Chances are you have heard the term “peak gold.”
But what does peak gold mean?
In simple terms, it means the world’s gold mines have reached the largest annual production possible. After that point, the theory goes, production will dwindle until all the gold in the world is above ground.
Now, some believe that day will not arrive until some distant future. And critics think plenty of gold must still exist underground. Plus, they argue, modern technologies may make it easier to find new deposits.
But a growing group of experts and analysts believes the evidence shows:
Peak gold is happening soon…
Or it may already have come and gone.
According to the World Gold Council, gold production is dropping worldwide. Especially among the world’s largest gold producers—Russia, Australia and China.
The problem is that gold miners are having a tough time finding large high-quality gold deposits. And the quality of the gold ore they’re extracting is dropping. At the same time, mining is growing more expensive for many reasons—including labor shortages and high inflation.
Now, here’s the kicker most people have never heard:
Being able to mine new gold takes a very, very long time.
From the moment a gold miner discovers a gold deposit to the time they can extract the gold from it and the mint can turn it into a gold coin…
It takes an average of almost 20 years.
This means, even if miners develop new technologies to find and extract the ore…
They may not be able to meet rising global demand for quite some time.
And while the world waits for gold production to meet that demand…
Circumstances are calling for even larger gold production numbers than anticipated today: The dollar is losing purchasing power due to inflation. Global geopolitical tensions are mounting. And the World Gold Council says the world’s biggest buyers—central banks—are gobbling up the most gold since 1950.
In other words, the demand for gold is rising while the supply is dwindling.
So, you have to wonder…
If the well-known and trusted basic economics of supply and demand hold true for gold as they always have for all other assets…
What do you think will happen to the price of gold in the future?
Again, critics argue plenty of gold is available underground. And new technologies could lead to gold deposit discoveries. But that doesn’t mean these discoveries will be enough to offset demand. Nor does it mean miners will be able to offset rising costs and risks.
Plus, if the average time it takes to bring gold to market holds true…
It may be a decade or more before we see newly discovered gold reach the market.
So, have we reached peak gold?
It’s challenging to say right now.
But former Goldcorp chair and gold expert Ian Telfer says:
In my life, gold produced from mines has gone up pretty steadily for 40 years. Well, either this year it starts to go down, or next year it starts to go down, or it’s already going down… we’re right at peak gold here.
Regardless of any expert’s opinion, here’s what we know:
We know people tend to acquire gold during times of economic uncertainty.
We know major buyers like central banks are buying more gold than ever…
And we know gold is a finite asset.
Only so much gold exists above ground. Only so much exists below ground. And at some point, there’s zero doubt… miners will pull the last nugget from the earth. From that moment on, the precious metal will go from scarce to ultra-rare as the world’s buyers pounce.
And from where I’m sitting, that means a long-term strategy of buying gold to help secure savings right now may prove to be a wise move for many years to come.
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