Is the world ready for a gold deficit?

The global demand for gold is unprecedented: tons of jewelry, coins and gold bars are bought daily, yet few people think about how much more of this resource is left on the planet: its reserves are limited, and soon we will face a shortage of gold. According to the Bloomberg analysts, the global gold supply (aka peak gold) will top out in 2019 before declining.

The chart illustrating the declining gold supply

Three main causes of the crisis

1. Inaccessibility

To date, almost all the exploited gold deposits have been virtually depleted. According to the World Gold Council, two thirds of the world's gold reserves were mined after 1950. What has been left of it now lies at great depths, out of reach for modern technology: finding new gold deposits is a real challenge.

In the chart:

The amount of gold found by miners from 2006 to 2015 decreased by 85%.

2. High costs

The need to create technologies for the exploration of new deposits forces companies to invest huge amounts of money. Outdated geological research methods leave much to be desired – additional costs are inevitable. In such circumstances, gold mining becomes unprofitable, as a result, many mines cease operating.

3. Bureaucratic obstacles

The specifics of policies and laws in different countries complicate the exploration process of new gold deposits. Often, 7 to 20 years must pass from the day of the discovery to the start of gold production.

Experts on the gold production decline:

Pierre Lassonde, billionaire, chairman of the board of Franco-Nevada Corporation:

"Since 1970, we used to find at least one deposit with 50 million ounces of gold and 10 deposits with 30 million ounces every decade. Over the past 15 years, no deposits of such scale have been found."

Nick Holland, CEO of Gold Fields:

"Previously, we have projected an increase in annual production volumes, but those days are gone."

Kelvin Dushnisky, former president of Barrick Gold:

"Declining production, the lack of new deposits, expensive technologies create difficulties for the industry and increase the price of gold."

Ian Telfer, chairman of Goldcorp Inc.

"For the past 40 years that I have been in business, the production volumes were constantly growing. However, now they begin to decline. The peak of gold mining is almost over."

Randall Oliphant, chairman of the World Gold Council:

"Looking ahead, I have no idea where we will mine gold to satisfy all the demand."

Problems of gold mining in different countries

The United States and Canada

Last year, the total production of the largest US-based gold mining companies Goldcorp, Barrick Gold, Newmont decreased by 15% compared to 2017.

South Africa

1970 was the peak of gold mining in the country. Since then, rates have steadily decreased – by more than 80% so far.

Australia

According to the data obtained by S&P Global Market Intelligence, the country’s gold production will hit a record low by 2022. Most of the operating mines will close within the next few years.

Forecast: Gold production in Australia

In the chart: Black – existing mines. Blue – new projects. Red – exploration discoveries.

Peru

Since 2017, no new deposits were brought into use in Peru. According to S&P Global, gold production in the country will be reduced by 1,9 million ounces by 2022.

What lies ahead for the gold market?

The growing deficit will exacerbate the imbalance between supply and demand. China and India will have a strong impact, where gold consumption is massive. The unstable situation in the world will reinforce the interest in gold as a protective asset. These factors will be key to the success of gold in the coming decades.

The yellow metal remains an ideal tool for the preservation of wealth. By purchasing gold now, you ensure your Financial Security. The noble metal will make your capital immune to such pressing threats as:

• inflation;

• foreign exchange market fluctuations;

• financial crisis;

• political tensions.

Now is the best time to purchase gold!

How to strengthen Financial Security