Fortress Financial Group fka FFGO

[Texan77]

Peak Gold is Real
Despite record nominal gold prices, gold miners just can't crank out enough of the stuff. Between 1997 and 2001, miners "high-graded" (mined ore with the highest grades) just to keep the lights on, as gold prices bottomed and the yellow metal was reaching the peak of its secular bear run.

Ever since, as gold prices have steadily climbed, these miners have been shifting production to gradually lower grade ore, leading to ever-lower output. In fact, in just the past five years, the average recovered grade has declined a full 30% - dropping from 1.8 grams per ton down to 1.3 grams per ton.

And the grades of replacement ore being found are now averaging about 0.60 grams per ton, meaning twice as much ore has to be found just to replace gold being produced at current grades. Gold has become so valuable that millions of tons of what was formerly considered waste rock are now being recategorized as gold reserves.

Economic theory tells us that as demand increases, so does supply, which helps to contain prices. In the case of gold, however, that just isn't happening. There's simply not enough new gold being found to replace consumed reserves and to allow for higher production levels.

Over the past year, gold production has only managed a 3.0% increase, despite a 20% increase in price.