Thanks to a rising dollar and speculation that the U.S. Federal Reserve will boost interest rates, early December was a low point for gold prices – a five-year low as a matter of fact. The industry buzz is that a restricted worldwide gold supply is on the horizon:
- The World Gold Council’s November 2015 Report hints at reduced gold supply as mines struggle to operate on lower profits, forecasting that “supply will remain constrained as the mining industry continues to proactively manage costs and optimize its operational performance.”
- Former Goldcorp CEO Chuck Jeannes predicted in 2014 that the world will reach “peak gold” starting within two years.
- Similarly, Goldman Sachs analysts predicted gold production would peak in 2015, estimating that mineable gold could only last about 20 more years.
- Most recently, Mark Bristow, CEO of Randgold Resources Ltd. (a gold mining company) expressed that half of the gold coming from mines may not be viable at current prices.
With gold prices so low, hard-to-reach ore may no longer be profitable to mine. If the production decreases, the supply is likely to follow.
However, that same report from the World Gold Council also found that “Q3 2015 gold demand rose by 8% year-on-year, reaching a two-year high of 1,120.9 tonnes.” If demand continues to grow, prices may increase and spur greater production. So as always with the gold market, nothing is set in stone yet. We’ll be watching closely as the situation progresses into 2016.