Peak Gold – Are We There Yet?

According to leading gold Industry analysts, the mining output of gold has been shrinking and in 2018 it has reached its lowest. We might be at the peak of long term decline or a growth spurt. The cost of mining has grown over the years. Gold miners have to dig deeper, but those that can’t shoulder the cost of going deeper are being forced to shut down. Adoption of new technologies and automation may change things by allowing low grade to be profitably mined. Efficiency is the buzz word that always makes workers nervous because they immediately assume that their jobs would be given to machines. Automation is not a bad thing. For one, it reduces possible deaths by miners underground. It also means that the mining process is faster. As for workers losing their jobs and entire towns whose economy depended on the Mining Industry, the industry might have to re-skilling their employees to take up jobs that machines aren’t equipped to.


Going back to the theory of mining reaching “peak gold”: the theory was based on oil output’s relentless decline since 1970. Oil went through a cyclical peak production, but since then it has gone up and down with new technologies like extracting oil from shale coming into the mix. In 2017, oil returned to its peak of 1970. The same is expected to happen to gold. The global gold industry has been able to place more gold in reserves than what they were mining.


Things might be better than they seem. There might have been little exploration done to discover large bodies of unmined gold ore, but analysts reckon that the amount of ground ore might double up in the next 45 years. One more positive thing is the rise in the price of gold bullion. It has made investing in gold mining more enticing.


The discovery of gold in South Africa, California, Australia, some north-western areas of the U.S and Eastern Russia in 1800 brought on gold rushes that changed the economic system of the world. The invention of dynamite and the Cyanidation process of extracting gold increased gold production and brought on an international currency revolution known as the global Gold Standard. Central banks began hoarding. Over the years mining techniques and technologies of extractions that boosted gold production like heap leaching that enabled producers to extract gold from low grade surface ore brought more economical gains.


However some techniques like open pit mining and the waste dumps known as tailing stands are becoming unpalatable. Experts expect an acceleration to underground mining however, digging deeper becomes more expensive and less safe. This is why the industry is looking to Artificial intelligence and compact equipment with technology that will completely remove the need for people to go underground.


The mining industry has had to face a number of problems that have affected the overall production from environmental issues in China to crackdowns on illegal mining in countries like Columbia, Peru and Indonesia. However, there have been some good news like the 7% rise in output brought on by Donald Trump’s relaxation of environmental regulations. Russia has become the third largest producer and its gold output is expected to double up from current levels by 2030.


Despite these good news, the world’s production has been on the verge of decline for a while now, mainly because of the lack of new discoveries. According to data collected over the years, goldmine discoveries reached peak levels in the 1980s. The rate at which new gold is being found has not improved despite the rise in exploration budgets. In its Gold 2048 report, the World Gold Council states that gold would have to be actively sought and sourced from a greater number of small operations in order to avoid sharp contractions. So, now might be the best time to invest in small to mid-tier gold operations and to accept that the era of the underground gold miner is gone and the age of AI is upon us.