Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
This Dividend Aristocrat Is Leading the 5G Revolution - 22nd July 19
What the World Doesn’t Need Now is Lower Interest Rates - 22nd July 19
My Biggest 'Fear' For Silver - 22nd July 19
Reasons to Buy Pre-Owned Luxury Car from a Certified Dealer - 22nd July 19
Stock Market Increasing Technical Weakness - 22nd July 19
What Could The Next Gold Rally Look Like? - 22nd July 19
Stock Markets Setting Up For A Volatility Explosion – Are You Ready? - 22nd July 19
Anatomy of an Impulse Move in Gold and Silver Precious Metals - 22nd July 19
What you Really need to Know about the Stock Market - 22nd July 19
Has Next UK Financial Crisis Just Started? Bank Accounts Being Frozen - 21st July 19
Silver to Continue Lagging Gold, Will Struggle to Overcome $17 - 21st July 19
What’s With all the Weird Weather?  - 21st July 19
Halifax Stopping Customers Withdrawing Funds Online - UK Brexit Banking Crisis Starting? - 21st July 19
US House Prices Trend Forecast 2019 to 2021 - 20th July 19
MICROSOFT Cortana, Azure AI Platform Machine Intelligence Stock Investing Video - 20th July 19
Africa Rising – Population Explosion, Geopolitical and Economic Consquences - 20th July 19
Gold Mining Stocks Q2’19 Results Analysis - 20th July 19
This Is Your Last Chance to Dump Netflix Stock - 19th July 19
Gold and US Stock Mid Term Election and Decade Cycles - 19th July 19
Precious Metals Big Picture, as Silver Gets on its Horse - 19th July 19
This Technology Everyone Laughed Off Is Quietly Changing the World - 19th July 19
Green Tech Stocks To Watch - 19th July 19
Double Top In Transportation and Metals Breakout Are Key Stock Market Topping Signals - 18th July 19
AI Machine Learning PC Custom Build Specs for £2,500 - Scan Computers 3SX - 18th July 19
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Uncertainty about OPEC and US Election Leads to Oil Price Drop

Commodities / Crude Oil Nov 09, 2016 - 01:41 PM GMT

By: Jason_Hamlin

Commodities

During the third quarter of 2016, global gold production dropped by 0.5%. Miners brought 846.8t onto the market versus 851.2t during Q3 of 2015. While this isn’t a huge decline, it marks the second consecutive quarter that gold production was down versus the previous year. The overall trend of plateauing output remains in place and has increased the odds that we are approaching, or have already reached, peak gold. The chart of annual mine production is shown below.


Also notice the sharp decline in the line from 2009 to this year. The strong growth trend from earlier years has fizzled out and trended towards zero.

The flat production story is occurring due to operational changes by miners over the past few years. During the 4+ year correction, miners had to focus on cost reductions to remain solvent. Furthermore, they had to reign in exploration and focus on core assets. This will negatively impact gold production for years, as the project pipeline has been scaled back considerably and this will reduce the amount of gold that is being mined annually.

Total gold supply increased, but it was driven entirely by a big jump in recycled gold. The higher price encouraged consumers to sell some of their existing gold holdings. These high levels of recycling, driven by the big jump in gold prices this year, are not likely to be sustained going forward.

Has Peak Gold Arrived?

A few prominent analysts believe that peak gold hit in 2015. Peak gold suggests that total annual global gold production is likely to have peaked and will gradually drop into the future. Reduced gold production and total gold supply is a positive fundamental factor for the gold price going forward.

The following chart suggests that peak gold hit in 2015/2016, following peak discovery back in 1995. This gap coincides with the rough 20-year development cycle from peak discovery to peak production.

Another important factor is that the new discoveries are not as large or as high grade as they have been in the past. The result is that new mines are making a smaller contribution to global gold production and failing to replace the quantity or quality of previously discovered mines.

Goldcorp CEO Chuck Jeannes’ has predicted that peak gold is just around the corner.

“There are just not that many new mines being found and developed,” he told the Wall Street Journal in 2014, adding that this was “very positive” for the gold price going forward.

Mr. Jeannes is not alone in his assessment:

Nick Holland, chief executive of Gold Fields: “We were all talking about how production was going to increase every year. I think those days are probably gone … you are not going to see massive production increases in the industry.”

Vitaly Nesis, CEO of Polymetal: “I think supply will drop by 15 to 20 per cent over the next three to four years.”

Kevin Dushnisky, president of Barrick Gold: “Falling grades and production levels, a lack of new discoveries, and extended project development timelines are bullish for the medium and long-term gold price outlook.”

Mark Bristow, CEO of Rangold Resources: Peak gold production may be reached within the next three years as miners fail to replace their reserves. World’s gold output could peak as early as 2019.

Barrick Gold, the world’s biggest producer, had output of 1.3 million ounces in the second quarter, a drop of 7.5% versus year ago. AngloGold Ashanti, the third-largest miner of the metal, notched a 12% decline in gold production in the first half of 2016.

Gold’s value is partly driven by its rarity. Goldman Sachs estimates that we have only “20 years of known mineable reserves of gold.” Of course, unknown gold reserves will be discovered in time, but this helps in understanding just how little gold there is in the world.

To put these numbers into better perspective, all of the gold mined in 2016, melted down into bars, would roughly fit into 2-car garage. In fact, all the gold ever mined would fit snugly into an Olympic-size swimming pool or stacked just 5 stories high on an average residential house lot. Note that estimated of all the gold in the world vary, but we think the higher side estimates closer to 180,000 tonne are likely more accurate. Either way, it is much less than one would imagine, especially when melted down into a cube.

Total gold demand is on track for a 7% increase in 2016, while global mine production is trending essentially flat. Higher demand and flat or declining supply is a recipe for higher price. In the near term, total gold supply growth is matching demand growth thanks to a huge increase in gold recycling. But absent recycling, mine production alone would not be sufficient to cover new demand.

So, we can’t yet say for certain if peak gold has arrived. And even if it has, the price impact is likely to be muted as the large increase in gold recycling fills the gap. But over time, a flatlining of gold production coupled with increasing demand from central banks, investors and ETFs is likely to be supportive of higher gold prices.

Of course, this is just one of the many fundamental reasons that we believe the gold price is heading much higher in the coming years. If you would like to receive our full analysis of the gold market, price forecasts, timing alerts, stock picks, model portfolio, monthly contrarian newsletter and more, sign up for the Gold Stock Bull Premium Membership by clicking here.

By Jason Hamlin

http://www.goldstockbull.com/

Jason Hamlin is the founder of Gold Stock Bull and publishes a monthly contrarian newsletter that contains in-depth research into the markets with a focus on finding undervalued gold and silver mining companies. The Premium Membership includes the newsletter, real-time access to the model portfolio and email trade alerts whenever Jason is buying or selling. Click here for instant access!

Copyright © 2016 Gold Stock Bull - All Rights Reserved

All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise. The information on this site has been prepared without regard to any particular investor’s investment objectives, financial situation, and needs. Accordingly, investors should not act on any information on this site without obtaining specific advice from their financial advisor. Past performance is no guarantee of future results.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules