The last known gold deposit
Gold is one of the rarest elements in the world, making up roughly 0.003 parts per million of the earth’s crust. (For some perspective, one part per million, when converted into time, is equivalent to one minute in two years. Gold is even rarer than that.) If we took all the gold ever mined—all 186,000 tonnes, from the bullion at Fort Knox to India’s bridal jewelry to King Tut’s burial mask—and melted it down to a 20.5 meter-sided cube, it would fit snugly within the confines of an Olympic-size swimming pool.
The yellow metal’s rarity, of course, is one of the main reasons why it’s so highly valued across the globe and, for most of recorded history, recognized and used as currency. Unlike fiat money, of which we can always print more, there’s only so much recoverable gold in the world. And despite the best efforts of alchemists, we can’t recreate its unique chemistry in a lab. The only way for us to acquire more is to dig.
But for how much longer?
Goldman Sachs analyst Eugene King took a stab at answering this question last year, estimating we have only “20 years of known mineable reserves of gold.”
The operative word here is “known.” If King’s projection turns out to be accurate, and the last “known” gold nugget is exhumed from the earth in 2035, that won’t necessarily spell the end of gold mining. Exploration will surely continue as it always has—though at a much higher cost.
(In fact, our insatiable pursuit of gold might one day soon take us to space, as President Barack Obama signed legislation in November that permits commercial mineral extraction on asteroids and the moon. Many near-Earth asteroids are said to contain trillions of dollars’ worth of precious metals and other minerals. But that’s a discussion for another time.)
We’ll probably see a surge in mergers and acquisitions, as I told Kitco News’ Daniela Cambone last week. I think that as long as they have reliable output, mid-cap companies could be gobbled up by the Barricks and Newmonts of the world.
Another consequence of recovering the last known nugget? The gold price could spike dramatically to levels only imagined. My colleague Jim Rickards, in his book “The New Case for Gold,” puts it at $10,000 an ounce. GoldMoney founder James Turk says it’s closer to $12,000. There’s really no way of knowing how high gold could go.
Did gold production peak in 2015?
What we do know is that global gold output has been contracting since 2013. Last year might have been the tipping point, however, in line with Goldcorp CEO Chuck Jeannes’ prediction that peak gold was within spitting distance.
“There are just not that many new mines being found and developed,” he told the Wall Street Journal in 2014, adding that this was “very positive” for the gold price going forward.
This year, second-quarter mine supply was 2% less than the same period in 2015, according to preliminary estimates made by Thomson Reuters GFMS. Some analysts now expect global production to fall 3% in 2016, after seven straight years of growth.