Total world gold mine production decreased last year for the first time since 2008. That’s sure to put upward pressure on world gold prices, as increased demand and decreased supply will work together to send gold skyward, perhaps even taking out its all-time high prices in 2020.
Production from gold mines has generally increased every year since the 1970s, buoyed by consumer investment demand. With so much pent-up demand in the US finally being released after gold ownership was legalized in 1975, the result since then has been ever-increasing investor demand, and increasing mine production to suit that.
The fact that mine production decreased last year, despite rising investment demand and rising gold prices, could be an indicator that we have reached “peak gold.” That is, the available supply from gold mines may be so limited that even with increased demand, there just isn’t that much gold in the ground to satisfy that demand.
If 2020 shows a further decrease in production, that might be the beginning of a longer-term trend of decreased gold production worldwide. And if that happens, it could help lead to a long-term gold bull market that won’t stop anytime soon.
Aside from mine production, gold recycling is the only other major source of gold worldwide. But recycling output pales in comparison to mine production. Plus, with more and more electronic devices being created every year, all of which require gold to operate, the outlook for recycling output looks set to diminish too as more devices remain in use for longer periods of time.
These supply pressures will only enhance the effect that demand increases will have on the gold price. With stock markets feeling pressure not only from economic headwinds, but also from the coronavirus, gold demand is set to increase yet again this year. Gold had a decent year last year, with about a 15% gain in price. But this year’s increases could easily be double that if things get worse.
If gold mine production continues to decrease year after year, don’t be surprised to see annual increases in the gold price, with no annual pullbacks. We’re entering a perfect storm that is shaping up to give gold investors incredible returns on their investment. But if they don’t pull the trigger and invest in gold today, they’re likely to miss out on the next gold bull market.