Gold is a currency more powerful than the Dollar, the Euro or the Yuan.
Humans have had a long love affair with gold. Due to gold’s malleability and lustre we began adorning ourselves with it over 6,000 thousand years ago. Today, jewellery remains a major driver of gold demand, over 50% of demand, but gold as an investment is also an important driver. Over the last three decades, the annual volume of gold purchased has increased 235% largely due to demand for gold as an investment -- gold can help protect purchasing power and reduce volatility and losses during market shocks. However, despite increased demand, gold miners have struggled to keep pace as there have been fewer and fewer major gold discoveries. In fact, according to some analysts, we have entered into a period called “peak gold”.
“Peak gold” refers to a theory that annual world gold production has peaked and it is now entering into a period of decline. Supporters of “peak gold” argue that annual world gold production will decline as it becomes increasingly difficult to replace existing gold reserves with new discoveries in favourable mining jurisdictions. A recent report by the GFMS team at Thomson Reuters lends credence to “peak gold”. GFMS reported that world gold mine supply fell by 22 tonnes or 3% in the third quarter of 2016. “Peak gold” should benefit many gold exploration and development companies as constrained supply should support a higher gold price and also drive mergers and acquisitions as gold producers seek to replenish their gold reserves.