You’ve Heard of Peak Oil, But What About Peak Gold?

While many people may think the earth is a source of unlimited energy and raw materials, that isn’t necessarily the case. And while we may be familiar with the depletion of above-ground resources like forests, jungles, lakes, and rivers, many of us don’t give any thought to the depletion of underground resources.

The concept of peak oil is tied into the concept of resource depletion, the idea that oil resources are finite, and that at some point the available stores of oil that can be produced will no longer be economically viable to extract, and so oil production will peak at some point before entering an inexorable decline.

The same theory has been applied to gold too, with the theory being that gold production will peak at some point and then decline as all economically viable gold to be mined will be exhausted. And now some researchers have put a date on that.

The Gold Mining Process

When we think of gold mining, many of us naturally think of the California ‘49ers, panning for gold in streams and creeks. Or we may think of underground mines out in the West, or deep earth mines in South Africa, with loads of rich ore being brought to the surface in railcars or elevators.

The reality of much of the world’s gold mining today, though, is that it takes place in large open pit mines, in which thousands of tonnes of rock are removed, crushed, and subjected to chemical treatments that remove the gold from them. A high grade gold mine is one that contains 8-10 grams of gold per tonne of rock. In other words, it would take 3-4 tonnes of rock to get a single ounce of gold.

Some of the world’s largest gold mines produce over a million ounces of gold per year, meaning that they’re processing massive amounts of rock. Naturally that is very energy intensive, capital intensive, and expensive. So the idea that at some point there may no longer be enough gold deposits rich enough to profitably mine seems to make sense.

Some experts predict that the world’s gold resources will be effectively depleted by 2050, a mere 27 years away. And what happens then?

Sources of Gold Supply

Right now mining production accounts for about 75-80% of world gold production in any given year. Recycling accounts for the rest of it.

If gold mines were to cease producing gold in meaningful amounts, because it was no longer profitable to do so, then it would fall on recycling of above-ground gold stores to make up the shortfall between demand and supply. Unlike oil, which is consumed in the form of gasoline, motor oil, or diesel, and is thus lost forever, most of the gold that has ever been produced remains in existence above ground in some form or another.

Could gold recycling pick up enough to equilibrate gold demand and supply? It’s hard to think that the gold-plated pins on our computer chips could ever be crucial to gold supply, but that could very well become reality in a few decades. Or the gold jewelry and gold coins we currently have squirreled away could end up being melted down to satisfy growing gold demand.

One would imagine that the gold price would have to rise too in order to induce people to give up their valued jewelry and coins. That’s the natural consequence of a decrease in supply, if demand remains the same.

If the predictions of those who subscribe to the peak gold theory are correct, we could see significantly decreased gold production within our lifetimes. Gold could get more expensive as a result, which would greatly benefit gold owners, while those looking to buy gold would have to pay a lot more.

What Peak Gold Means for You

If you already own gold, peak gold could mean that the value of your gold assets could increase significantly. And if you think you can wait for years to buy gold, then it’s possible that the gold price could rise so much by then that you’re priced out of the market.

Of course, all of this could be much ado about nothing. Peak oil predictions have been anything but accurate, and the future is a tough thing to predict in any case. It could very well happen that gold production decreases but gold prices increase enough to keep marginal producing mines open longer.

Still, if there is a possibility that peak gold could be true, could it hurt to position yourself to take advantage of it? After all, owning gold can already benefit you through portfolio diversification, inflation hedging, and acting as a safe haven. If you take advantage of those benefits and also position yourself to reap the gains in the case that peak gold turns out to be true, that would be a win-win situation.

With over a decade of experience, over $1 billion in precious metals placements, and thousands of satisfied customers, Goldco has everything you need to help you benefit from owning gold. Whether you want to protect your retirement savings with a gold IRA or buy coins to store at home, Goldco’s experts have helped people just like you harness gold’s benefits. Give us a call today and learn more about how to put gold to work for you.