Indian Passion for Gold Gets American Glitter

US & Co set to become biggest suppliers as mining the metal gets difficult in other big producers

 India's lust for gold is legendary. Indian households hold over $950 billion of the yellow metal, revealed a recent study by Macquarie Research. India imports most of its requirements: a quarter of all the gold sold globally is imported by us. 

But in recent times, another country has matched India's hunger for gold. China, the largest producer of the precious metal, became a net importer in 2011, as domestic demand soared. Sometime this year, China is expected to overtake India as the largest gold consumer. China, which is among the top producers of gold globally, has high entry barriers for private miners and also uses its production for building up national reserves. 
Entry barriers for entrepreneurs are high in Russia as well. South Africa and Australia, both big producers of the yellow metal, are becoming unpopular due to high taxation and high production costs, respectively. 
Some European gold reserves — for example, the Rosia Montana in Romania, the largest untapped reserves in Europe — are facing problems due to environmental regulations. That begets the question: where will India get its gold from? The US, and other countries in the Americas. 
North America has always been significant in the global gold stakes. Globally, there have been 99 significant gold discoveries (defined as a deposit containing at least 2 million oz of the metal) during 1997-2011. The Americas hold the greatest share in these discoveries—not surprising given that the Americas have accounted for more than half the industry's discovery-oriented gold exploration spending during the period. In 2010, the gold exploration budget rose to $5.4 billion, which was 59% more than in 2009. In 2011, mines in the US produced gold worth about $12 billion. 
Gold mining companies are again flocking to the Americas. In Canada, miners are making huge new discoveries as well as re-starting old mines that were deserted due to lack of funds. In 2011, production rose 21% year-on-year to Canada's highest output in five years. Mexico's large mineral belts have been equally attractive for gold miners. North America Accounts for Lion's Share of Production 
With 2011 production coming in at an estimated 85 mt, Mexico has seen a 254% increase in output. 
In all, North America was responsible for 16% of mine production in 2011. And with a year-on-year production growth of 9%, well above the global average, along with a bevy of ongoing junior exploration, North America will be pumping out gold from a lot of new mines. Mining companies without proven reserves—the so-called juniors—are equally enraptured by North America. More than 70% of them own a project in North America, with over half owning a project in Canada, 17% in the US and 11% in Mexico, according to research by Zeal, a consultancy. 
What does this mean for India? It is clear that in the short term the physical market will not be flooded by freshly mined gold despite the high prices. Scrap sales and offloading of bullion by central banks will remain critical for ensuring adequate supply in the market to meet our demand. 
The silver, or perhaps golden, lining is that mines of the future will be developed in nations that believe in free trade. Unlike China, which is using mines for building domestic reserves, countries such as the US and Canada will allow gold to flow into the international market.