Gold production from mining is rising at an unsustainable rate, according to the World Gold Council
There’s only about 15% of known gold reserves left, says the USGS
Recycling is ramping up, but that will only get us so far
Hold onto your hats, gold lovers – things could be about to get a little bumpy, after some moderately concerning rumblings from industry experts that are pointing towards a rapidly-approaching deadline called “peak gold”.
Peak gold (or peak ‘anything’, for that matter) is the point at which production (or in this case, from mining) of a commodity stops growing, because we’re starting to run out of a finite resource for humans to extract and turn into other, hopefully better things.
And it’s well-known that gold is most definitely a finite resource, with only an estimated 244,000 metric tons lying in the “discovered” column, of which 187,000 metric tons have already been mined, with most of that coming from China, Australia, and South Africa.
That’s according to the United States Geological Geological Survey, which also offered up this wonderful visualisation: all of the world’s mined gold, if you smelted it down and turned it into a solid block, would make a cube 23 metres long on each side.
That, in layman’s terms, is only about 5.5 Volkswagen Beetles (an accepted non-industry standard measurement) per side, and – in the grand scheme of things – is not very large.
Before you fire up the calculator, at today’s prices (US$2,312/oz) it’s worth a cool US$15,263,225,994,000 – or thereabouts.
That cube represents close to 77% of the known gold on the planet – and the remaining 23% isn’t exactly lying around on the surface, waiting to be picked up.
Finding and mining gold is getting harder – and at the rate we’re going, there’s close to zero chance that the industry will be able to continue to ramp up production to meet demand.
Diminishing returns
There’s one side to this theory that suggests that we might have already passed the “peak gold” moment, back in 2018 when things started looking a little tight.
More recently, however, are reports that the global industry is struggling to maintain production growth to meet the constant demand, with John Reade, chief market strategist for the World Gold Council, sounding the alarm in a recent chat with CNBC.
“We’ve seen record first quarter mine production in 2024 up 4% year on year. But the bigger picture, I think about mine production is that, effectively, it plateaued around 2016, 2018 and we’ve seen no growth since then,” Reade said.
In 2020, production retreated for the first time in a decade, falling by about 1.0%.
By 2021, gold mining fell short of actual requirements by just over 460 metric tons, and the industry turned to recycling to make up the shortfall.
In 2022, mine production was up 1.35% year on year, but in 2023 we saw a relative slow-down, with production rising by just 1% to 3,644 tonnes.
Notably, Australian output for that period actually fell 2.0% year on year, a fall of around 7 tonnes of mined gold.
“I think the overwhelming story there is: after 10 years of rapid growth from around 2008, the mining industry is struggling to report sustained growth in production,” said Reade.
“It’s getting harder to find gold, permit it, finance it, and operate it,” he concluded.
Keep digging…
It’s not all bad news, though – as previously reported on Stockhead, Metals Focus, a renowned London-based precious metals research consultancy group, has released its Gold Focus 2024.
And the tone of that report is, unsurprisingly, fairly upbeat, suggesting that gold is expected to achieve fresh all-time highs in H2, 2024, as the economic and geopolitical backdrop remains supportive.
On top of that, the ASX-listed goldies have been having a pretty solid time of things so far in 2024, with a number of decent finds and some solid backing from investors who are either super-serious about gold, or see it as a perpetual safe haven during times of broader market volatility.
Combined, the ASX-listed gold diggers have put on about +0.42% so far this year, but things have been a tad tumultuous, with the XGD All Ords Gold Index falling very sharply in the past week, down -3.52% at the time of writing.
But, as they say in the classics, “when in doubt – zoom out” – and a wider look at that sector’s performance shows that the goldies are up significantly since this time last year, by 8.12%.
So while the alarm bells might be ringing for global supply, there’s still money moving in the right direction for investors.
Which means – maybe – that hitting peak gold wouldn’t be such a bad thing after all…
Read more: Gold Digger: These small ASX goldies nailed it in May
The post We might be about to hit ‘peak gold’. For real, this time appeared first on Stockhead.
