Bad News About Gold Supply

Mining companies tried their best, but the gold production is declining.

Barrick Gold, the world's top gold producer, announces that gold production is declining despite its record high price and efforts of mining company to discover new sources.

Mr. Aaron Regent, president of Barrick Gold, said the global output has been falling by as much as 1 million ounce a year since the beginning of 21^st century. Mass mining has made gold ore eroded and the supply has dropped by 10 percent.

"There is a strong case to be made that we are already at 'peak gold'," He said at the the RBC's annual gold conference in London. And he is serious; ore grades have fallen from 12 grams per ton in 1950 to about 3 grams in the US, Canada and Australia at the moment. In South Africa, the world's famous gold mine, the output also has halved since peaking in 1970.

Shortage in supply helped gold price pass the mark of $1,118 an ounce yesterday (November 10^th, 2009). Governments around the world have to take moves to control the gold price as investors continue to store more gold in fear of inflation. China has quietly doubled holdings to 1,054 tons and this country is expected to continue adding more as gold is still a small part of its reserves. Gold Exchange-trade funds (ETFs) - have accumulated 1,778 tons, making them the fifth biggest holder after the US, Germany, France and Italia. Ross Norman, director of theBullionDesk.com, said exploration budgets had tripled since the start of the decade with stubbornly disappointing results so far.

However, the output of gold can' rise as its price. Mining companies in South Africa suffered an output fell last year although they managed to dig deeper - with greater cost - with hope of replacing the depleted reserves. Harmony Gold said yesterday that it has to close two mines over coming months due to poor ore grades.

Mr. Norman said central banks used to be source of gold supply as they auction of reserves. But they are becoming giant net buyers and making the situation more complicated.

As the market goes wild and nothing can be sure at the moment, we should look after our asset carefully and wait for moves from gold companies, governments and international organization.