Tuesday, October 31, 2017

Peak gold or the shutting down of production? World's top gold mining producer drops 10% in 2017

The most unfortunate fact in regards to gold is that price is determined today by paper derivatives rather than by supply and demand.  And as opposed to many other commodities, the gold price is highly manipulated due to its relation with the dollar and other currencies.

Thus even as the dollar has devalued immensely over the past 20 years, and central bank monetary policies have created price inflation as well as expanded debt and the money supply, not even a decline in gold output has been able to cause gold prices to rise.  And this growing decline in mine output is begging the question of whether we have reached a point of peak gold, or if producers are simply shutting down output because the price manipulation no longer makes it affordable to produce.

Graphic courtesy of SRS Rocco
The world’s top gold producer saw its mine supply plummet by 10% in the first half of 2017.  According to the GFMS World Gold Survey newest update, China’s gold production in 1H 2017 fell the most in over a decade.  The fall in Chinese gold production is quite significant as the country will have to increase its imports to make up the shortfall in its mine supply 
The data in the GFMS 2017 Q3 Gold Survey Update & Outlook reported that Chinese gold mine supply declined 23 metric tons to 207 metric tons in the 1H 2017 versus the 230 metric tons during the same period last year: - SRS Rocco via Silver Doctors
Either way, gold is not the only metal being produced in lower volumes as the question of peak silver is also relevant due to the fact that most silver production is done as a by-product from the mining of other metals.

In any market when prices are artificially controlled both higher or lower, the results have severe consequences all across that industry.  And whether it is through artificially created price inflation as we see today in housing and equities, or price deflation in commodities such as copper, silver, gold, and oil, the inability to achieve an honest price for one's output will either cause producers to overproduce just to break even, or shut down production in the hopes of creating their own artificial shortages to force prices higher.

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