Last week, we reported on an oft-ignored fundamental in the gold market – the shrinking supply.
Mining.com analyzed the data and concluded there are no more easy gold discoveries. In fact, the number of major gold discoveries is shrinking. This week we have further evidence that the supply of gold is being squeezed. In fact, MarketWatch asserted that we’re heading for “an impending gold production cliff” based on analysis by Sprott Asset Management.
Analysts say gold discoveries peaked in 2007, and a production peak will soon follow. Since that high-point in ’07, discoveries have collapsed, this “despite exploration budgets increasing by 250% from 2009 to 2012,” Sprott’s gold team said in a recent note.
Mining companies have begun to consider upping exploration budges with the price of gold on the rise, but there’s a “lead time to transition a discovery to production,” Sprott analysts said. As a result, “production is forecasted to decline over the next number of years.”
Last year may well have been the peak production year at around 95 million ounces. Sprott analysts expect production in 2024 to fall to 78 million ounces. That represents about a 2.2% decline per year.
Charles Jeannes, former CEO of Goldcorp, echoed Sprott’s findings in an interview with :
There are just not that many new mines being found and developed.