Where is Tomorrow’s Gold Going to Come From?

China is out with some new gold-related statistics, so we have a good idea about the current trends inside the world’s largest gold-producing nation.

Output in China totaled 70.2 metric tons of gold for the first three months of 2010, up about 4 percent from a year earlier, according to the China Gold Association.

In dollar terms, the value of that gold was $5.5 billion, up 33 percent from the same period in 2009. On the trading side, the Shanghai Gold Exchange reports that the trading volume in the latest quarter was up 36 percent, with the value of trading adding up to about $18 billion.

We know where gold is coming from now – China, Australia, the U.S., South Africa and Russia were the top five in 2009, with Peru, Canada, Indonesia, Ghana and Uzbekistan rounding out the top 10. Together these countries account for nearly three-quarters of the world’s production.

But where is tomorrow’s gold going to come from?

This illuminating map above from the analysts at Zeal LLC shows where the junior gold exploration companies are placing their bets. And it may come as a surprise that North America, long considered a mature (albeit productive) gold region, is where most of the action is. More than 70 percent of the 400 junior miners in Zeal’s universe have at least one project under way in the U.S. or Canada.

More gold comes out of Asia than any other continent, but only 7 percent of juniors are working there. In Africa, a promising underexplored region (outside South Africa), the number is just 9 percent.

Why is that?

There are the issues of political stability, investment restrictions, cumbersome regulatory standards, lack of infrastructure and legal structures that present the risk of government seizure of discoveries.

The folks at Zeal also point to the upside in the U.S. and Canada. In the U.S., production is way down from its peak in the late 1990s, but today’s prices make many gold projects attractive. Canada, also far below its peak, has already reversed its production slide – 2009 output was up and the trend continues to point upward. And true to the junior exploration model, Canada is seeing many new discoveries in areas outside the country’s traditional gold districts.

About Frank Holmes 263 Articles

Affiliation: U.S. Global Investors

Frank Holmes is CEO and chief investment officer of U.S. Global Investors, Inc., which manages a diversified family of mutual funds and hedge funds specializing in natural resources, emerging markets and infrastructure.

The company’s funds have earned more than two dozen Lipper Fund Awards and certificates since 2000. The Global Resources Fund (PSPFX) was Lipper’s top-performing global natural resources fund in 2010. In 2009, the World Precious Minerals Fund (UNWPX) was Lipper’s top-performing gold fund, the second time in four years for that achievement. In addition, both funds received 2007 and 2008 Lipper Fund Awards as the best overall funds in their respective categories.

Mr. Holmes was 2006 mining fund manager of the year for Mining Journal, a leading publication for the global resources industry, and he is co-author of “The Goldwatcher: Demystifying Gold Investing.”

He is also an advisor to the International Crisis Group, which works to resolve global conflict, and the William J. Clinton Foundation on sustainable development in nations with resource-based economies.

Mr. Holmes is a much-sought-after conference speaker and a regular commentator on financial television. He has been profiled by Fortune, Barron’s, The Financial Times and other publications.

Visit: U.S. Global Investors

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