☆Peak Gold: A Looming Precious Metal Crisis

“Peak Gold” represents the point at which global gold extraction reaches its maximum rate, after which production gradually declines. Unlike petroleum, gold can be recycled and reused, mitigating the decline to some extent. Historically, world mined gold production has experienced several peaks, such as in 1912, 1940, 1971, and 2001, with each peak surpassing the previous one. However, the most recent peak occurred in 2001 when production reached 2,600 metric tons. While production rebounded in 2009, reaching record highs in subsequent years, it stagnated in 2016. The question remains: Is the gold production industry on the cusp of another peak?

The concept of “Peak Gold” has its share of criticisms, and one significant flaw is analogous to the challenge faced by “Peak Oil” – technology. Just as innovations like fracking opened up previously inaccessible oil and gas resources, emerging technologies and advanced mining techniques hold the potential to unlock gold reserves in locations previously deemed unreachable, while also paving the way for new discoveries in the future.

Over the past century and a half, the gold mining industry has witnessed at least two technological revolutions that have completely transformed its operations. These game-changing advancements include the MacArthur-Forrest cyanide process, developed in the late 1880s, and heap leaching, which was introduced for gold mining in the late 1960s. While an exhaustive historical account of both these technological developments is beyond our scope, it’s worth noting that the MacArthur-Forrest cyanide process played a pivotal role in triggering the Witwatersrand Gold Rush in South Africa. This geological formation, the Witwatersrand Basin, would later become the world’s largest known gold reserve, contributing to an estimated 20% of the world’s total gold production. An emerging “second gold rush” is unfolding in Victoria, Australia, where mining companies harness updated insights into rock formations to better pinpoint gold reserves. Modern drilling equipment enhances yields, and occasional discoveries, such as a 2.6-kilogram (5.7-pound) gold nugget found by an amateur gold hunter, affirm that significant gold reserves remain untapped.

Gold, often perceived as a timeless store of value, is facing unprecedented challenges as the demand for this precious metal outpaces its supply. In 2021, the world witnessed a significant deficit of 460.3 tonnes of gold, prompting a surge in gold recycling to meet this insatiable demand. The gold market is fraught with challenges, such as the difficulty of expanding existing deposits and a conspicuous lack of substantial discoveries in recent years. These challenges raise concerns about the concept of “Peak Gold,” much like the well-known notion of “Peak Oil.

Key Points:

Peak Gold Looms: The concept of “Peak Gold” is becoming a reality as gold production faces challenges to meet surging global demand.
Supply-Demand Imbalance: The world experienced a substantial gold supply deficit in 2021, prompting increased reliance on jewelry recycling to bridge the gap.
Recycling vs. Mining: “Peak Gold” underscores the struggle of the gold mining industry to produce sufficient gold to meet demand without resorting to recycling.
Expert Concerns: Prominent figures in the gold industry have voiced concerns about “Peak Gold,” raising questions about the industry’s future.
Future Challenges: To address “Peak Gold,” the industry must explore new mining projects while grappling with depleting reserves and complex extraction processes.

Summary: The looming reality of “Peak Gold” is marked by a supply-demand imbalance, with gold production struggling to meet global demand. Concerns from industry experts add weight to the issue. The industry must navigate the challenges of depleted reserves and complex extraction to secure the future of gold production.

Have We Reached “Peak” Gold?

Prominent figures in the gold industry, including former CEOs of major gold mining companies and experts, have expressed concerns about the potential occurrence of “peak gold,” a point where gold production ceases its consistent growth and may decline. Factors such as reserve depletion, challenges in expanding existing deposits, and environmental considerations contribute to these concerns. While the exact year for “peak gold” remains uncertain and challenging to predict due to various factors affecting gold production and demand, it is a topic of growing significance in the gold industry, highlighting the need for new gold discoveries to meet the rising demand.

Global gold production 2007-2021, in tonnes (Source: USGS)

Peak Gold was reached in 2019.

Contrary to the notion of a surplus in gold supply, a more in-depth analysis paints a starkly different picture. When excluding jewelry recycling from the equation, the numbers reveal a stark reality. In 2019, for instance, a demand of 4,355 tonnes minus a production of 3,463 tonnes left a significant deficit of 892 tonnes. Even in 2021, despite major gold mining companies exploiting their reserves to the fullest, they failed to satisfy the global demand for gold, falling short by 460.3 tonnes.

The Role of Jewelry Recycling:

The reliance on recycling thousands of tonnes of gold jewelry in recent years underscores the notion of “Peak Gold.” This raises a pivotal question: Can the gold mining industry produce or discover sufficient gold to meet demand without resorting to recycling? Thus far, the answer is an unequivocal no. The industry has been tracking this challenge since 2019, and the situation shows no sign of improvement.

A Glimpse into the Future:

As gold mining companies grapple to keep up with the soaring demand for gold, the prospects for this precious metal seem promising. Numerous indicators suggest that “Peak Gold” is a genuine concern. For instance, research conducted by AOTH and Wood Mackenzie underscores the value of potential future gold mines, primarily controlled by junior resource companies, in addressing the challenge of depleting reserves.

Covid has to see with it?

The video discusses the need for gold exploration projects to become economically viable mines and how the industry must find new gold deposits to meet rising demand. It mentions a projection that the industry would need to commission 8 million ounces of gold projects by 2025 to maintain 2019 production levels. SalivateMetal emphasizes that gold’s price may continue to rise due to the challenges in gold production, unless new large gold deposits are found. The geopolitical and economic factors affecting gold production, such as mine closures and supply chain issues, are also briefly touched upon.

Expert Opinions on Peak Gold:

Prominent figures in the gold industry have expressed concerns about “Peak Gold.” Aaron Regent, the former CEO of Barrick Gold, asserted that global gold production had peaked in 2000, while Roland Watson posited that it peaked in 2001 due to reduced exploration during the 1990s when gold prices were low. Charles Jeannes, the CEO of Goldcorp, predicted “Peak Gold” in 2014 or 2015, emphasizing the scarcity of new mines. Ian Telfer, the former Goldcorp chairman, echoed these concerns, stating that gold production might have already (2015) reached its peak, expressed the belief that there are no new mines to be discovered, which means that there won’t be any significant large-scale discoveries in the future.
Former U.S. Mint Director, Philip N. Diehl, who also serves as the President of U.S. Money Reserve, has voiced in 2022 a concerning perspective regarding the possibility of reaching “peak gold. in 2022 “ “Peak gold” represents the critical juncture where the maximum gold extraction rate is achieved, subsequently leading to a gradual decline in mining until gold can no longer be profitably obtained. Diehl suggests that “peak gold” may already be upon us or is rapidly approaching. The implications of this phenomenon are clear: a limited gold supply that could potentially drive gold prices higher. Randall Oliphant, the former Chairman of the World Gold Council, expressed in 2017 his belief that the world may have already entered the era of “peak gold.” This concept denotes a critical juncture where the annual gold extraction from the Earth ceases its consistent growth trend, which has been ongoing since the 1970s. Oliphant highlighted various indicators suggesting that this turning point might already be here. He anticipated that, in the near term, gold production would likely stabilize at best and subsequently decline gradually. This scenario is propelled by growing global demand, particularly in light of political uncertainties and robust gold purchases by consumers in India and China.

Understanding Peak Gold:

“Peak Gold” is a term familiar to gold enthusiasts and investors. It parallels the concept of “Peak Oil” and signifies the point at which gold production ceases to grow, ending a century-long trend of a 1.8% annual production increase. While “Peak Gold” does not necessarily entail a significant drop in gold production, it indicates that the mining industry lacks the capacity to meet the rising demand for gold, even if prices were to soar. The primary reason behind this shortfall is the shortage of mines capable of delivering additional supply.

Escalating Gold Prices:

If gold reserves are indeed becoming scarcer, it becomes inevitable that gold prices will surge, provided that the demand for this precious metal remains steady or continues to grow. This price surge seems inevitable as the world grapples with the challenges posed by “Peak Gold.” This looming crisis has been substantiated by evidence of declining gold production, as demonstrated in the World Gold Council’s annual reports.

Gold Mining.

What we have mined so far:

The historical accumulation of gold is estimated at approximately 169,643 tonnes, with the total discovered gold amounting to about 221,353 tonnes. In 2019, the World Gold Council estimated that 190,040 tonnes of gold have been mined throughout history. This enduring precious metal, virtually indestructible and recyclable, has defied the test of time. Despite the seemingly substantial figures, all the gold ever found could be compacted into a 23-meter (75.5-foot) cube, roughly the length of a cricket pitch. Annually, the gold mining industry extracts between 2,500 to 3,000 tonnes of gold, with the Witwatersrand Basin mine in South Africa contributing over 30 percent of the world’s gold output. Presently, China leads as the largest gold miner, and Barrick Gold’s Nevada Gold Mines represent the single largest gold-mining complex, producing a remarkable 99,223 kilograms (218,749 pounds) each year.

What’s left:

As for what’s left beneath the Earth’s surface, gold is found in relative abundance at 0.0013 parts per million in the Earth’s crust, although it might appear rare. For perspective, the scarcest precious metal is located at a mere 0.000037 parts per million. Remaining gold reserves are categorized as either “reserves,” viable for mining at current gold prices, or “resources,” necessitating further evaluation for economic viability or a higher selling price. According to the US Geological Survey, approximately 51,700 tonnes of below-ground gold reserves still exist, constituting about 20 percent of the known gold. The potential to mine these reserves could be realized in slightly over 17 years. Nonetheless, advancements in mining technology facilitate the discovery of new reserves and render resource extraction more cost-effective, thus preventing the depletion of Earth’s gold reserves in the near future.

The Way Forward:

To ensure that gold production can meet the annual demand without relying on jewelry recycling, the industry faces two critical choices: mining more gold or discovering new gold deposits. However, both options present significant challenges. Squeezing more gold from existing deposits is problematic due to depleting reserves, lower grades, labor disputes, and other challenges. Finding and exploiting new gold deposits is even more arduous, expensive, and risky, and very few projects possess the necessary economic viability and backing to become productive mines.

The notion of “Peak Gold” is no longer an abstract concept; it’s a stark reality that confronts the gold mining industry. As the world’s demand for this precious metal continues to rise, the industry must grapple with the depletion of existing reserves and the challenges of discovering new, economically viable gold deposits. With “Peak Gold” approaching, the future of gold production remains uncertain, and the industry must adapt and innovate to confront this impending crisis.