BAGHDAD — Baku, a city in Azerbaijan’s western province of Dagestan, is already on the verge of being overrun by the demand for gold.
As the world’s largest gold producer, Baku has the potential to produce a quarter of the world market for the precious metal, which has become increasingly valuable amid rising interest rates, rising inflation and a tightening global economic outlook.
But Baku’s ambitions are becoming increasingly ambitious as it ramps up its production capacity to a record 3,300 tons of gold per day this year.
With Baku now producing at least $1.4 billion in gold per year, it’s already surpassed the $1 trillion mark and is on track to reach a peak of $2.6 billion by the end of the year, said Nesman Azizov, head of the International Gold Market Research Centre in Baku.
At the same time, there are fears the region could become the next Mecca of gold mining.
While gold has historically been the source of wealth in many Asian countries, gold prices have been plummeting, and a recent spate of terrorist attacks in the Middle East have created a fear that gold could soon become the new hot commodity.
In the U.S., gold prices are down by $1,000 per ounce in recent weeks, the worst drop in more than two years.
Baku’s economy is a small one, just 4.5 percent of the total of Azerbaijan’s 3.5 million people, and most of the wealth it produces comes from the oil and gas sector, which employs 1.5 to 2 million people.
But it has been able to sustain a boom in the gold market through its diversified energy and tourism industries.
Its largest mines are still being built and most are expected to begin producing in 2017, but they are also working to produce at least half of the region’s gold by 2018, Azizova said.
“It’s the biggest boom yet,” he said.