Many economies and industries were affected by the onset of the coronavirus pandemic and the spread of this disease, which led to shutdowns of facilities and countrywide lockdowns in various regions in the world. However, while most industries suffered, producers of gold in the mining industry enjoyed increases in revenue as the price of gold rose by more than 20% last year.
These price surges were caused by various demand shocks that were brought about by the pandemic, such as investors moving from equities to bonds and the U.S. dollar losing more of its purchasing power. Last year’s increase in demand for this precious metal has many questioning whether the world can produce enough amounts of this mineral to meet demand, which is steadily rising.
Generally, increasing prices for both services and goods is a good thing for precious minerals. Gold is often used as a store of value because it offers a return greater than inflation.
Today, we look into the concept of peak gold.
Gold investors and many readers are familiar with peak gold. This refers to the point when the production of gold is no longer increasing. For more than a century now, gold production has been increasing by 1.8% annually. However, once production reaches a peak, it will begin to drop.
While peak gold does mean that the natural resources industry doesn’t have the capacity to increase production in order to meet a rise in demand, it doesn’t mean that the production of gold will decrease significantly. It should be noted that even an increase in price will not grow gold production, as there aren’t more mines to extract the mineral from. However, this does not change that the scarcer the mineral becomes, the higher its demand grows, regardless of the increase in prices.
The most recent report from the World Gold Council shows that in comparison with 2019’s gold supply, there was a 4% drop in 2020’s total supply of gold. The report also observed that mine production also declined, which was mainly caused by disruptions resulting from the pandemic.
Additionally, the production of the eight biggest producers of gold in the world also declined to 25 million ounces in 2020, a 6.5% decrease. This was attributed to lower recoveries, decreased mill throughput, asset sales and lower ore grades.
With grades falling to where only low-quality material is left to process and gold mine reserves are getting low, mining more gold to keep up with the supply is becoming increasingly difficult.
However, a number of companies, such as GoldHaven Resources Corp. (CSE: GOH) (OTCQB: GHVNF), have pipelines of gold-rich properties they are developing, which could boost the supply of this precious metal once full-scale extraction activities begin.
NOTE TO INVESTORS: The latest news and updates relating to GoldHaven Resources Corp. (CSE: GOH) (OTCQB: GHVNF) are available in the company’s newsroom at http://ibn.fm/GHVNF
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