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In 2013, gold production hit an all-time high… but supply pressures look set to build as new gold discoveries wane

by , 29 July 2014

Last year saw the production of 3,018 tonnes of gold. That's over 100 million ounces. The sector managed to achieve this even though the price of gold was falling.

Now the gold sector is facing a very big problem: A lack of new gold discoveries.

Let's take a closer look at what's going on…


Gold production has been ramping up over the years


Let’s take a closer look at what’s been going on in the gold industry…

For the past 24 years, gold production stands at 1.85 billion ounces. Over that same period, gold discoveries stand at 1.66 billion ounces, Dominic Frisby in Money Morning UK explains.

This highlights a deficit.

Gold producing is rising at a higher rate than the amount of new gold discoveries. With 217 major gold discoveries made over the period, the number has declined over the last few years.

To put this in perspective, through the 1990s, gold explorations found 1.1 billion ounces in 124 deposits. Since the turn of the millennium, gold exploration has only uncovered 93 deposits amounting to 674 million ounces.

And over this period, the grade of gold has been in decline.

Add to this that a lot of the gold found isn’t economical to mine. Or the deposits are in areas not suitable for mining, for example, for political or environmental reasons.


New gold discoveries are falling fast


Have a look at the chart below…


The chart shows you three things:

  • The gold price, the green line;
  • Production from the world’s mines, the brown line;
  • And the amount of newly discovered gold, the copper bars.
 
This chart highlights that new discoveries of gold are declining fast.

One major problem with gold mining is the length of time it takes from discovery to production. And as the deposits tend to now be in more difficult places, it can take nearly two decades to get gold out of the ground.

With new discoveries ebbing and the time it takes to get gold out of the ground on the rise, it looks like this is the perfect recipe for a gold supply squeeze. And this is sure to affect the price of gold over the longer-term.

So there you have it, why supply pressures look set to build as new gold discoveries wane.

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In 2013, gold production hit an all-time high… but supply pressures look set to build as new gold discoveries wane
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