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The World’s Natural Gold Supply May Be Running Out

Jun 25, 2024

Is the world's gold production getting to the point where it is no longer growing and can't meet future demand? This is the idea behind the notion of “peak gold.” Peak gold assumes that there's a limited amount of gold in the world. Eventually, there will be less gold mined in the future than there is today. This means that the supply of gold will start to grow more slowly, and there will be a higher risk of gold supply not matching with gold demand.

This isn't some wacky theory, but instead it's validated by data and expert scientific opinion. According to the World Gold Council, which represents the world's gold miners, it's getting harder to find gold. It's also getting harder to get permits to mine and process it. And it's getting harder to afford the increasing costs to finance it. Let me give you some examples.

Roughly 187,000 metric tons of gold have been mined throughout all of history. Two thirds of that have been mined since the 1950s. The US Geological Survey estimates that there's another 57,000 tons that have been discovered, some which can be mined and some that are cost prohibitive or impossible to mine given our current technology. Government permits and licenses are much harder to get, subject to anti-mining activists, and environmental and safety concerns, and can take years or even decades to be approved. Once you get past that step, the cost of exploring for gold and mining it continues to rise.

Much of the un-mined gold is found in remote areas. This means first building roads and then bringing in utilities like power and water. And if you're lucky enough to discover gold, it can take up to ten years to develop the mine so it can finally produce. And production is frequently interrupted by labor problems, protests, and lots of unproductive ore. At the current rate of gold mining, all the current mineable gold could be extracted in 17 years.

So what does this mean for future gold prices and the person saving for retirement? Well, gold prices specifically, and commodity prices in general are really hard to predict so far in the future. But one factor plays a consistent role, and that is supply and demand. There's much data to support the slowing growth in the supply of gold over the next 20 years. And there's much data to support increasing demand for gold for jewelry, technology, investment, and central bank demand over the next 20 years.

Taken together, the data suggests that in this longer term scenario, gold prices can appreciate. That is an important reason why diversifying your retirement portfolio with gold can make sense. My retirement portfolio is diversified, with physical gold held in an IRA, also known as a gold or precious metal IRA. Mine is from U.S. Money Reserve.

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