Archive for May 19th, 2015

May 19, 2015

Goldman Sachs: 20 Years Left of Mineable Gold.

Recent Goldman Sachs report reveals that some of the world’s rarest commodities are expected to become seriously scarce, with only two decades left of mineable gold and diamond reserves.

 The report was researched and written by Eugene King, Goldman Sachs’ European metals and mining analyst. His report “shows that there are only 20 years of known mineable reserves of gold and diamond.” In addition to those gold and diamond reserves, platinum, copper, and nickel reserves are also estimated to have about 40 years left.
Gold bars

“The combination of very low concentrations of metals in the Earth’s crust, and very few high-quality deposits, means some things are truly scarce.” He wrote in the report.

King notes that the intention behind the report was to highlight the areas of scarcity, and demonstrate how scarcity is the ultimate driver of value and investment.

“Perhaps unsurprisingly, these are the so-called precious metals (and diamonds), and that their value is derived from the fact they are rare.” He writes, “Gold has been used as a measure of wealth for more than 4,000 years, as the ancient Egyptians soon worked out that gold was not only shiny and heavy, but rare.”

He adds that the relative scarcity of the commodity, and “the market’s belief that new discoveries will be limited, is what drives the price of these super-rare commodities.”

King’s report falls in line with the forecast made last year, estimating that 2015 will be the year when gold production would reach its peak in the mining industry, a concept known as Peak Gold.

Last September, Coldcorp, a leading gold miner, forecast estimated that Peak Gold will be reached in 2015. “Whether it is this year or next year, I don’t think we will ever see the gold production reach these levels again,” Goldcorp CEO Chuck Jeannes told the Wall Street Journal. “There are just not that many new mines being found and developed.”

Peter Grant, an analyst for USAGOLD makes a similar estimation. Speaking to Marketwatch, he explained “Mining output has been fairly flat for years, but new discoveries of gold have been falling rapidly.”

“If we do reach peak gold in the new future,” He added. “One would logically expect this to be broadly supportive to the price of gold for years to come.”