Surprisingly, non-essential goods tend to be generally more expensive than essential goods. For instance, why do water and food cost so little that they are of significant importance to humans? Conversely, why are diamonds, gold and silver so expensive when neither of them is necessary?
The answer to these questions has always been straightforward and constant throughout. All economic goods are scarce and more scarcity equals more value, all other factors constant and equal. There is plenty of grain and water worldwide but limited diamonds and gold minerals.
Additionally, people value both essential and non-essential goods for varying reasons. Regardless, it is much easy for an average person to locate a water source than to mine an ounce of gold.
TWO DECADES LEFT
Gold is precious for many reasons, scarcity being one of them. According to a report in the Wall Street Journal by Alistar, gold is so rare that the world’s natural supply could be depleting.
According to Alistar McDonald, the author of the piece, the biggest dilemma for gold miners is that there isn’t much gold left. True to fact, the shortage of readily mineable gold has made life challenging for mining companies from all parts of the world.
Unfortunately, regardless of the well-crafted informational piece, the article does not seem to be making a big enough deal about the sensitivity of such a matter. It generally feels like the sensitivity of running out of such a rare and precious metal is being downplayed. However, such information happens to be bigger and more sensitive than people intend it to be.
In the article, Alistar further claims that the world is only two decades away from completely exhausting all the world’s discovered gold mines at the current mining levels.
However, this is not to conclusively imply that more gold cannot and won’t be found. It just won’t be straightforward to find new gold fields and pockets of gold. The rise in global demand for gold in the last two and a half-decade is proof that finding gold is becoming harder with time.
FINDING MORE GOLD
SNL Metals Economic Group keeps a tab on the yearly discovery of precious metals, including gold. According to SNL, a major gold deposit can be categorized as having at least two million gold ounces.
Research has been conducted and discoveries made as to the decline in major gold deposits. Based on the results, 22 major deposits were found in 1995, six in 2010, one in 2011, and none in 2012. The decline is evident.
On the bright side, it has been estimated that there could be a large gold supply underneath the arctic circles. Unfortunately, the gold is buried deep under layers of rock and solid ice. There could also be large supplies of gold near the earth’s core, which is nearly impractical and impossible to extract any time soon.
Based on facts, gold production seemed to have peaked around the year 2000. Moreover, it has averaged a decline of 1 million ounces annually ever since.
WHAT DOES THIS MEAN FOR GOLD PRICES?
Over the years, gold has always been considered a good investment. It is also expected to be an even better investment in years to come. Over the past half-decade, the demand for gold has been steadily rising. With the rapidly decreasing gold supply, there is an expected price exaggeration of gold value and prices.
In basics economics, scarcity has always contributed to value. The higher the demand for a good, the more valuable it will be. Similarly, the lesser the supply of a good, the more value it attains. Gold has notable high demand and less supply, making it extremely valuable.
However, just like any other commodity, gold is at the risk of struggling in the short term. Daily demand, production, and other market variables are hard to predict. Regardless, a depleted gold supply only has one outcome: a significant increase in gold prices.
Currently, gold prices have shot up more than 3,000% in the last 45 years. During these four decades, miners discovered gold deposits consistently, and the demand was not as high as now. Consequently, gold is expected to increase in value over the long run.
Gold is a rare metal that has played a critical role in society since its discovery centuries ago. It is important to note that gold supply won’t run out. The gold will still be there, but a challenging task lies ahead for those who seek it.