Peak Gold: Yellow Metal reserves are depleting

You have heard of Peak Oil, as the world is increasingly debating the maximum rate of oil production because oil reserves are depleting in comparison to the rising demand for energy. But have you heard of Peak Gold?

Similar to Peak Oil, we have these days a Peak Gold phenomenon whereby demand for gold is increasing; but the production of the yellow metal is coming down and biggest gold discoveries have already been done.
“While world’s mines are depleting their reserves, particularly their high grade ore, the remaining supplies of gold are becoming harder to find,” says reputed gold analyst Jon Herring. Demand for gold reached 1,133 tonnes in 2008, an 18% increase from the previous year. In dollar terms, this represented a 51% increase to an all-time record $31.8 billion.

Gold prices are zooming these days. It rose to $926 per ounce last week, prompting analysts to predict that gold prices will easily touch $1000 in a month or two thanks to the global economic meltdown and the free-fall of currencies across several nations led by the US dollar.

While the price of gold has gone up every year since 2001, global production of gold has been falling in comparison to the demand. For instance, gold production in South Africa, the largest producer of gold, has peaked in the 1970s. Brazilian gold production peaked in 1982, Canadian in 1991, Australian peaked in 1997 and US in 1998. All these countries together produce around 40% of the global gold.

New discoveries of gold are becoming smaller and companies are struggling to maintain existing gold reserves thanks to high cost of production. In spite of an estimated $18 billion in exploration expenditure over the past five years, the quality and number of new gold deposits dropped, says a research analysis from the Metals Economic Group.

Interestingly, probably, you have not have heard of any new gold reserves discoveries in the recent past. The Metals Economic Group says there has only been four world class gold discoveries in the last 15 years. Also, in the last 15 years, top five gold producing companies in the world have each produced between 3.5 and 7 million ounces per year.

Thus, while demand for gold has been increasing day by day along its price, production or supply of gold has been falling.

Commodity Online