Golden dawn for local miners

Western Australian gold producers are enjoying a bright start to 2015 as the domestic price of the precious metal surges higher.

After closing out November at an Australian dollar bid price around $1,370 per ounce, according to the Perth Mint, the spot price was now comfortably above $1,600/oz at the time of writing.

That substantial turnaround in the local dollar value of the metal has come as the US dollar price, in which it is most frequently quoted, has also rallied, up around $US100.

The other key driver of the gain is a substantial depreciation of the Australian dollar against the greenback, from around US85 cents at the end of November to around US78 cents last week.

Consequently, the ASX All Ordinaries Gold Index has staged a strong rally, from a steep low of 1,700 points only two months ago to be travelling around the 2,600 mark.

At prices of around $1,600/oz, gold is in real terms trading at around double its level for most of the 1990s and early 2000s.

But the very long-term history of gold prices is difficult to analyse because the price of the commodity was heavily regulated during the era of the gold standard and Bretton Woods currency fix.

Only during the oil shocks of the 1970s, in the years after the end of Bretton Woods, has the real price of gold been close to the level that was reached in 2012.

Nonetheless, the World Gold Council has reported that global gold mine production reached 3,054 tonnes in 2013, and was on track to surpass that in 2014, which would make the year a record.

Expanding production in China, which is now the world’s largest producer, has driven the higher output.

In 2013, gold sales represented around 0.8 per cent of Australia’s gross domestic product, the World Gold Council said, with production of around 226t.

Around half of the world’s gold production is used for jewellery, at around 2,370t in 2013.