Numerous news reports have quoted a Goldman Sachs metals analyst as suggesting the world will run out of gold in 20 years—but the analyst tells JCK it’s not so simple.
Eugene King, European mining and metals analyst for Goldman Sachs, says it’s not quite right to suggest this year will see peak gold, and supplies will deplete about 2025.
If the metal continues to be priced at $1,200 an ounce, then about 20 years of “known minable” reserves may be left, he explains. However, if the metal’s price rises to $1,800—and if the market experiences a shortage, it might increase—then mining will become more economical and should ramp up, he says.
In any case, “there are around 130,000 tons of refined gold on the surface. So to say we are going to run out or this is peak gold is a bit strong.”
For the near future, he thinks the gold prices will be linked to the actions of the U.S. Federal Reserve.
“If the Fed puts rates up sometime this year, this will cause current U.S. dollar holders of gold to rotate into bonds, and the price of gold will likely decline,” he says. “Conversely, if the U.S. holds off on rate rises gold could continue to get support as a currency or bond proxy.”
King’s note also says that there are two decades of minable reserves of diamonds left, though that finding is perhaps a little less disputed in the diamond business, which has often talked about an upcoming shortage of new mines.