Gold mine production was up modestly in 2022 as mining operations normalized post-pandemic. But mine output still hasn’t returned to the peak we saw in 2018, boosting speculation that we have possibly reached “peak gold.”
Gold mine output continued to rebound in 2022 with the industry remaining largely free of COVID interruptions and safety stoppages in China. According to the World Gold Council’s 2022 Demand Trend Report, full-year mine production came in at 3,612 tons. This was a 1% increase from 2021 and the highest output since 2018.
But gold production still hasn’t rebounded to its 2018 peak. The WGC said, “This lack of production growth gives further credence to claims that gold production is close to plateauing.”
Looking at the longer trend, gold production has flatlined in recent years, even accounting for the impact of the pandemic.
After slowing for several years, gold mine output fell by 1% in 2019. Although that year marked the first absolute decline in gold production since 2008, it continued a general trend of diminishing mine output.
Historically, mine production has generally increased every year since the 1970s. There was a drop in production in 2008, but that was something of an anomaly, as it occurred at the onset of the 2008 financial crisis.
The recent slowdown in mine production is more concerning.
In fact, some analysts speculate that we may be at or near “peak gold.” This is the point where the amount of gold mined out of the earth will begin to shrink every year. Several prominent players in the mining industry think we’re close to that point.
In recent years, several gold-mining executives have warned that we have discovered most of the world’s reasonably minable gold. For instance, in 2019, Goldcorp chairman Ian Telfer said, “We’re right at peak gold here.” And during the Denver Gold Forum in September 2017, World Gold Council chairman Randall Oliphant said he thought the world may have already reached that point. Franco-Nevada chairman Pierre Lassonde has also indicated he expects a significant dip in gold production in the coming years. And in the spring of 2019, a report in Deutsche Welle made the case that we’re approaching peak gold.
The biggest problem facing mining companies is they have already dug most of the easy-to-mine gold out of the earth. We’ve seen a sharp decline in the discovery of new gold deposits despite increases in exploration funding. Technology advances could help reach the more difficult to mine gold, but this means increased costs and a higher gold price is necessary to sustain these projects.
According to the World Gold Council, the average All-In Sustaining Cost (AISC) hit US$1,289/oz in the third quarter of last year. That was another record high and up 14% y-o-y.
South Africa demonstrates the problem facing gold miners. The country was once the world’s leading gold producer. In 2020, it dropped out of the top 10.
In 2018, a study came out saying South Africa could run out of gold within four decades. Analysts say that at current production levels, the country had only 39 years of accessible gold reserves remaining.
Whether we have reached peak gold or not remains debatable. Regardless, 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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