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Peak Gold (and Silver)

-- Posted Sunday, 1 February 2009 | | Source:

By Andy Hoffman

The below article beautifully illustrates a concept I have highlighted for years, in other words the horrific outlook for future gold production. 

Before reading the article, which shows how gold production has been in decline for decades with little (read: no) hope for improvement, look at this graph, which shows that, amazingly, despite a now ten-year bull market, global gold production has fallen nearly every year since its commencement!


Like all commodities, there is only a finite supply in the world.  We will never “run out” of gold, or oil for that matter, but given the difficulty of finding inexpensive sources, it will take significantly more money to materially increase supply, and in turn significantly higher gold prices.  Aside from the fact that new sources tend to be deeper in the ground (South Africa is the best example), in more remote regions, and in more politically unstable countries, the costs of drilling equipment and personnel continue to rise due to a combination of tight supply and the ongoing ravages of inflation.

Last but by far not least, the horrific suppression of gold prices over the past decade, yielding non-stop crashes of the metal each time it has threatened to finally give the industry an opportunity to be profitable, have yielded an incredible decline in gold mining capital spending over the past few years despite the ten-year bull market.

Before reading this article, keep in mind that demand is starting to exponentially rise (for REAL, PHYSICAL gold).  Based on anecdotal evidence, as well as the fact that today’s gold mining industry probably is in its worst financial shape since the treacherous, bankruptcy-yielding 1980s, I forecast that global gold production will fall by an additional 10%-15% over the next 5+ years no matter what the gold price rises to.

Notably, unlike gold roughly two-thirds of global silver production emanates as by-product from gold and lead/zinc mines, so the factors influencing its production are slightly different.  However, combining the aforementioned data about declining gold production, as well as the fact that lead and zinc mines are being closed everywhere due to this year’s plunge in prices, it is easy to see that silver production, too, has nowhere to go but down.  And keep in mind that silver has been in a supply/demand deficit for 15 straight years, with nearly no material global inventories to speak of.

As Jim Sinclair says, “This is it, and it is now”.


Peak Oil...What about Peak Gold?

-- Posted Sunday, 1 February 2009 | Digg This Article | Source:


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