Are We Running out of Physical Gold? That Would be a Big YES
The precious yellow metal, that is commonly used for jewelry and as a currency for thousands of years and is also a popular store of value option, according to people responsible for supplying it to the world its mining is topping out.
Gold is not manufactured rather only mined. And its popularity is driven by its rarity as gold is a finite commodity.
Experts are sounding an alarm as they share that discoveries of the precious metal are shrinking and the amount of future gold to be mined is on the decline.
The decline in the gold mine is nothing new as it has happened before however, mining companies are actually running out of physical gold as they are no longer finding the new deposits.
While mining companies are spending more money in exploring the new sites, the 140-year old gold industry of South Africa is facing a major crisis. What was once the world's largest gold industry has entered the final phase of its slow death as 75 percent of its gold miners are reported unprofitable by the country’s mineral council.
No high grade or world-class deposits that have yielded over 50 percent of today’s available gold, have been found in a long time.
“We're right at peak gold here,” said Ian Telfer, the chairman of Goldcorp last year while Seabridge Gold chairman Rudy Frink shared his concern with:
“Peak gold is the new reality in the gold business with reserves now being mined much faster than they are being replaced.”
In comparison to 1970s’ 10 grams, many depots today are producing 1.4 grams of gold per ton. Moreover, extraction is becoming costly to obtain. This struggle among the mining companies has led to mergers over diminishing reserves and poor return.
Just recently, the world’s second-largest gold producer, Barrick Gold had a joint venture with Newmont Mining that believes Nevada still has plenty of gold. The time and cost involved in gold exploration make mergers and partnerships a more profitable proposition for these players.
In 2012, the price of gold has been at $1,800 an ounce which is currently down at $1,300 an ounce. However, as the peak of gold nears, scarcity would lead its prices to go up.
Gold Price Chart, Source: Gold.org
The amount of money mining companies allocated for new explorations has also declined during this period that is $21 billion in 2012 to $20.1 billion in 2018.
With the economic growth expected to slow down globally despite presenting a strong picture along with a decline in physical gold, a rise in gold prices is very likely.
Meanwhile, the digital gold, that is Bitcoin which has a set limit, according to some experts would emerge as an alternative option to gold as a store of value and in the coming years would reach yellow metal’s market cap.