E Peak Gold Is Not A Bullish Fundamental For Prices

For over a year now, the South African mining industry has experienced a measurably significant decline in the amount of gold produced.  Statistics reported by South Africa last week show that the amount of gold produced by South African mines has declined for fifteen consecutive months. In December, gold output dropped thirty-one percent from the year before.

All mines, including gold, have a useful life which is determined by the 'extraction period' - the period of time during which recovery of the desired mineral deposit is procured. The output over time tends to grow at first, reach a peak, and then decline. 

As the decline in output for a particular mine grows, the extraction process eventually proves unprofitable. After a certain point, it is no longer feasible to pursue the activity.

Generally speaking, this simply means that it costs more to mine the gold (in this case) than it can be sold for.

By the time this occurs, the miner (mining company, owner, investor, etc.) has usually moved on to a newer mine with a longer, useful life and the opportunity for more productive use of time, money, and activity.

But that is not happening in South Africa. Mining companies are not investing in new South African projects.

This is at least partly due to hostile actions (including expropriation) by the South African government. There are other factors, too. Among them are labor disputes and violence. But the end result is still the significant drop in gold produced by South African mining.

In other parts of the world, it is difficult to find and economically develop new reserves. When this is considered in addition to the problems in South Africa, some have predicted that global gold production could actually decline on a world basis. Maybe even this year.

This has led to a reference to something called 'peak gold'. Ostensibly, it means that the total amount of gold pulled out of the ground in a one-year period is as high as its going to get; and will decline going forward.

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Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN'T, AND WHO'S RESPONSIBLE FOR IT and  more

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Mohamed Wareth 3 weeks ago Member's comment

so, back to the technical analysis