Limits on Gold Supply The World is Running out of Gold

Limits on Gold Supply The World is Running out of Gold

The world is running out of gold. It is projected to be in short supply a few decades from now. This is because in contrast to commodities that can be created like currency, real estate, bonds, etc, no one can create gold. The availability of gold depends on supplies availed by nature. If we don’t discover new gold sites to mine the commodity, then we would be gradually running out of mining sites, as a result of depletion.

The table below shows that the earth supply of gold is dwindling, as a result of continuous miming, without the corresponding discovery of new deposits.

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Is the World Running out of Gold?

Several centuries ago, economists were bamboozled by a trend concerning prices, to wit: what makes prices of certain nonessential commodities to be higher than that of some essential commodities.

For example, why water, an essential and indispensable good is so inexpensive compared to diamonds or gold which are nonessential and do not sustain life

It is instructive how simple the answer was, yet potent. Unlike water, which is readily and abundantly available, all economic commodities are scarce and not readily available. The scarcer an item is the higher its value. The amount of water in the world cannot be compared to that of gold. It is far easier to find and fetch water from a stream or river than it is to discover and mine gold.

Gold and water are valuable for lots of reasons, but the rarity of gold makes it an expensive commodity that may be just about to run out in few decades.

Running out of Gold in Just 20 Years

A report which referenced why we just might be running out of gold was posted in the Wall Street Journal in respect of a write up which talked about the pulling through of the “the Barrick-Newmont” mining merger, written by Alistair MacDonald.

The report began by stating:

”The big dilemma for gold miners: There aren’t much gold left.”

The shortage of mineable gold is causing nightmares to several mining corporations around the world. My only reservation with Mr. MacDonald’s supposition is that it lacks emphasis on the fact that we may be running out of the world’s most precious metal: gold.

At contemporary mining intensity, we are just about twenty years away from absolutely draining all of the known gold mines on earth.

However, this does not imply that we cannot find more gold. My concern is that it is very uncommon to discover new gold mines to extract this yellow precious metal. This has become even more apparent with the explosion in the universal demand for gold over the past 25 years.

Gold Deposits are Running out of Gold

SNL Metals Economics Group, one of the most reliable sources for information on the global mining industry, tracks the discovery of gold deposits and precious metals.

Gold Deposits are Running out of Gold

According to SNL, major gold deposits can be classified by containing at least two million ounces. Now, let’s consider the reduction in key gold deposit findings over the years:

From the chart below, twenty-two (22) main deposits were found in 1995, six (6) found in 2010, one (1) in 2011 and nothing in 2012. This graph trumpets the notion that gold supply is running out fast.

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While the reduction is obvious, the possibility that there could be massive gold deposits under the arctic circles has been suggested. It is believed to be masked underneath exceedingly deep, covered layers of solid ice and rock. The presence of huge layers of molten gold close to the earth’s core has been predicted as well. However, we can safely assume that it would take a very long time to begin any extraction of gold from that depth.

Records show that gold production may have climaxed more or less in the year 2,000, while an average decline or reduction of one million ounces every year thereafter has been trending.

How Does Running out of Gold Affect Gold Prices?

Investing in gold is a good investment, but in the long run, it might be a great investment.

The high demand for gold has been sustained over the past five years, and with a rapidly diminishing supply, the value of gold will ultimately increase because the world is running out of gold.

Keep in mind that scarcity elevates value. Basic economics dictates that an increase in demand works well with a diminishing supply which will increase its value. This is the position that gold enjoys at the moment.

Gold has a potential to struggle in the short term, just like any other commodity, but a depleted gold supply will definitely lead to one result – elevated prices. There is needed for the world to pay drastic attention to the search for more gold to address an ultra-scarce situation

In other words, if we consider that prices of gold have already increased by well over 3,000% in the last four and half decades, at a period when gold deposits were being discovered at a regular rate, and demand much lower than it is at the moment, it could be comfortably predicted that value of gold would drastically increase in the long-run.