Are We Ready For A Global Gold Deficit

The global demand for gold as a safe haven is growing but gold is increasingly being used in other industries like jewellery and electronics. Tons of gold bars and gold coins are bought every day but few people ever stop to think about how much more gold we can expect to get from this planet. Gold cannot be manufactured, it is a completely natural resource and as such it is limited. We have heard talk about peak gold production but we either aren’t fully aware of what this means or we are simply oblivious to what is going on.

So how did we get here? There are three main reasons why we are facing a peak gold crisis:

Gold is becoming less accessible

The World Gold Council reports that more that two-thirds of the global gold reserves were mined after the 50s. That is gold that was easy to access , now we have to dig deeper, buy more expensive technology or face losing more lives just to get to the deepest levels of the earth. We may be able to devise some useful technology but finding undiscovered gold deposits is a real challenge. There has been a reported decline in the amount of gold found by miners between 2006 and 2015. The decrease was a staggering 85%.

High gold production costs

To explore and to mine that gold from the bely of the earth companies have to invest in new technology. They also need to put money in research and explorations. This costs a lot of money but it companies know they cannot rely on outdated geological data and old technology. The race is to find new gold deposits and to invest in efficient production machinery. This costs money and sometimes this investment does not pan out or produce spectacular results. The high cost of mining for gold has bankrupted a few companies and many mines across Australia, South Africa and other countries have had to cease operations because they were not making much profit.

Bureaucratic obstacles

Different countries have different laws governing mining and sometimes these can be major obstacles for mining companies. It could take up to 20 years to move from discovery to actual production. Since the 70’s there were deposits with up to 50 million ounces of gold and one could find up to 10 sites with deposits of about 30 million ounces of gold. This happened every decade or so but these gone significantly down in the last decade. There are virtually not a lot of large scale mine deposits that have been discovered in recent time. So, the difficulty of finding need gold deposits also has an effect on the price of gold.

Different countries have different problems they have to contend with:

Australia has been experiencing a decline in gold production resulting in the closure of a lot of mines. Researchers estimate that Australian gold production will reach rock bottom as soon as 2022.

The United States and Canada have experienced a decline in production from some of their largest gild mining companies. Companies like Garrick Gold, Goldcorp and Newport have seen an average 15% decline in their production figures.

South Africa had high gold productions in the 70s, however since then the production rates have been declining. They currently stand at 80%.

Peru which has also been a big producer of gold has not reported any new findings recently. Researchers estimate that by 2022, the production of gold will decrease by 1,9 million oz.

So, what is the future of gold?

The growing reduction in production will make the disparity between supply and demand even worse. The biggest consumers in the gold market are China and India. Gold is essential in the culture in both these countries but it is also becoming clear that people in these countries also buy gold as protective asset. More countries are seeing the value of owning gold. This will ensure that gold remains a savvy and successful investment in coming years.

Sources:
https://www.gold.org/goldhub/data/above-ground-stocks
https://www.rt.com/business/432838-global-gold-shortage-alarm/

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