In truth, global gold production has been going through one of the most challenging periods in its history where output levels have flatlined since 2018. This slowdown in the rate of new mining activity coming online has led many industry insiders to worry about the long-term availability of this precious metal. Specifically, gold production witnessed a rare 1% drop in 2019, the first outright decrease in production in absolute terms since 2008. The international appetite for gold continues to surge. Without redressing of these supply constraints, prices will continue to rise over the next several years.
Ian Telfer, Chairman of Goldcorp, first announced the world was at “peak gold” back in 2018. His claim speaks to a greater fear among miners that returns from gold exploration and mining are starting to dry up. As far back as 2016, he warned investors that the days of “easy gold discoveries” were over. This implied that the industry was having a difficult time locating new deposits. Exploration budgets had been quietly increasing since 2017. It usually takes a decade or more to transform these new finds into real quarterly production.
The Decline of New Discoveries
The math behind new gold discoveries is terrifying. As of today, since 1990 there have been 278 discoveries, with nearly half – 132 of these – still undeveloped. This backlog represents a serious challenge for the industry, because untapped resources don’t help support today’s production levels. Since 2020, only five large-scale gold discoveries have been announced, totaling a paltry 17 million ounces. This stands as a sharp juxtaposition to the past several decades when new discoveries were larger and much more numerous.
The future doesn’t seem bright, with a staggering drop in the discovery of new gold deposits over the past decades. In the 1990s, researchers discovered 132 drugs. This number decreased to 93 in the 2000s and then dropped even further to a mere 25 in the 2010s. Alarmingly, there have been zero major discoveries in the last three years. These intimate challenges are portrayed by the increased difficulty of finding new gold deposits. It highlights the opportunity that exists to drive innovation and get ahead of this problem through further exploration technology investment.
Record Production Amidst Challenges
In 2023, miners had an extraordinary year by digging up a new high of 3,661 metric tons of gold. They broke the old 2018 record by three tons! This small uptick raises troubling questions about the long-term viability of our existing, destructive approach to mining. Can these approaches keep producing this kind of result at scale going forward? To date, humans have extracted about 216,265 metric tons of gold from the Earth. Astonishingly, two-thirds of that value has already been removed since 1950, due largely to radical advancements in mining technologies.
While those production figures may be at an all-time high, the difficulty in finding new deposits continues to hang over the industry’s head. South Africa, formerly the world’s gold powerhouse, no longer ranked in the global top ten producers by 2020. A 2017 government audit cautioned that the nation could deplete its known gold deposits within only 40 years. This prediction will continue to be true as long as trends don’t change. Traditional mining hotspots are running out. Unfortunately, for miners, they’ll need to increasingly explore more and harder-to-find regions, increasing their costs of operations.
Central Bank Demand and Market Implications
Mining production is struggling with a headwind of flatlining supply as the world’s central banks beat a path to accumulate more gold for their balance sheets. April 2023 saw central banks slow their net buying to just 12 tons, mainly as a result of heavy and unprecedented sales by Uzbekistan. This increase and subsequent decrease demonstrate the continued appeal of gold as a safe financial asset in times of economic uncertainty.
As some analysts have noted, diminished supply would make prices rise. Scarcity increases demand. If you stacked all of the world’s gold in 400 kg bars, the resulting pile wouldn’t even come up to the waist of the Statue of Liberty. Her stunning portrayal serves as a potent reminder of how finite and vulnerable this invaluable resource truly is. This visual helps show that while gold has a long history, safe haven status, and intrinsic value, it is a finite resource.