Like any other commodity, the gold market ebbs and flows according to the laws of supply and demand. When supplies are tight and demand is strong, prices rise. When supplies are robust and demand is weak, prices fall.
The gold market could be hitting its peak for the current production cycle right now, which could potentially fuel higher prices.
In a recent Kitco.com article, analysts from Standard Chartered voiced their opinion on gold production. According to the bank, global growth output slowed down by .4% in 2016, which is the weakest rate of growth since 2009. These analysts also see the growth rate slowing in 2017 by another .2%.
According to the article, Standard was quoted as saying “New gold mines that are due to come online are on average smaller than the largest projects to have come online in the past few years. Further, although some mine closures and production cuts occurred when prices fell sharply in 2012-13, the primary effect of a lower price environment was reduced “low-grade” mining, i.e., sufficiently high prices to allow mine life extension or mining low grades that would otherwise be uneconomical.”
It’s no secret that miners have looked to trim costs in recent years, and that cost cutting equals fewer new projects that will be coming online in the near-term.
In fact, it could potentially be several years or more before significant reinvestment in gold mines takes place. Without as much fresh gold coming to market, it begs the question of whether or not a serious amount of capital inflows could send prices sharply higher.
If gold production is in fact peaking, the slowdown could potentially come at a time when gold sees demand rising. Any one of a number of current issues could spike gold prices higher, including geopolitical tensions, a stock market collapse or economic recession.
The potential tighter production figures combined with a sharp increase in demand could equate to much higher prices. A sudden and significant reversal in risk appetite could fuel a buying frenzy in gold and other perceived safe haven assets. That, combined with any type of supply crunch, could potentially drive gold right back to all-time highs near $2000 an ounce. The yellow metal could even move well beyond this figure. Think $3000, $5000 or even $10,000 per ounce isn’t possible? Think again.
If you have been considering an allocation in physical gold, now may be the ideal time to get started. If you do not already own physical gold, waiting could prove to be very costly.
Speak with an Advantage Gold account executive today about the potential benefits of physical gold ownership. Our precious metals professionals are here to answer your questions, and can even show you how simple and convenient it is to buy and hold physical gold using your IRA account.
Don’t wait for a supply crunch and corresponding higher prices before deciding to get involved. Explore your options for physical gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: advantage gold, gold, gold production, mining, scarcity, supply and demand