12 Ways The The $US210 Billion Gold Market Directly Impacts The Economy

We love to track the daily ups and downs of the gold market and debate whether or not the yellow metal actually has any intrinsic value.

But whether you like it or not, gold plays a major role in the global economy.

A new report titled “The Direct Economic Impact of Gold” from PricewaterhouseCoopers (commissioned by the World Gold Council) takes a look at the mechanics of the gold trade.

“The key metrics are GVA — which measures the economic contribution of those entities engaged in the gold value chain and reflects their contribution to the economies in which they operate — and employment,” according to the report. “GVA is used because it measures the value of an activity in a way which lends itself to direct comparison with Gross Domestic Product, which is used worldwide to measure economies’ economic output.”

Here are the 12 key takeaways from the report:

  • The 15 largest gold producing countries, which accounted for around three quarters of global output, directly generated US$78.4 billion of gross value added (GVA) in 2012 — approximately equal to the GDP of Ecuador or Azerbaijan or 30% of the estimated GDP of Shanghai.
  • Large scale, formal gold mining in the top 15 producing countries directly employed an estimated 527,900 people in 2012.
  • Gold mining is a significant source of exports for some countries: in 2012, gold exports were 36% of all Tanzanian exports and 26% of exports in Ghana and Papua New Guinea.
  • The estimated GVA of global gold recycling is between US$23.4 billion and US$27.6 billion.
  • The GVA per tonne of recycled gold is approximately US$16 million compared with approximately US$36 million for gold produced from mines.
  • In 2012, investment demand (consisting of bar and coin and gold-backed exchange traded funds (ETFs)) accounted for 35% of global gold demand, central bank gold purchases accounted for 12%, jewellery accounted for 43% and use in technology/manufacturing accounted for around 10% of gold demand.
  • The 13 largest gold consuming countries in 2012 accounted for 75% of gold used for fabrication and 81% of gold used for (final) consumption, either in the form of jewellery or investment products such as small bars and coins.
  • Their activities directly generate up to US$110 billion of GVA — approximately equal to the GDP of Bangladesh or half the GDP of Hong Kong or Singapore.
  • The direct GVA associated with the fabrication of small bar and coin is estimated to be US$13.3 billion across the top 13 consuming countries whilst the direct GVA associated with consumption is estimated to be US$38.3 billion: these estimates are not additional since the estimated GVA based on fabrication will be included in the consumption based estimate.
  • The direct GVA attributable to gold jewellery fabrication and consumption across the top 13 gold consuming countries is estimated at US $US69.8 billion.
  • The direct GVA attributable to gold’s use in technology fabrication is estimated at almost US$4 billion (excluding the value generated by the retail component of these goods).
  • Overall, the GVA associated with the supply of and demand for gold is estimated to be in excess of US$210 billion across those countries in scope of this analysis: this means it is similar to the GDP of the Republic of Ireland or the Czech Republic or Beijing.

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