The supply of gold comes from three sources:
- new production from mining
- recycled scrap, and
- releases from existing stocks of bullion by central banks.
A key difference between gold and other commodities is that it is not consumed. This means that most above-ground stocks of gold can be brought back to market. As a result, the amount of gold mined in any year represents only a small proportion of the total gold potentially available for sale.
With increased supplies coming from mine production, gold producers prefer to facilitate public sector purchases and decrease recycling levels.
In 2011, the total gold supply was 4% less than in 2010, amounting to 3,994 tons. This decline was chiefly due to a reduced public sector contribution. Lower recycling levels were also a factor in the slowdown in supply. In 2011, production reached a new annual record of 2,809.5 tons, up 4% on 2010.
Annual net purchases by central banks and official institutions were a very impressive 440 tons, compared with 77 tons the previous year.
Mexico was the largest net buyer of gold in 2011, adding almost 100 tons to its reserves; it was followed closely by Russia, with approximately 95 tons. Thailand, South Korea, Bolivia, and Venezuela also made significant purchases during the year, while Kazakhstan and Tajikistan added more modestly to their reserves.
In supply and demand terms, there were a number of noticeable themes: divergent paths for Indian and Chinese demand, growing mine production, and a falling recycled gold supply.