Gold was one of the first metals used by human beings.
For thousands of years, we’ve used the yellow metal for everything from money to medicine to electronics to space exploration.
And the demand for the most precious of metals has only increased in recent years, particularly in emerging markets like China and India.
At the same time, however, the supply of gold appears to be dwindling.
Peak Gold?
There is no doubt that the process of finding and extracting gold is becoming increasingly difficult and expensive.
Most of the easily accessible gold, the “low-hanging fruit,” has already been mined, collected by millions of men and women who worked mines over the millennia.
And most of the remaining reserves we know about are located in remote and difficult-to-reach locations.
In addition, new discoveries of gold are becoming rarer, and ore grades have been declining for decades.
That means the rate of production is unlikely to keep up with the growing demand and higher production costs.
That's not to mention mining anything is a highly destructive process that can cause significant damage to ecosystems and local communities. And many of the remaining gold reserves are located in areas that are environmentally sensitive, which means mining them could have serious consequences.
All of this has led some to speculate on the concept of “peak gold.”
Similar to the concept of peak oil, peak gold generally refers to the point in time when the production of gold reaches its maximum level and subsequently begins to decline.
Peak Oil Model
Source: ExplainingTheFuture.com
For marketers and those looking to hype up gold’s allure, the concept of “peak gold” is very appealing. It’s a simple story to tell: Gold demand is increasing and supplies are falling.
But there are a few big flaws in the peak gold theory.
The first main flaw also applies to peak oil — and that’s technology.
In the same way technologies like fracking allowed us to reach previously inaccessible oil and gas resources, new technologies and mining techniques will enable us to extract gold from previously inaccessible locations as well as help us make new discoveries in the future.
There have already been at least two technological revolutions that have completely changed the way the gold mining industry operates in the past 150 years alone. Those are the MacArthur-Forrest cyanide process, developed in the late 1880s, and heap leaching, which came into use for gold mining in the late 1960s.
I don’t want to go through the entire history of both technological developments, but the MacArthur-Forrest cyanide process is essentially responsible for the Witwatersrand Gold Rush in South Africa. The Witwatersrand Basin would eventually become the world's largest known gold reserve, and estimates suggest about 20% of all the world’s gold came from this basin.
Meanwhile, the use of heap leaching in the mid-20th century allowed for the production of gold from low-grade ore, eventually allowing countries like Australia and the United States to become some of the world’s top gold-producing nations.
The point is technology is always developing new strategies aimed at producing gold from lower-grade sources.
And the Earth has plenty of gold.
According to the National Ocean Service, the world’s oceans contain some 600 BILLION ounces of gold suspended in normal seawater. Out of the water (and at $2,000 an ounce), the gold contained in seawater is worth a whopping $1.2 quadrillion, which is more money than even exists. So there’s plenty of gold.
But there’s also plenty of seawater in the way.
Estimates suggest there is only about 1 gram of gold for every 100 million tonnes of ocean water, and the technology to economically recover that gold simply doesn’t exist… yet.
Meanwhile, futurists are already talking about mining the moon and asteroids for gold and other precious metals.
Point is, there is plenty of gold to be had if we could just get at it.
In some ways, this is similar to oil. However, we certainly won’t be finding any crude oil on passing asteroids we can pick up.
And that brings me to the next big flaw in the peak gold theory: Gold can be (and is) recycled over and over.
It’s true that both oil and gold are finite resources, and both can technically be recycled to some degree. However, once crude oil is turned into a fuel and burned, it can’t be recycled. Once oil’s energy used, it’s used.
Gold, on the other hand, basically lasts forever.
Estimates suggest there are somewhere around 200,000 tonnes of gold above ground. That’s gold that has been mined and is in our jewelry, bank vaults, and electronics. But all that gold isn’t fresh from the ground.
Other estimates say about 95% of all that gold has been recycled many times over thousands of years. Gold is very easy to recover (relative to other metals), and it’s very rare and valuable. That means gold, unlike oil, very rarely gets thrown away.
Many will point to the decline in global gold production that began in 2018 as evidence of peak gold, but I’m not convinced.
World Gold Mine Production From 2010–2022
Source: Statista
First, there are the COVID shutdowns to consider, which interrupted operations for industries market-wide.
But more to the point, global gold production isn’t something anyone really expects to consistently increase year after year over the long term.
The truth is world gold production ebbs and flows over the years based on many different factors, from demand to energy costs to economic conditions to wars, just to name a few.
A slight decline in production doesn’t mean the sky is falling.
LOOK HERE⇒⇒⇒⇒ I had to go out of my way to point this out because it’s that important: Just because I’m critical of the peak gold theory DOES NOT mean I think gold is a bad investment. In fact, I believe just the opposite.
I know this is kind of a crazy idea in today’s society, but you can be critical of one aspect of something without absolutely hating it.
Nevertheless, even though I don’t completely buy into the peak gold theory, I still believe gold prices will increase substantially over time. Mine production doesn’t need to completely disappear from the planet in order for gold to rise in value. Besides, there are plenty of reasons for gold prices to rise in the short term other than global mine supply anyway.
Maybe the world's production of gold has topped off, and maybe it hasn't. We'll need decades of verified data to be sure. A brief downturn in global production just doesn't cut it.
