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World Gold Council Chairman Says We May Have Hit Peak Gold

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During an interview at the Denver Gold Forum, the chairman of the World Gold Council said he thinks the world may have reached peak gold.

Peak gold means the amount of gold mined out of the earth will begin to shrink every year, rather than increase, as it has done pretty consistently since the 1970s.

Randall Oliphant said there are signs we’ve reached that point. He said in the near-term, production is likely to plateau at best, before slowly declining as demand rises, especially given global political risks and robust purchases by consumers in India and China

We’re not going to fall off a cliff in the near term, but in the same time it’s really hard to see how we’re going to produce enough gold to meet all this demand.”

The World Gold Council chairman said geopolitical risk and instability will continue to boost demand for the yellow metal.

All this uncertainty seems very fertile ground for people to get into gold.”

According to Bloomberg, Oliphant wasn’t the only person at the conference talking about peak gold.

David Harquail, chief executive officer of Franco-Nevada Corp., said earlier Monday that the gold industry continues to be in an ex-growth phase where new mining projects are simply replacing older assets that are running out of ore.”

There is solid data to back up the contention the world may have hit peak gold.  Mine production plateaued at 3,100 tons in 2016, equal to 2015’s output. And in the first half of this year, we saw sharp drops in mine output in both China and Australia, the world’s leading producers.

In 2016, Mining.com analyzed the data and concluded there are no more easy gold discoveries. In fact, the number of major gold discoveries is shrinking.  MarketWatch asserted that we’re heading for “an impending gold production cliff” based on analysis by Sprott Asset Management. Analysts say gold discoveries peaked in 2007, and a production peak will soon follow. Since that high-point in ’07, discoveries have collapsed, “despite exploration budgets increasing by 250% from 2009 to 2012.”

When we look at the future of gold, it’s easy to get caught up in the latest geopolitical turmoil or the most recent policy pronouncement by the Federal Reserve. Of course, these events in the news cycle are important. But investors should never lose sight of the most basic fundamentals – supply and demand. The gold industry may well be entering a long-term — and possibly irreversible — period of less available gold. As mining companies find it more difficult to pull gold out of the earth, it will mean less gold for refiners to produce for the consumer market. Remember, gold gets its value from its scarcity.

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