Global mine output hit 1,071 tonnes in Q3, the highest third-quarter level in the World Gold Council series back to 2000, and production rose 2% year-on-year, putting the industry on track for an annual record. Output gains were broad-based: Canada increased 22% and Indonesia 21%, while Chile and Ghana rose 19% and 13% respectively. Costs, however, continued to climb, with average all-in sustaining costs reaching a record US$1,930 per ounce in Q2; that was up 8% on the quarter and 22% over the year, the steepest annual rise since Q1 2013, versus a 5% five-year average.
Total supply still fell 1% because secondary flows weakened and hedging dynamics shifted. Recycling dropped 8% in Q3 to 314 tonnes as prices eased; although the average price was 23% above Q3’25, it fell 5% from the prior quarter, while recycling volumes were down 2% quarter-on-quarter and 8% year-on-year. India’s quarterly recycling was flat but 12% lower annually, China fell 12% q/q and 20% y/y, while Europe rose 12% y/y and the US gained 8%. Producer de-hedging reduced supply by 17 tonnes, with outstanding positions seen falling from 109 tonnes at end-Q2 to about 92 tonnes; WGC expects a slight supply contraction in 2026 as recycling stays soft into Q4.
Physical Tightness and Derivative Market Implications
We should prepare for upward price pressure on gold derivatives over the coming weeks as physical market tightness overrides record mine output. Total market supply falling by 1 percent despite record mine production of 1,071 tonnes shows that physical availability is rapidly tightening. We recommend leaning toward bullish options strategies or buying dips on futures to capitalize on this growing supply squeeze.
Escalating production costs are creating a strong price floor that derivative traders must factor into risk models. With all-in sustaining costs rising 22 percent year-over-year to a record $1,930 per ounce, miners face the steepest cost inflation since 2013. This elevated cost base severely limits downside risk, making bullish vertical spreads an effective way to capture upside while defining risk.
Recycling Trends, De-Hedging, and Trading Recommendations
An 8 percent drop in quarterly recycling to 314 tonnes signals that gold holders are refusing to liquidate, expecting higher prices down the road. At the same time, producer de-hedging removed another 17 tonnes of market supply, bringing total outstanding forward sales down to roughly 92 tonnes. We see this reluctance from both consumers and miners to lock in current prices as a clear signal to avoid aggressive short positions.
Historically, tight physical markets paired with robust structural demand, such as annual central bank purchases regularly exceeding 1,000 tonnes in recent years, spark extended bullish runs in derivative markets. As overall supply is expected to contract further into late 2026, we should treat short-term price pullbacks as high-probability entry points. Trading strategies should focus on capturing upside breakout momentum while keeping stop-loss orders just below key cost-support zones.
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