Emerging markets are leading the way in gold production, according to World Gold Council Strategist Joe Cavatoni.
During a recent interview on Nasdaq’s TradeTalks, Cavatoni said he sees a trend of foreign governments welcoming gold producers because of the benefits such operations can have on local communities. Meanwhile, the United States has failed to recognize gold on its list of 50 critical minerals. Many emerging markets like China have given gold that designation in national security strategies.
Cavatoni said the production of gold is highly diversified but added, “The one market we haven’t seen as much as we might expect from is the U.S. market. I think that’s a bit of a political issue around permitting and, frankly, having ample supply coming from other nations around the globe.”
Welcomed with open arms
“There are nations supporting this activity,” Cavatoni said of the gold-producing trend of moving to emerging markets. “Our mining members can get to an emerging market, open a site, apply (environmental, social and governance) standards and actually do a lot for that community.”
The top gold-producing nations in 2023 included emerging markets such as Russia, Ghana, Indonesia, Peru, and Mexico. (Source: World Gold Council)
Cavatoni said one of the benefits large-scale gold operations can bring to emerging markets is the advancement of energy sources such as solar or hydroelectric power into markets that need the support.
“That’s where we’re seeing this growth and I think that’s really exciting,” he said.
Supporting the supply chain
Cavatoni said mining operations could benefit heavily if the United States declared gold a critical mineral.
If gold were to receive the designation, he said, “It’s beneficial, whether its subsidies or some type of support economically or financially from the government to make more progress in terms of getting a better supply chain online — and we’re not.”
No Western market has identified gold as a critical mineral, he said.
Cavatoni believes the reason is that the diversification of supply that has swept across emerging markets likely comforts Western leaders in knowing that a single foreign power could not remove access.
“When (supply) is more concentrated and concentrated in places that might have a little bit more level of concern to them is when they will identify the metal to be on the critical metals list.”
He said governments also find gold less attractive because just 7% of the metal is used in industry as opposed to other metals like silver, of which 50% is used for industrial means.