With demand for gold remaining steady, new analysis reveals that the supply of gold left in the world to be mined is surprisingly low. Find out what it means for the future of the metal here.
For some time now, speculation has been that shutdowns of mining operations would eventually have a negative effect on the global gold supply. Now, an analysis by Macquarie Group highlights a similar, yet fundamentally different issue – that we might be close to exhausting all of the known supply from the Earth’s crust itself.
As reported by Business Insider, the threat isn’t quite on our doorstep yet – while most of the known gold supply is gone, there are still around 22 years’ worth of gold to be mined, assuming an extraction rate of 2,500 tons a year. But what happens when the last 55,000 tons are gone, and most of the metal has been turned into jewelry?
Earth should still have plenty of gold to go give – it will just be ‘hidden’, and there’s no telling how difficult it will likely be for miners to figure out new locations. Macquarie Group also touches on the yellow metal’s short-term future. While they note that gold’s status as both a currency and a commodity makes forecasting problematic, there are a few likely predictions to be made.
For one, Macquarie expects gold to rally from its current position as soon as 2016, although somewhat slower due to “investor disillusionment”. The bounce back should happen not too long after the Fed’s rate hike
is confirmed – probably sometime between September and December. In terms of the hike’s magnitude, Macquarie Group believes that interest rates will rise even slower than the general consensus, and that their long-term peak will also be lower than expected.
Central banks’ gold transactions should remain “firmly on the buy side”, despite recent factors diminishing the amount of gold being bought. A chart by Macquarie shows that central bank buying has been steady from 2011-2015, adhering to an upwards trend the further a year progresses.
China and India’s economies recovering into 4Q are expected to act as another positive for demand, which may allow two of the world’s top gold consumers make more purchases as the year draws to a close.
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