Stable value

Gold is a hot commodity but today it is increasingly difficult to find it

Posted by MoneyController on 10.06.2024

Gold has recently reached its price record and demand has grown: but discovering and extracting new quantities is an increasingly difficult undertaking.

Gold's bullish phase and the price record

Since the beginning of this year, gold has undergone a bullish period that has led it to steadily exceed the $2,000 per ounce mark. These days - perhaps due to the Federal Reserve's delay in raising interest rates - the price of gold is just under $2,300 an ounce. But while the price of the precious metal has experienced great success (also driven by central bank buying and a growing demand for the yellow metal in China), the situation of gold mining is different.

Gold mining growth slows down

Lee Ying Shan (CNBC) reports on this from the World Gold Council, in particular from chief market strategist John Reade, who notes that gold mining growth in 2023 was only 0.5 per cent. The slowdown in production growth has been trending over the past three years: +2.7% in 2021, +1.3% and +0.5% last year. For Reade, the situation can be explained by the fact that mining growth peaked between 2016 and 2018. So it is not surprising that, today, production is growing at a lower rate.

Difficulties in starting new mining operations

Mining is a very expensive business that needs 10 to 15 years of preparation (just think of the energy and transport infrastructure that is needed). One must also consider the fact - as the World Gold Council points out - that only in 10% of cases do gold discoveries indicate quantities worth starting a mining venture for in economic terms. Last but not least, there is the question of authorisations and permits, for which (as Lee Ying Shan's article states) it can take up to several years.

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