(Student’s Full Name)
Global Supply and Demand for Gold
According to the World Gold Council, gold demand “reached 1, 290 tonnes” in the first quarter of 2016 (“Gold Demand Trends Q1 2016” par. 1). This grew to an increase of 21 per cent from past years, making it one of the largest quarters ever recorded. The council explains further that this increase was fuelled by “huge inflows into exchange traded funds (ETFs)” (“Gold Demand Trends Q1 2016” par. 1). This, in turn, was driven by “concerns” surrounding the changing financial and economic environment of the world (“Gold Demand Trends Q1 2016” par. 1). Consequently, the steady increase in the global demand for gold over the last couple has led to the increase in the price of gold, as depicted in the chart below:
(Source: http://www.statista.com/statistics/268027/change-in-gold-price-since-1990/)
It should be noted that although the p rice of gold has increased steadily over the years, the price has decreased slightly on several occasions over the last five years.
Top Producers of Gold in the World
In order to meet the gradual increase in the world’s demand has caused leading producers of gold to increase their production of gold, as illustrated in the following table:
(Source: http://investingnews.com/daily/resource-investing/precious-metals-investing/gold-investing/2011-top-10-gold-producing-countries/ and http://www.worldatlas.com/articles/top-14-gold-producers-in-the-world.html)
The two leading producers of gold, which happen to be developed countries, are Australia and the United States. The four producers, which happen to be lower middle-income countries (according to data compiled by the World Bank), are Ghana, Papua New Guinea, Indonesia and Uzbekistan.
The Challenges Faced by Low-Income Countries that are Top Producers of Gold and Recommendations as to How They Can Improve their Standings
According to Andrew Britton, Ross Lakhdari, Jack Harvey, and Simon Forster, one of the most important challenges faced by developing states that mine minerals and precious metals is the improper “management” of profits earned from the mining industry (2). The authors explain further by indicating that low-income countries are not always transparent “about the revenues they receive” from the mining industries (Britton, Lakhdari, Harvey & Foster 2). This significantly has an “impact” on the “ability” of citizens from low-income countries from making their governments accountable for their actions (Britton, Lakhdari, Harvey & Foster 2). Therefore, it should be recommended that low-income governments be made accountable for how the resources for the mining industry are managed through the implementation of the Extractive Industries Transparency Initiative (EITI). This initiative gives a framework for gold- producing countries to “publicly” share the “revenues raised and received” from mining companies (Britton, Lakhdari, Harvey & Foster 2). This initiative will be helpful in reducing “corruption” (Britton, Lakhdari, Harvey & Foster 2). The academics note that gold producing countries that have put in place the measures outlined in the EITI (Britton, Lakhdari, Harvey & Foster 2). Additionally, the authors mention that gold producing countries that have implemented the initiative shows a favorable connection between the increased “economic contribution” of gold mining done on a commercial scale and reduction in corruption activities (Britton, Lakhdari, Harvey & Foster 2).
Another way in which low-income gold producing countries can economically benefit from gold mining is through the various activities of productions conducted at “gold mining companies” (Britton, Lakhdari, Harvey & Foster 2). However, most low-income gold producing countries benefit from “royalty rates on mineral extraction” from lands (Britton, Lakhdari, Harvey & Foster 2). The scholars note that “[r]oyalty rates” account for approximately “15% on average of direct taxation” (Britton, Lakhdari, Harvey & Foster 2). On the other hand, governments of low-income gold producing countries should tax “payments to suppliers and contractors” and “wages for employees” (Britton, Lakhdari, Harvey & Foster 2). It should be noted that, as it regards “direct taxation,” nearly two-thirds of the “payments that gold mining companies” make to governments hosting these mining governments are for “income and corporate taxes” (Britton, Lakhdari, Harvey & Foster 2). Therefore, every effort should be made to ensure that governments from low-income gold producing countries collect taxes from the activities done at gold mining countries. Furthermore, governments of low-income gold producing countries can benefit from obtaining “import or fuel duties” from gold mining companies (Britton, Lakhdari, Harvey & Foster 2). This is an important point to acknowledge because gold mining companies fuel costs “may account for up to 40% of total operating costs” (Britton, Lakhdari, Harvey & Foster 2). Therefore, the duties that can be had from this are sizable sums that can be used as revenues by governments of low-income gold producing countries.
Works Cited
“10 Top Gold-producing Countries - Investing News Network.” Investing News Network. N.p., 28 Apr. 2016. Web. 23 May 2016. <http://investingnews.com/daily/resource-investing/precious-metals-investing/gold-investing/2011-top-10-gold-producing-countries/>.
Britton, Andrew, Ross Lakhdari, Jack Harvey, and Simon Forster. The Social and Economic Impact of Gold Mining. N.p.: Maxwell Stamp PLC, 2015. Print.
“Change in Gold Price until 2015 | Statistic.” Statista. N.p., n.d. Web. 23 May 2016. <http://www.statista.com/statistics/268027/change-in-gold-price-since-1990/>.
“Gold Demand Trends Q1 2016.” Gold Demand Trends. World Gold Council, 12 May 2016. Web. 23 May 2016. <http://www.gold.org/supply-and-demand/gold-demand-trends>.
“Top 14 Gold Producers In The World.” WorldAtlas. N.p., n.d. Web. 23 May 2016. <http://www.worldatlas.com/articles/top-14-gold-producers-in-the-world
