However, let us take a brief look at recent gold output in certain transitional economies. The reality is quite a bit different than what is being heard out there in fund promo land. BRIC s may be all the rage when it comes to equity buyers willing to take a flyer, but CARs could come to impact the gold market - and are already rolling. This, before the $40-odd billion that has been spent on gold exploration globally, begins to bear some low-hanging fruit of its own on the gold supply tree:

For example, In 2007 China produced 270.6 tonnes of gold, just ahead of South Africa's 255.05 tonnes of production. In 2008, China produced 282.1 tonnes of gold, up 4.3% from the 2007 levels. We say, get set for a 15% hike in Chinese output in 2009 (vs. 2007's levels). Why? Bloomberg reports that: "China, the world’s largest gold producer, may have record output this year as miners expand production after gold prices reached all-time highs, according to the China Gold Association.

The country’s gold output may climb 10 percent to 310 metric tons, compared with 282 tons a year earlier, Zhang Yongtao, deputy secretary-general of the association, said at a conference in Kunming today. Annualized growth in China’s gold production was 9.5 percent in the past eight years, he said.

China overtook South Africa to become the world’s largest producer in 2007 and the World Gold Council said in July that the nation may pass India as the biggest consumer. Bullion touched a record of $1,195.13 an ounce Nov. 26 as a weaker dollar drove demand for precious metals as an alternative asset. “Record prices boosted profitability of Chinese miners, giving them incentive to expand production,” Zhang said in a speech."

Over to the Great Motherland, where in 2007, Russia produced 161.73 tonnes of gold. By 2008, the country produced 183.5 tonnes and moved to the number five spot in global gold production. Get ready, we say, for a 27% hike in gold output by Russia (vs. 2007 levels) as it might just produce 205 tonnes in 2009.

Gulfnews reports that: " Russian gold production rose 12.2 per cent year-on-year in the first 10 months of 2009, mainly due to the launch of large projects in its far east, the Russian Gold Industrialists' Union said yesterday. The union, which is the main industry lobby, said in a statement gold output by the world's No. 5 miner of the precious metal totalled 171.2 tonnes from January to October, compared with 152.5 tonnes in the same period a year ago. Russia produced about eight per cent of the world's gold last year and plans to significantly increase this share by developing its reserves that are second only to South Africa's. It aims to produce 205 tonnes of gold this year, up 11.1 percent year-on-year."

Finally, over to a mainstream economy -the one Down Under- where in 2007, the country of Oz produced 245.7 tonnes and then lost about 28 tonnes from that number in its 2008 output of gold. Australia's 2009 production could see a 3-5% rise when it is finally tallied up, and might reach 225 tonnes. Reports The Australian: "Australia is back to the No 2 spot behind China in global annual output of the precious metal. Industry consultant Surbiton Associates' quarterly survey, released yesterday, states that Australia produced 112 tonnes of gold in the first half of this year. That compares with Chinese equivalent production of 147 tonnes in the same period, 105 tonnes from the US and 103 tonnes from South Africa."

These are the "CARs" and, these are the drivers - of the gold market- in addition to scrap, fabrication, central banks, and investment. Cross the road and ignore them at your own risk. Some quick math indicates that the three countries in question are set to supply a possible 740 (or about 30% of total mine output for 2009) tonnes of the shiny stuff to the market when this calendar year draws to a close. Mine supply from market and transitional economies amounted to 2,363 tonnes in 2008. If our estimates are correct, the 2009 gold output from the mines in these two niches will come in at about 2,457 tonnes - on track for a total annual mine supply rise of nearly 4%.

Analytical firm GFMS has already tabulated a 7% hike in global mine output as of mid-year. It stood at 1,212 tonnes. This, of course, At a time when spec fund spokespersons (and even some mining firm CEOs) are telling us that we have nowhere to go but down. All good, provided the eager and willing takers of metal remain eager and willing. Surging scrap supplies (hitting a record 880 tonnes by mid-year 2009) are a story for another day...

Jon Nadler is Senior Analyst, Kitco Bullion Dealers Montreal

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