Peak Gold
Most have heard about
Peak Oil – the proposition that world oil production has peaked and is
in terminal decline. Now, Peak Gold is being proclaimed by industry
experts. Vincent Borg, spokesman for the world’s biggest gold producer
Barrick Gold, says gold production has been in decline since 2001.
Total gold production peaked at 2,600 tonnes per year around 2000. The
reason gold production has peaked is that existing mines are being
depleted and new discoveries are few and small. Also, it takes many
years to bring a resource discovery into production.
Demand,
on the other hand, has increased to 3,800 tonnes in 2009 according to
the World Gold Council. Over the decade from 1999 to 2009 central banks
have sold 3,867 tonnes of their gold under various Central Bank Gold
Agreements. These agreements have now ended and no more central bank
selling is planned. Even with central bank selling the gold price has
increased well over 200% since 1999. During the last several years a
number of Gold Exchange Traded Funds have appeared. These are funds that
sell shares to investors that track the price of gold. These funds must
purchase and hold physical gold to back the shares. Currently these
funds hold 2,000 tonnes of gold and represent a major new source of
demand. The financial crisis that began in 2007 adds other demands as
large institutional investors that have never owned gold before move
into the market. New small investors are attracted to buy into the
funds, coins and jewellery.
It appears that Peak Gold is real. Given the current climate – the gold price has only one way to go.
An
interesting fact: The total amount of gold ever produced will fill a
little more than 3 Olympic-size swimming pools. Here is the calculation.
The World Gold Council estimates 163,000 tonnes of gold exists above
ground today. That is 163,000,000 kg. The density of gold is 19,300 kg
per cubic meter. Dividing 163,000,000 kg by 19,300 kg per cubic meter
gives 8456 cubic meters as the volume of all the gold in existence. The
volume of an Olympic-size swimming pool is 2,500 cubic meters (50 m by
25 m by 2 m). Dividing 8456 cubic meters by 2,500 cubic meters give
3.34 Olympic-size swimming pools as the volume of the gold in the world.
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