May 20, 2009

Has World Gold Production Peaked?

It is feasible that some day we might mine all the gold and gold will be harder to find and mining production will go down. One day the mining production of gold in the world may hit a peak. How do we know if or when gold has peaked?

Some people believe that we hit a gold production peak in 2001. In this article on Kitco the author a Dr Thomas Chaize says that they believe we hit world peak production of gold in 2001. The original article is on the author's site. He has a graphic showing the peak in 2001. Here is another article where the author feels that we may have already hit the peak in production.

You can get gold production from the US Geological Survey which has statistics on world gold production. Here is a graphic showing world gold production in recent decades:

The production values are in metric tons.

If you look at this chart alone it does definitely appear that production peaked in 2001. The maximum worldwide production was 2,600 in 2001 and we haven't hit that amount since. In 2007 the total production had fallen to 2,380.

How do we know gold production has peaked? Does six straight years of falling production mean that we'll never see an increase again?

Lets take a look at previous history of gold production. Back at the start of the 20th century there was a peak in production around 1915. Here is the production trend then:


If you compare the two graphics the peak in production around 1915 seems a bit more distinct. In the next 7 years from 1915 to 1922 production went from 704 to 481 or a drop of 31%. The drop in production from 2001 to 2007 is only down about 8% from the peak of 2001. If it was 1922 and you looked at the chart above then would you think that production may have peaked in 1915? It looks more like a peak than the 2001 peak.

Lets look at all the data from the USGS site on world gold production over the past 100+ years. Here is a graph showing the world gold production from 1900 to 2007.

There have been 4 distinct peaks in production over the past 100 years. We hit peaks in 1915, 1940, 1970 and 2001. I would assume that the peaks in 1915 and 1940 were caused by disruptions due to WWI and WWII. Long term it appears that the gold production has cycles with short term ups and downs.

In short term periods these ups and downs form peaks. If you were sitting in 1922, 1950, 1978 or 2007 and looking back over the previous 20 years of production then it might appear that we've hit "the" peak. But if you then look forward after those points we see production goes up again.

How much gold is left?

There is a limited amount of gold buried in the ground for us to find. Eventually gold will become harder and harder to find and we'll likely mine as much as we can and production will drop. But over the past 100 years the gold production has increased steadily. If you add up all the world gold production from 1900 to 2007 the total amount mined was over 130,000 metric tons. Right now the gold reserves left in the ground are estimated at 90,000 metric tones. That figure was from the USGS report in 2007.

The amount of gold left in the ground is a moving target. As technology gets better and more gold is found our estimate of how much gold is left goes up.

Back in the USGS 2001 report the reserve gold estimate was 77,000 tons. Then from 2001 to 2007 the world mined out over 17,000 metric tons. If we started with 77,000 ton reserve and mined out 17,000 tons then you'd expect that by 2007 the reserve would be down to 60,000. But it wasn't, in fact the reserve had a net increase of 30,000 gold in 6 years. This means that we were finding new gold reserves almost twice as fast as we were mining it.

Nobody can say for fact if we've hit the peak in gold production. The cycle of ups and downs in gold production over the decades and the fact that we've been finding gold faster than its being mined are two solid reasons against the conclusion that we've hit gold peak.

3 comments:

  1. Absolutely right. I'm amazed that over a year later, this hasn't gotten a single comment.

    ReplyDelete
  2. it is a very informative article. good to know this information before investing in gold.

    ReplyDelete

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