The gold price surged to unprecedented levels in the second quarter of 2025, breaking through $US3400 per ounce for the first time.
The Australian Government’s latest ‘Resources and Energy Quarterly’ forecasts gold will remain in the $US3000–3500 range through the second half of 2025, before moderating to around $US2600 by 2027 as market conditions stabilise.
This remarkable rally, driven by escalating geopolitical tensions and economic uncertainty, represents a golden opportunity for Papua New Guinea’s (PNG) mining sector.
For PNG gold producers, a sustained period of elevated prices promises significant revenue opportunities, especially as global mine production struggles to keep pace with higher demand. Despite the record prices, global production grew by just 0.3 per cent year-on-year in the second quarter.
Uncertainty drives demand
The surge in gold demand reflects a perfect storm of economic and geopolitical factors that have reshaped global markets in the first half of 2025.
Investment demand skyrocketed in the first quarter, with uncertainty over world trade pushing investors to safe-haven assets. Of these, gold has been particularly sought after as a portfolio hedge. A potential trade war, and rapidly changing policies from key trading markets look set to continue over the coming months, driving further interest from the investment sector.
Central banks around the world have also increased their appetite for gold stocks this year – buying that is expected to exceed 1000 tonnes for the fourth consecutive year in 2025, up from an average of 512 tonnes per year over the preceding decade.
The central bank surge in 2025 is related to a preference for gold over US Treasury Bonds, the Resources and Energy Quarterly advised.
Meanwhile, traditional jewellery demand has declined under pressure from the record-high prices. Chinese jewellery consumption fell 45 per cent year-on-year in the December quarter of 2024, though this was somewhat dampened by a modest five per cent rise in Indian demand.
India’s demand recovery comes as economic conditions improve, particularly in rural areas of India where gold jewellery has rich cultural significance.
Peak supply approaches
World gold production and supply is approaching its peak this year. According to the Resources and Energy Quarterly, global production is forecast to reach approximately 5200 tonnes in 2025, before stabilising at around 5000 tonnes per year in 2026.
This supply ceiling comes despite the higher global demand, which will likely put further upward pressure on gold prices.
Global mine production has grown only modestly, increasing just 0.3 per cent year-on-year in the March quarter of 2025. While PNG mines are growing, larger producers such as Australia and the US have faced production declines, in part due to grade deterioration at several key sites.
Looking ahead, mine supply is expected to grow by only two per cent to around 3800 tonnes in 2026, with new projects and expansions barely offsetting declining output from existing operations.
The amount of recycled gold available adds another layer of complexity to the global balance. Scrap production dropped one per cent year-on-year in the March quarter of 2025. Over the forecast period, scrap supply is expected to decline further as inventories become depleted and prices retreat from current record levels.
A sustained gold supply–demand imbalance will continue to loom large. Mine supply growth has been constrained by operational challenges and long development timelines. At the same time, gold’s investment and central bank demand has been surging, meaning the global gold market is structurally positioned for continued price strength.
Winners at home
What does a sustained period of high gold prices mean for PNG gold miners?
Unlike major producers such as Australia and the US, which have experienced gold production declines, PNG has maintained stable annual output of around 50 tonnes over the past three years.
This production stability is particularly valuable given the current backdrop of soaring gold prices. Even maintaining current output levels, PNG producers can expect substantial windfalls if gold trades in the forecast $US3000–3500 range through the second half of 2025.
The record price environment also enhances PNG’s investment attractiveness. Previously marginal deposits now present viable development opportunities, while existing projects become far more economically compelling.
Higher gold prices improve project economics across the board, from exploration through to production, potentially attracting fresh capital to PNG’s mining sector and supporting the development of new operations in the years ahead.
