World gold production in 2023 is reaching unprecedented levels, fueled by soaring prices that exceeded $2,000 per ounce three times this year and the removal of Covid-19 restrictions that had hindered output in the previous years.

The World Gold Council (WGC) reports a remarkable achievement in mined gold production, reaching a new quarterly high of 971.1 tonnes in the three months ending in September. This marks a significant increase from the 949 tonnes produced during the same period in 2022.

Cumulatively, mined gold output for the first nine months of 2023 stands at 2,744 tonnes, surpassing the 2,686 tonnes mined during the same period last year. This impressive performance positions the industry on course for a record-breaking year. However, the advantages of increased production and prices are being eroded by rising inflationary costs.

Notably, the industry’s key cost measure, All In Sustaining Costs, reached a new high in the first half of the year and is on track to set a new annual record by December’s end.

The growth witnessed in the first nine months of 2023 suggests that world mine production is approaching the 2018 annual total of 3,656 tonnes. This remarkable growth can be attributed to increased production in key countries, including Canada, the US, Ghana, and Australia.

Canada and the US experienced substantial increases in mined volumes, rising by 14% and 13%, respectively. In Canada, the boost in output followed the severe wildfires in the spring and summer, with production rebounding due to factors like the resumption of full production at Newmont’s Eléonore mine and higher forecast grades at Musselwhite. However, Newmont’s output was negatively impacted by a strike at one of its major Peñasquito mines in Mexico that persisted through the third quarter.

In the US, the 13% year-on-year increase in gold mining was driven by improved mining efficiencies at the Cortez and Carlin operations, as well as higher production at the Turquoise Ridge’s third shaft.

Ghana experienced a 7% year-on-year increase in mine production due to the ongoing ramp-up at Bibiani (Asante Gold) and higher-grade ore availability at Ahafo (owned by Newmont). In Australia, mine production increased by 3% year-on-year, attributed to higher output from KGCM in WA (Northern Star) and the ongoing ramp-up of the Cowal underground operation of Evolution Mining in NSW.

On the downside, gold production decreased in other regions, including a 45% drop in Russia, a 15% decline in Mexico (due to the strike at Newmont’s Peñasquito mine), a 14% decrease in Tanzania, and a 10% estimated drop in Sudan.

Regionally, North America recorded the most significant increase, with an 8-tonne year-on-year rise, followed by an estimated 7-tonne increase in the Asia region and a 4-tonne increase in Oceania, attributed to higher production in China, Australia, and Papua New Guinea.

However, rising mining costs have become a concern due to inflationary pressures. The All Sustaining Cost reached a record quarterly high of $1,315 per ounce in the June quarter, up from $1,276 per ounce in 2022, representing an 18% increase. The WGC attributes rising industry costs since 2020 to inflationary pressure on various input costs, particularly labour, fuel, and electricity.

Despite the increase in costs, the high gold price led to an 8% increase in recycling, reaching 289 tonnes compared to the previous year. Additionally, producer hedging turned positive, with just 7.2 tonnes hedged in the quarter, marking the first hedging in over two years and a decrease from the 26.8 tonnes hedged in the September 2022 quarter.

Exchange-traded fund (ETF) demand, however, remained negative, with outflows of 139.3 tonnes during the quarter and a total of 189 tonnes outflows in 2023 so far. This decline was largely driven by economic concerns in Western countries, particularly Germany.

On a positive note, a group of central banks, led by China and Turkey, continued their purchases, reaching a record 800 tonnes in the first nine months of 2023, up 14% from the same period last year.

These central bank purchases have helped absorb the selling from ETFs, enabling gold prices to respond more positively to factors such as the ongoing conflict in Ukraine, Middle East tensions, rising bond yields, a strong US dollar, and persistently weak demand in some investment and industrial sectors, despite the high prices.