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Commodity Trading: Gold Futures

Supply / Production Considerations

According to the World Gold Institute's Annual Production report, world Gold mine production is expected to increase by one percent a year between 1998 and 2001, reaching a total mine production of 83.5 million ounces in 2001. This rate of increase is in sharp contrast to that of the 1980's, when mine production jumped from 41 million ounces to 65 million ounces. The sustained low price of Gold in recent years has caused miners to slow production and to concentrate more on lowering production costs than on exploration of new mines. This change in emphasis is expected to reduce the total production of Gold by 15 million ounces in the next three years.

South Africa is the world’s largest producer of Gold. Accounting for an estimated 16.5 million ounces of Gold annually in the next three years, South Africa produces almost 20 percent of the world’s bullion. Due to the extended weakness in the price of Gold in recent years, the South African Gold Industry has reorganized to lower its production costs and boost productivity, hoping to halt its declining production trend which has been in force since the 1960's. The United States is the second largest producer of Gold, accounting for an estimated 10.4 million ounces of Gold annually by 2001. America produces roughly twelve and half percent of the world’s Gold supply. The United States is also expected to reduce mine production during the next three years, due to expanded US Mining operations in South America and the Orient, as well as by reduced profitability due to the low price of Gold. The U.S. is expected to reduce production by nine percent in the next three years. Australia is the world’s third largest producer of Gold, with an estimated 9.6 million ounces annual production by 2001. Though Australia experienced an increase in production in 1998, they are expected to lower production by four percent during the next three years.

The top three producing nations are expected to produce roughly 45% of the world Gold supply in 2001. Latin America (Mexico, Peru, Chile and Brazil) is expected to increase production in the next three years, as are the Far East producers. Though these are marginal producers, their production increase will counteract some of the production cuts made by the top three, big producers.

SPONSORED BY:

Commodity Trader's Almanac 2008
Scott W. Barrie
Best Price $26.37
or Buy New $26.37

Disclosure of Risk: The risk of loss in trading futures and options can be substantial; therefore, only genuine risk funds should be used. Futures and options ARE not suitable investments for all individuals, and individuals should carefully consider their financial condition in deciding whether to trade. Option traders should be aware that the exercise of a long option would result in a futures position.

SEASONAL TENDENCIES ARE A COMPOSITE OF SOME OF THE MOST CONSISTENT COMMODITY FUTURES SEASONALS THAT HAVE OCCURRED IN THE PAST 15 YEARS. THERE ARE USUALLY UNDERLYING, FUNDAMENTAL CIRCUMSTANCES THAT OCCUR ANNUALLY THAT TEND TO CAUSE THE FUTURES MARKETS TO REACT IN SIMILAR DIRECTIONAL MANNER DURING A CERTAIN CALENDAR YEAR. EVEN IF A SEASONAL TENDENCY OCCURS IN THE FUTURE, IT MAY NOT RESULT IN A PROFITABLE TRANSACTION AS FEES AND THE TIMING OF THE ENTRY AND LIQUIDATION MAY IMPACT ON THE RESULTS. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT HAS IN THE PAST, OR WILL IN THE FUTURE, ACHIEVE PROFITS USING THESE RECOMMENDATIONS. NO REPRESENTATION IS BEING MADE THAT PRICE PATTERNS WILL RECUR IN THE FUTURE.

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL, OR IS LIKELY TO, ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.

ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM, IN SPITE OF TRADING LOSSES, ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS, IN GENERAL, OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.