Because it is a natural resource that must be extracted from the earth, gold has an inherently limited supply. This is one of the reasons it has always been a relatively scarce commodity.
A persistent trend in gold mining that's emerged over the past few years, however, may mean that limited supply will be even more restricted from now on.
For years, goldbugs and a certain segment of commodity analysts have been warning of the arrival of "peak gold." This is the theoretical point-of-no-return for global gold mining, after which the world's gold production (albeit gradually) will unavoidably decline and never again reach new highs.
Without question, peak gold will happen someday. The same notion applies to oil, and could in fact be extended to all non-renewable resources. Only a finite amount of each kind of resource is available on Earth.
Up to now, mainstream sources have been skeptical of calls for peak gold. Yet it's beginning to appear that the evidence no longer supports ignoring this claim: significant new gold deposits are not being discovered at a rate that will maintain the current level of output from the world's gold mines.
If you follow this trend to its logical conclusion, the implications are clear: The amount of new gold mined each year will slowly but surely be on perpetual decline from the moment we reach "peak gold."
Until recently, annual global gold output had steadily been on the rise for decades. If we are indeed at this major turning point, it suggests that gold prices will eventually climb due to the reduced supply.
According to the CEO of the major mining firm Polymetal, the global gold supply could drop by "15% to 20% over the next three to four years."
It's not just mining executives and gold investors who are making waves about peak gold, either. The evidence and data are now backing up their assessment.
South Africa's gold mining industry has long been a juggernaut. Since the early 20th century, the country has been the world's largest producer of newly-mined gold by a very wide margin. It was unprecedented—and to date unparalleled—gold production, exceeding all of the gold mined in human history leading up to the 1900s. South Africa's gold deposits once represented about three-quarters of the world's available supply.
However, the industry has been in decline since its peak in the 1970s.
The situation is progressively becoming even more dire. New gold exploration hasn't been fruitful and annual output of the metal in South Africa has fallen by 85% in less than four decades.
Although it has receded from its historic highs, gold mining is still an important sector of the South African economy. This key industry now teeters on the verge of collapsing altogether. A mere 20% of the country's gold mines are currently profitable.
Unlike a printing press that can create more paper money endlessly at relatively little cost, it takes considerable time and overhead capital to mine for gold. In other words, it's not a process that can be jump-started overnight.
Given the mining crisis in South Africa and the likely onset of peak gold, the sector's focus has been on existing major gold mines. Of course, even those huge projects will be on a perpetual path of declining output themselves.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.
Everett has been the head content writer and market analyst at Gainesville Coins since 2013. He has a background in History and is deeply interested in how gold and silver have historically fit into the financial system.