United States, Australia, Peru, Indonesia, Ghana, Canada, New Zealand and Mexico. It employs more than 33,000 employees. Its 2009 gold production was 5.3 Moz and has the gold modesty of 91.8 Moz ( Newmont Mining, 2010 ) .
AngloGold Ashanti is a South African excavation company with over 21 mines in 4 continents. Majority of their mines lie in African and South American continent. In 2009, the company ‘s gold production was 4.6 Moz and has the militias of 71.4 Moz ( AngloGold Ashanti, 2010 ) .
Gold William claude dukenfields:
Gold Fields, another South African gold excavation corporation is one of the universe ‘s largest unhedged manufacturers of the gold. Its primary operations are in the continent of South Africa and Australia. For 2009 it produced 3.6 Moz and current militias stands at 81 Moz ( Gold Fields, 2010 ) .
Porter ‘s Five Forces Analysis.
Figure 5: Porter ‘s Five Forces
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Porter ‘s five forces is a model that explains five forces that influences an industry. These different beginnings shapes up the competition nowadays in the industry. ( Porter, 1979 ) .
These five forces in context of Gold Industry are:
Menace of New Entrants: The chief barrier to entry is financing. All cherished metal industry including the most outstanding metal gold is extremely capital intensifier. Even before the gold mine starts its first production, major investing is required for geographic expedition, mine building, heavy excavation equipment etc. Therefore the menace of new entrants is comparatively low.
Power of Suppliers: The primary resource a gold mine needs is land which is available in big sum in the universe. So the lone supply job remains is the authorities ‘s license to mine the land. Issues like environmental hazards posses hard challenges in procuring authorities ‘s blessing.
Power of Buyer: Buyer ‘s power is high in the gold industry as the gold is a trade good based merchandise. Therefore gold mined by one company is non really different from the gold mined by another. Hence purchasers will ever favor companies that provide lower monetary values or favorable contract footings.
Handiness of Substitute: Presently the menace from replacements is comparatively low. Substitutes for gold include other cherished metals like Ag, Pt, diamonds etc. Although their credence degree is lower than gold. Gold presently holds the advantage of universe currency as all over universe it is used as investing. But as other cherished metals like diamond addition popularity they may go more baleful replacements.
Competition Competition: The four Industry constructions that were mentioned finally drives competition and profitableness non the development of the industry in footings of being it high tech or low tech, emerging or mature, regulated or unregulated ( Porter, 2008 ) .
Gold companies do non vie on monetary value as market forces determine the monetary value. But the chief competition between them is for land. The long term endurance of a cherished metal company depends upon its militias sum. And the lone manner to spread out militias is to continuously research for economic executable excavation countries. Therefore gold companies invest to a great extent in geographic expedition as the first one to detect is given first penchant to mine by the authoritiess.
( Investopedia, n.d. )
PESTLE Analysis of Gold Industry
Plague or its drawn-out signifier PESTLE analysis is scrutiny of the external macro environment in which an industry maps. These factors are by and large beyond the control or direct influence by a concern in the industry. But they have important impact on any concern running in the industry ( RapidBI, n.d. ) .
Figure 6: Stamp
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Government of a state has immense impact in the gold industry. Unlike other industries authorities imposes royalty merely to mine the gold. And the rate of this royalty affects greatly the fight of the industry particularly the bottom-line of legion small-scale mineworkers ( Kerr, 2010 ) . Besides many policies of the authorities ever seek to command both supply and monetary value of the gold by stashing or dishoarding the gold. First of all, authorities pursues the policy of stashing gold in order to promote mineworkers to mine new gold ( Montana River Action, n.d. ) . And when the demand for gilded pushes the monetary values, the authorities dishoards it to maintain the monetary value down ( Goldprice.org, 2005 ) .
The province of the economic system of the universe has even greater impact on the gold monetary values than any policies by authorities. In fact economic status can easy overrule any control by authorities to maintain the gilded monetary value in cheque. Gold monetary values have inverse relation with the economic system ( Cunha, 1999 ) . When the economic system is in good conditions investors put their money on stocks and bonds. And when stock market falls due to bad economic system, panicked investors sell their stocks and invest to a great extent in gilded thereby doing monetary value rise ( Amadeo, 2009 ) . Almost every recession period had affected positively on gilded monetary value.
Figure 7: Recession ‘s affect on Gold Price
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Social factors can be said as chief drive factor for the popularity of the gold, as the jewelry comprises the most major portion in human ingestion of the gold.
Figure 8: Global Gold Consumption
Beginning: hypertext transfer protocol: //www.goldworld.com/articles/gold+prices-bull+market-jewelry/159
Since jewelry holds this big portion in gold ingestion hence any demand alteration in the straight affects the monetary value of the gold. And jewellery demand depends upon many societal factors like season, particular occasions and cultural values. Particular occasions like Weddings, Valentine ‘s Day, Religious festivals etc. causes high addition in demand. Besides cultural values plays really of import function in the universe. Traditionally Asiatic civilization like Indian, Middle-East and Chinese are ever biggest purchaser of the jewelry ( World Gold Council, n.d. ) .
Gold apart from being merely popular for societal intents is besides one of the most sought after stuff for technological intents. It is most ductile, malleable and extremely bacteriums immune stuff known to adult male ( Azomaterials, 2001 ) . Gold has really high utilizations in broad scope of industries from Bio-Medical, Catalysis, Dental, Environmental, Fuel Cells, Electronics, Nanotechnology, Photography, Space etc. Every twelvemonth new industrial utilizations are discovered which in hereafter can switch the ingestion of gold more towards industry than societal intents.
Figure 9: Medical Uses of Gold
Beginning: hypertext transfer protocol: //www.mailonsunday.co.uk/health/article-1024865/Medicine-going-gold-experts-rediscover-ancient-properties-precious-metal.html
Before excavation for gold, conformity with local governmental Torahs are necessary in which a prospector wishes to mine. For illustration in U.S. all excavation including gold is controlled under General Mining Act of 1872. This act loosely states that any individual is US above 18 old ages of age can interest a excavation claim in any federal belongings ( Goldplacer.com, n.d. ) .
Environment and gold excavation does non travel good with each other. Gold excavation is really toxic waste bring forthing industry. It is responsible for more than 96 % of Arsenic and 78 % of Lead toxic pollution in US entirely. ( Grining Planet, 2005 ) .
Figure 10: Gold Mining Pollution
Beginning: hypertext transfer protocol: //www.nodirtygold.org/solid_waste.cfm
Environmental phenomenons like temblor besides pose high danger to excavation industry. Harmonizing to geoscientists deep gold mines are most seismically active parts of the universe and can do cave-ins ( Richardson, 2004 ) . Recent 5.2 magnitude temblor caused an Australian gold mine to close down and lose 1000000s of dollar in gross ( Valentine, 2010 ) .
Product Life Cycle of Gold Industry
A new merchandise introduced in market goes through series of phases which jointly known as Product Life Cycle. These phases are Introduction, Growth, Maturity and Decline. The implicit in footing for these phases is the client ‘s cognition of the merchandise. A freshly introduced merchandise is comparatively unknown but as the client became cognizant of it gross revenues turn. Finally due to alterations in client gustatory sensations gross revenues diminution and the merchandise is phased out ( Day, 1981 ) .
Figure 11: Merchandise Life Cycle
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Gold industry is different than other industries because gold is non a merchandise, it is a trade good. That is, there is ever demand for gold and gold from one manufacturer is non different from another ( World Gold Council, n.d. ) . Therefore Life Cycle in instance of gold is non relevant to the merchandise ; its relevance lies with the company which is bring forthing gold. The undermentioned rhythm explains how a gold excavation company progresses through assorted phases in its life ( Holmes, 2009 ) .
Figure 12: Gold Firm ‘s Life Cycle
Beginning: hypertext transfer protocol: //www.resourceinvestor.com/News/2009/2/Pages/The-Five-Ms-for-Picking-Gold-Stocks.aspx
Introduction or Exploration Phase:
In this stage, the company foremost discovers the gold sedimentations and the stock monetary value of the company rises aggressively as investor ‘s tallies to purchase portion. After that people realize that there are many barriers before first gold is produced and besides will take old ages for the first gold to be produced. This causes large rectification in company ‘s stock which can plump up to 70 % .
Growth or Development Phase:
In this stage alternatively of lifting gross revenues like in traditional PLC, the company ‘s stock really declines till it reach a stable phase and so remains there while company performs feasibleness survey and development of mine over the old ages.
Adulthood or Production Phase:
In this phase company is really close to mining its very foremost gold, different investors so come causes the monetary value to lift once more aggressively. Finally the portion monetary value stabilizes and the mine remains operational for many old ages.
Decline or Shutting Phase:
After many old ages of excavation, the gold mine ‘s production starts worsening where the measure of gold mined per twelvemonth falls below the profitable border for the company. Then the company either partly or wholly, depending upon the size of the mine, closes it down ( Creamer, 2010 ) .
Future Scenarios for Gold Industry
Scenario 1: Gold ‘s Demand for Industrial Use Would Rise
Gold is extremely valuable metal for scientific discipline and engineering. It has really broad industrial applications particularly in the field of Biotechnology, Catalysts, Environmental, Electronic and Nanotechnology. Gold is considered at head of the approaching Nanotechnology Revolution. It is because gilded nano atoms display really different and alone belongingss than in normal signifier. Nanotechnology is now considered as the major country of the hereafter. Worldwide authoritiess are passing one million millions of dollars in nanotechnology research ( Keel et al. , 2010 ) .
Figure 13: Global Government Funding for Gold-based Technology
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Probability: Low to Medium
There are still many discoveries needed before the existent Nanotechnology revolution is realized and nanotechnology comes to the multitudes ( Berube, 2006 ) . Hence the chance for addition in gold ‘s demand for the industrial utilizations is low for near to mid-term hereafter.
Scenario 2: War would do the Gold ‘s demand to lift exponentially
War and Gold have really close relation. Whenever there is possibility of war someplace, the investors run to put to a great extent on gold as it is considered as the safe oasis for their money ( wiseGeek, n.d. ) . Hence this causes the gold ‘s monetary value to be lift aggressively ( BBC News, 2002 ) .
Today the universe has become comparatively safer than the past due to modern societies antipathy towards war. And the possibility of any important war to originate in any portion of the universe is really low.
Scenario 3: Gold ‘s demand would witness a little autumn
Gold has an opposite relation with the planetary economic system. In times of growing the investors chose to set their money on stocks and bonds and the gold monetary values falls. And in bad times investors consider gold as the safe-haven to hive away their money.
Figure 14: Future Forecast for Gold Industry
The universe late exited from a major economic recession. This recession caused the gilded monetary value to surge. Hence the demand for gold will be for twosome of more old ages but as the universe informant sustained period of stableness this demand will finally fall.
Cite this Global gold industry analysis
Global gold industry analysis. (2017, Jul 07). Retrieved from https://graduateway.com/global-gold-industry-analysis-essay/