Expert Online: Gleaming prospects


The demand for gold is close to record levels following the Swiss National Banks refusal to limit the franc exchange rate and in anticipation of the expansion of the programme to repurchase assets of the European Central Bank. The precious metal also reacted to the decrease in forecasts for the world economy, and became an alternative instrument for investors. 

Gold prices on the world markets exceeded 1300 dollars per ounce for the first time since August 2014, as stagnation in the world economy heightens the demand for the metal as a safe asset. During yesterdays trading, spot gold prices rose 0.6% - to 1303.63 dollars per ounce. In electronic trading on COMEX (division of New York Mercantile Exchange), the February contract on gold rose 0.6% - to 1302.40 dollars per ounce. 

Russian beneficiaries 

Russian gold mining companies managed to end 2014 with positive financial results, despite the low prices for the precious metal. Some companies were even able to pay out special dividends. Companies reduced their production costs, being aware that the current price levels would be the only way to remain afloat. The collapse of the national currency has come as good news to the industry, as it has significantly increased the gap between rouble losses and pseudo-currency revenue. If the price of gold does not decrease, Russian gold miners will feel very much at ease with the weak rouble. 

According to the Russian Gold Producers Union, during the first ten months of 2014, the production of gold bullion and gold concentrates in Russia rose 17% compared to the same period the previous year, that is, to 248 tonnes. The increase is largely due to the introduction and development of new facilities at deposits in the Omolonsky Hub, and at the Maysky and Albazinsky deposits (Polymetal Int.), the Verninsky deposit (Polyus Gold Int.), Albynsky and Malomyrsky deposits (Petropavlovsk plc), Dvoynoe and Kupol deposits (Kinross Gold), Taborny and Berezitovy deposits (Nordgold), and the Belaya Gora deposit (Highland Gold). The total gold production for the year is expected to be 275 tonnes based on the outcome of 2014. This is more than sufficient to meet the requirements of the domestic market, but obviously not enough for large-scale expansion on foreign markets.

For the Russian market, 2014 has also been notable for the dramatic increase in the amount of gold in international reserves. At the beginning of December 2014, the figure reached a high of 38.2 million ounces (1188 tonnes) the highest level for two decades. In 11 months, Russia purchased 4.9 million ounces of gold (approximately 152 tonnes), which is more than half of the annual domestic production volume. According to the World Gold Council, Russia was the clear leader in terms of gold purchasing in 2014. However, analysts are not excluding the fact that in December the Central Bank started to sell gold reserves to stabilize the economy.