It seems we have been so caught up in the decline of oil reserves that another commodity—one that the mining industry has thrived on for centuries—is apparently even in more scarce supply. Gold reserves are running surprisingly low, and analysts believe that recoverable resources could run out completely within 20 years.
A report written by gold mining analysts for Standard Chartered Bank cites U.S. Geological Survey estimates that at the end of 2010, global gold reserves were only 51,000 tonnes. At the rate of production seen in 2010, this would translate to only 19.2 years of production. Unfortunately, the report also shows that while exploration budgets have risen for major gold mining companies, it has failed to prevent an overall decline in the rate of new gold reserve discoveries.
"In response to escalating gold prices, exploration budgets for gold have been rising since 2002," the report notes. "As a result of declining hit rate and cost inflation, the average discovery cost of primary gold found has seen a rising trend since 1960, which is evidence that good, large gold deposits are increasingly difficult to come by."
Moreover, higher spending toward gold exploration between 2000 and 2009 still saw an average discovery rate lower than the period of 1980 to 2000.
Standard Charter adds, "It is also worth highlighting that the average ore grades of new deposits discovered have declined noticeably in the past six decades." In 1960 for example, one tonne of gold ore yielded 2.86 grams of gold. In 2000, one tonne only yielded 1.37 grams of gold. Now, the newest gold ore discoveries are yielding less than one gram per tonne of ore.
This news may come as a shock to the mining industry, which may have to face the very real possibility of a non-existent gold mining sector in the next few decades. What’s more concerning is that while gold may be running out, our need for it has increased dramatically, most notably in the continual advancement of computing technology. Computers of all makes and models use gold in their circuitry for its malleable and non-corrosive qualities, and with demand for computing power only going up, the drop in gold supply may cause a ripple effect that could send shockwaves through the computer industry and other gold-reliant industries aside from just flashy jewelry outlets.
So what’s the best thing to do in such a situation? Well, while the mining companies will undoubtedly continue pumping money into gold exploration, commodities traders and wise investors may want to revisit buying gold—solid, real gold. That’s because at this rate of supply reduction over the next 20 years coupled with exponentially increasing demand from China and India, Standard Charter estimates that gold could be worth $5,000 an ounce in the not so distant future.
By John Shimkus of Energy Digital