Gold’s Peak Doesn’t Mean New Price Heights – by Helen Thomas (Wall Street Journal – June 4, 2015)

The industry has been in survival mode, companies warn

Announcing that gold production is approaching its limits can be hazardous. In 2009 Aaron Regent, who shortly after became chief executive of Barrick Gold, said the world had reached “peak gold.” Three years later, Mr. Regent was out of a job and mined gold output was still rising. Indeed, it hit a record 3,133 metric tons last year.

Yet predictions of peak gold are again in vogue. It remains doubtful, however, that this heralds much elevation for the gold price.

Gold production may be plateauing: precious metals consultancy Metals Focus expects a slight fall in output this year. A decadelong rise in the gold price from 2001 fueled indiscriminate investment but miners have slashed spending since 2013. Substantial new mines, like Barrick’s Pascua Lama in Chile, have been halted and exploration efforts scaled back.

The industry has been in survival mode, argues Randgold boss Mark Bristow. Companies have tapped higher-grade resources to boost production, service debt and stay in business. But that hurts long-term production, while efforts to cut costs can also reduce the lifespan of mines. With gold now hovering around $1,200 an ounce, down 30% since the start of 2013, weaker companies may falter or consider mergers. All of this portends declines in output.

But peak-gold thinking offers little reason to be bullish on the metal’s near-term price.

Unlike many other commodities, such as oil, iron ore or corn, gold doesn’t really get used up: estimated stocks held above ground are nearly 60 times annual mined output. A chunk is in central banks’ vaults, or cherished family heirlooms, and may never come to market.

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