← Back to All Videos

How Peak Gold Effects Gold Prices

Blog Apr 29, 2014

First of all, understanding peak gold is not as difficult as it may seem. In fact the word “peak” can be applied to all types of produce and commodities, it just so happens that “peak” is a little easier to apply to, and prove for, gold than other produce and commodities. The idea behind peak gold is that either more than half of the gold available for mining has been mined, or at least, all of the easy to mine gold has already been mined, leaving only the harder to get to gold available for mining. Whichever definition you subscribe to, proving that peak gold has been reached and surpassed is not difficult.

What Evidence Supports That Peak Gold Has Been Reached?
Whether you subscribe to the idea that more than half of the available gold has been mined, or that all of the easy to get to gold has been mined, there are cold hard facts that will support either claim. For instance, today we more technology available than ever to find gold, including ground penetrating sonar, the ability to quickly drill and test for samples, and computer modeling. None of these advantages were available just 100 years ago, and remember, humans have been mining gold for over 5000 years. Now, take into account that even with all of the technological advances available these days, worldwide gold production has been falling year over year for some time now, as evidenced by the graph below.

Not Only Has Gold Production Been Falling, The Amount Of Ore That Needs To Be Mined To Produce An Ounce Of Gold Has Been On The Rise.

Not Only Has Gold Production Been Falling, The Amount Of Ore That Needs To Be Mined To Produce An Ounce Of Gold Has Been On The Rise.

What Does This All Mean?
Gold is becoming rarer and rarer, while dollars are becoming more and more numerous. The U.S. has been going through round after round of quantitative easing, in effect creating dollars out of nowhere. Over time, this money creation shows up in the form of increasing gold prices for several reasons. One reason in particular, is evident in the chart below, which I found in a very well put together report written by Lynette Zang, Senior Analyst at ITM Trading. The chart shows that each ounce of gold produced these days requires more and more diesel fuel for it’s extraction, and in addition to requiring more fuel, we all know that the price of fuel has been increasing over the years. Simply put, the more something costs to produce, the higher it’s price will be when it comes to market.

The Rising Need And Rising Cost Of Diesel Fuel Needed To Produce Gold Influences The End Price

The Rising Need And Rising Cost Of Diesel Fuel Needed To Produce Gold Influences The End Price

What Does This Mean For Gold Coins Already In Circulation?
Gold coins are somewhat unique in that at their empirical value, which would be the pure gold content, they are all equal. Simply put, an ounce of gold is an ounce of gold, whether it was produced in the USA or Turkey, this year or fifty years ago. Few items in the marketplace carry the distinction of being fungible. Ultimately however, what this means to you is that if you bought a one ounce gold coin today for $1385, and four years from now the same coin cost $2200, your coin would be worth about $2200. This would be true for gold coins and gold bullion. If you buy old gold coins, or if you buy numismatic gold coins, there will be other factors such as rarity and quality that will factor into the final price of your gold coins, but the fact that gold has increased in value relative to the dollar will also positively effect the value of your holdings.

Thumbnail Photo We believe that everyone deserves a properly developed strategy for financial safety.

Lynette Zang

Chief Market Analyst, ITM Trading

Sources & References In This Article

Similar Posts

Blog Jan 3, 2024

The Great Taking: Understanding the Shift in Global Debt | A Deep Dive into Financial Collateral

Learn More
Blog Dec 19, 2023

Is the U.S. Dollar in Crisis? Exploring Currency Markets, Inflation, and Bank Downgrades

Learn More
Blog Dec 8, 2023

From Treasury Outflows to Inflation and Consumer Anxiety, how far will it go?

Learn More
Blog Dec 8, 2023

Your Safety Is Not Their Concern

Learn More
Blog Sep 29, 2022

What’s Driving Energy Prices Up? Will the Crisis be worse than the 1970s?

Learn More
Blog Sep 15, 2022

Underneath the Surface: Recession or DEPRESSION?

Learn More
Blog Jan 9, 2020

REAL OR FAKE GOLD, BIG VS SMALL BANK DEPOSITS… Q&A with Lynette Zang and Eric Griffin

Learn More
Blog Nov 28, 2018

ENTERING THE MINEFIELD: Is Your Armor Ready? By Lynette Zang

Learn More

Not Sure What Works for You?

Our team has over a century of combined experience in guiding our customers to the best products is for their wealth protection and preservation goals. Call us today.

888-696-4653
or schedule a call

Schedule A Strategy Session

Get Your Free Protection Guide

Stay Informed

Receive the latest updates regarding the economy.

Send this to a friend