Have We Already Reached Peak Gold?

Ian Telfer, who spent a lifetime in the mining business and is the former  Chairman of GoldCorp had this to say back in 2018, "If I could give one sentence about the gold mining business, it’s that in my life, gold produced from mines has gone up pretty steadily for 40 years. Well, either this year it starts to go down or next year it starts to go down, or it’s already going down. We’re right at peak gold here”

Tefler then predicted that gold would rise to at least $1,600 based on lower mining output. On August 7, 2020 gold hit $2,067. Fast forward to February 15, 2022 and once again, Ian Telfer is talking about peak gold.  He says in an interview on Kitco News that all the deposits that can be profitably mined below $3,000 per ounce have been found and exploration success over the last 20 years have declined as a result. Telfer has a new forecast of $2,400 to $2,500 for gold and believes we have reached 'peak gold'.

As former Chairman of GoldCorp, Telfer should know what he's talking about. The company was bought out in 2019 by Newmont Corporation for $10 billion to form the new company Newmont GoldCorp, making it the largest gold miner in the world, producing some 5.88 million ounces in the last year.

So have we really reached peak gold as Telfer believes we already have. China accounted for 11% of total output in 2020, making it the largest gold producing country in the world at 368 tonness. Russia follows next with 331 tonnes, Australia with 328 tonnes, United States with 190 tonnes and Canada with 170 tonnes round out the top five gold producing countries.

It is estimated that in the last 6,000 years, about 120,000 tonnes of gold has been mined. 90% of all the gold that's ever been mined has been mined since 1848. From that year onward, world gold production went from less than 200 tonnes per year on a steady rise to over 3,200 tonnes with production ramping up in the last 70 years or so as mining equipment got bigger, better and stronger while scanning technology allowed for easy finds of near surface deposits.

An article by Vladimir Basov, published on May 25, 2021 on Kitko News, points to an increase in gold production, peaking at 3,800 tonnes per year by 2024, led by Australia and Canada and that gold output would begin to decline in years 2025 - 2026 as ore grades decline and operational costs increase. His information comes from 'DISER', the Australian Government’s Department of Industry, Science, Energy and Resources.

So we have lifelong miner, Ian Telfer telling us we have hit peak gold, likely in 2018 and the Aussies are saying it's just a few years ahead of us. Either way, it looks like peak gold is upon us, one way or the other. Couple mining reduction with all the inflation central banks have unleashed around the world and we'll likely have much higher gold prices than Telfer's $2,500 forecast.

Today, near closing time, gold is 10 cents shy of $1870, $270 higher than Telfer's original $1,600 gold price prediction (Courtesy ). Gold enjoyed a nice $30 ride up two days ago on Ukraine / Russia fears and smacked back down yesterday when the situation appeared to cool off as Russian forces pull back from their mutual border.

Minutes from the FED's last meeting in January just came out and hints of coming rate hikes starting in March. This is their plan to combat inflation. Maybe we shouldn't let the ones creating the inflation to police it. Regardless, it spooked investors back into gold. Are we going to have a 'shock and awe' moment in March after their next meeting?

We may have or are about to reach peak mining of gold but I doubt we've come close to a peak in the dollar value of gold. Ahhh, the metal of kings. Central banks around the world have switched from being net sellers to buyers of gold to build up their reserves in the last couple of years. Are they worried about something? 

Consider diversifying your portfolio by adding precious metals and slam dunk inflation where it hurts!

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