In early 2024, the price of gold soared to a historic high. The World Gold Council (WGC) stated that as the search for yellow metal deposits becomes increasingly challenging, the growth in gold mining production has become more difficult.
“We saw a 4% year-on-year increase in mining production in the first quarter of 2024, setting a new historical high,” said John Reade, Chief Market Strategist at WGC. “But from a broader perspective, I believe mining production actually stabilized around 2016 and 2018, and we haven’t seen any growth since then.”
According to data from the International Trade Association, mining production only increased by 0.5% in 2023.
In 2022, a similar figure showed a 1.35% increase from the previous year, while in 2020, global gold production saw its first decline in a decade, dropping by 1%.
“The most shocking story, I believe, is that after experiencing rapid growth since around 2008, the mining industry is struggling to report continued production growth,” Reade explained.
Reade pointed out that as many promising areas have already been explored, finding new gold mines around the world has become increasingly difficult.
According to the World Gold Council, large-scale gold mining is a capital-intensive industry requiring extensive exploration and development. Only about 10% of discovered gold mines globally contain enough metal to ensure extraction.
Furthermore, even if mineable gold deposits are found, it typically takes an average of 10 to 20 years to prepare for production.
So far, around 187,000 tonnes of gold have been extracted, with the majority coming from China, South Africa, and Australia. The U.S. Geological Survey estimates that there is only about 57,000 tonnes of gold reserves left to be mined.
Reade added that apart from the difficulty in finding gold mines, government permits are increasingly harder to obtain and take more time to complete, making the mining industry even more challenging. Mining companies may need several years to secure the necessary permits before commencing operations.
Additionally, most newly discovered gold mines are located in remote areas, requiring infrastructure such as roads, electricity, and water, which adds to the difficulty of gold extraction.
“Finding, permitting, financing, and operating gold mines are becoming increasingly challenging,” Reade said.
Amid escalating global geopolitical tensions and persistent inflation, many people are turning to the investment value of gold, especially in China where the more expensive gold becomes, the more people are inclined to buy.
Driven by strong demand from the world’s largest producers and consumers of precious metals, the price of gold has surged to historic highs in recent months, currently experiencing a slight breather. The spot price of gold is currently trading at $2,294.3 per ounce.
(This article referenced CNBC reporting)