Twenty-First Century Economics of the Gold Price

The twenty-first century has seen two profound changes occur in the gold market. The first is that the gold price has surged in unexpected ways and secondly, the price appears to have become more volatile over time. This chapter considered the various factors that have shaped gold spot prices over the last two decades and examined the long term gold prices over the last two decades. This is important as two questions, for quite different reasons, arise and are of vital importance to Africa and its economic future. Leaving aside the obvious macro-economic factors associated with the rising or falling price of a dominant export, where Africa was in 2018 the world’s largest supplier of gold, there is an important microeconomic consideration. Without a rising or at least a high price of gold on the world market, the expansion of production of both artisanal small scale mining (ASM) and large scale mining (LSM) would not have occurred. Perhaps just as significantly, the question of volatility stems from the declining industrial demand for gold and the increasing demand for gold as a financial instrument. The traditional industrial role of gold for the production of jewellery is in relative decline. This raises a profound question as to whether the down-stream processing of gold can act as a basis for African industrialisation as it is so commonly assumed in so many of the high level policy pronouncements on the matter.