We live in a world where markets are continuously experiencing peaks and troughs. The latest data suggests there are 244,000 metric tonnes of gold on Earth. Just a quarter of this figure is estimated to be yet to be dug up, suggesting there really isn’t much left to be found.
The primary sources of gold include China, Australia, and South Africa, but even the innovative technologies of the present can’t stave off the inevitable peak in gold production worldwide. This tightness of supply could become a significant driver of gold prices in the coming years.
While the apparent headway in our fight against the COVID-19 pandemic appears to have pushed gold prices lower, the fundamentals suggest prices could be heading much higher, especially as supply is likely to remain tight for the foreseeable future.
From the stars
It isn’t an exaggeration to say gold originates from the stars themselves. Scientists believe gold as an element was forged in the heart of exploding stars known as supernovae. These stellar explosions created the element billions of years ago, with 79 protons and 118 neutrons, making gold one of the heftiest elements on the periodic table.
These exploding stars deposited gold across the universe, and Earth was gifted with a slither of that interstellar haul. You simply can’t create gold from scratch, and there is only so much to find here on Earth. Gold almost certainly exists on other planets and pieces of space debris, but until space exploration becomes more advanced, the rest of the universe’s gold remains out of reach.
You can always tell when you’re in possession of pure gold, from that characteristic shine it exudes. True gold is soft, and often requires fortification with denser metals to use for jewellery or gold coinage. Past generations of people have dedicated their lives to digging piles of earth and rock up from the bowels of the crust to find even a nugget or vein of gold.
Most found their efforts to no avail, given the sheer rarity of gold. The attraction to gold is obvious - gold is incredibly unreactive as an element, meaning the atoms refuse to allow oxidation to affect them. Gold can exist for thousands of years, remaining virtually intact, while iron crumbles into iron oxide, and copper fades from a brassy tone to a dull greenish appearance. There’s a reason the Ancient Egyptians used to furnish the tombs of their fabled rulers in this yellow metal - it was built to last.
Gold’s longevity and lasting shine, alongside its rarity are factors which have kept the precious metal close to the top of the leader board, when it comes to the most valuable of precious metals. This consistent intrinsic value is something to bear in mind if you should ever wish to buy gold yourself.
Peak gold may be upon us
There have been two factors at play with gold, which have been a constant since as far back as the Middle Ages. Prices have risen steadily, before surging in the last century or so, with the advent of printed fiat currencies. Alongside a rise in value over time, gold production has also been a feature of the past few centuries, keeping us well fed on a steady stream of fresh supplies.
In the centuries since records for gold prices began to be kept, empires have come and gone, but gold has remained intact. However, while prices have moved higher and higher, we may have entered an era of peak gold. This means the bulk of gold discoveries may be behind us already. The intensive mining operations of the past century may have exhausted easy-to-find seams of gold, leaving us with an impending shortage.
Just as experts show concern about a coming era of peak oil, peak gold means what little gold we already have could be the best it gets. Anyone with a piece of gold could stand to benefit, should the markets take stock of this basic truth, repricing gold significantly higher over time. How do we know we’ve reached peak gold? The data is beginning to look conclusive.
According to a report on the gold markets by CPM Group for 2020, gold mining production peaked at almost 100 million Troy ounces, around 3,100 tonnes, in 2016, having fallen for each year since then. Unless a previously unforeseen stash of raw gold is found in an uncharted and easy-to-reach part of the world, peak production may have just passed us by in our lifetimes, having a profound impact on prices.
While South African mining production for gold has slumped since 1980, Australia, the US and China plus a group of smaller players have helped plug the gap up until now. If even this coalition of countries is unable to keep production rising year-on-year, supplies could be constrained to the point where the average person on the street could start to notice.
It took just five years for gold prices to double from £700 to £1,400 per troy ounce, between 2015-20. While prices appear to be dropping somewhat as the threat of COVID-19 eases, supply alone could be the only catalyst required to push prices even higher in the coming decade. If the existing trend of lower production persists and buyers regain an appetite to gain a share of the wealth by buying gold, prices could be squeezed.
The Gold Bullion Company has seen how the UK is at an especial disadvantage when it comes to supplies of gold, but demand for gold coins, bars and other products remains healthy. The UK Government famously sold off a significant proportion of its gold reserves during the price low of the late-1990s, losing the taxpayer billions of pounds, as prices then rose up until last year.
Don’t miss out on a piece of the action, as gold supplies tighten in the coming years. Here at the Gold Bullion Company, we have an array of gold items, as well as products struck in silver and other precious metals, which all serve as ideal stores of wealth. As inflation erodes the value of savings and socio-economic crises cause market turbulence, buying gold with us could offer much-needed security to weather the storms.
Call us on 01902 623 253 today to see what we can do to help you buy gold during this unprecedented chapter of peak gold.
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