Peak gold

This is interesting:

Aaron Regent, president of the Canadian gold giant, said that global output has been falling by roughly 1m ounces a year since the start of the decade. Total mine supply has dropped by 10pc as ore quality erodes, implying that the roaring bull market of the last eight years may have further to run.

\”There is a strong case to be made that we are already at \’peak gold\’,\” he told The Daily Telegraph at the RBC\’s annual gold conference in London.

Ore qualities are declining, so much so (as has happened before with advancing technology) that some of the richest deposits are in fact the tailings from previous mining attempts.

It\’s also true that gold is a very odd metal in many ways. Speculative demand is vastly higher than industrial and pretty much all gold (not quite but nearly) that is used industrially is reused. I don\’t have the figures to hand but I could believe that the supply of recycled gold is as large as the supply of virgin.

In fact, if you were to look for a resource which came closest to the green dream it would probably be gold. It is very much a \”stock economy\” rather than a flow one (as described in \”Blueprint for Survival\” as the desirable method of using resources). New virgin gold coming onto the market is less than 10% (and I think it might be lower than that, 2,500 tonnes or so annually as against 30-40,000 tonnes already above ground?) of the total stock.

However, and there always is a however here, those who want to use \”peak gold\” as an example of what\’s going to happen with peak everything else have something of a problem. OK, so there are no more nice deposits of 10 to 20 ppm gold ores about (let us assume, I wouldn\’t bet on that though but still). Does that mean that there is no more gold?

Well, no actually, it doesn\’t. Extractable resources are defined as extractable at a price. If the price of the resource rises, or the costs of extraction fall, then new resources become extractable at market prices. The supply thus does rise: for we\’ve no shortage of gold atoms on the planet, we\’ve a shortage of those we know how to turn into nice 40 kg bars at a price that people are willing to pay.

Depending upon who you believe there\’s between 7 million tonnes and 70 million tonnes of gold dissolved in seawater for example. Which should be enough for a few centuries, if only we knew how to get it out. The major cost here at the moment is energy, we do know how to get it out, we just don\’t know how to do it profitably.

If you want to define \”peak\” as a limited supply at current prices and technologies, then fine, I\’m right with you. But using \”peak\” to describe hard and fast limits to supply without taking into account possible changes in prices and technology then, ah, no, I\’m afraid it doesn\’t really work.

2 comments on “Peak gold

  1. “It’s also true that gold is a very odd metal in many ways. Speculative demand is vastly higher than industrial”

    It’s almost as if gold is some sort of money…

  2. Many years ago (in the ’60s) I read that most of the gold ever mined since the Spanish conquest of the New World (for which fairly reliable records exist) is still at the bottom of the seas in many different locations. Whenever there seemed to be fewer pirates about, they tended to send off overloaded vessels, with somewhat predictable results.

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