Quote from article "The massive increase in Chinese mining supply has raised some eyebrows with some questioning whether the figures are being exaggerated by Chinese mining companies and Chinese bureaucrats. More recently, there is a concern that gold production in China may actually be declining as older mines reduce production. South Africa produced over 1,000 tonnes of gold in 1970 but production has fallen to below 250 tonnes in recent years (see chart above). This is a collapse as these are levels last seen in 1922 and happened despite the massive technological advances of recent years and more intensive mining practices. South Africa's gold output fell further 2.9% in May, according to data from Statistics South Africa released Thursday, despite a 0.8% rise in total mining output in the same month." ............. Production peaked around 2000 and it has been in decline ever since, and we forecast that decline to continue. It is increasingly difficult to find ore," he said. Ore grades have fallen from around 12 grams per tonne in 1950 to nearer 3 grams in the US, Canada, and Australia. South Africa's output has halved since peaking in 1970. Peak gold may not have happened in 2000. Nor may it have happened in 2011. However, the geological evidence suggests that it may happen in the near term due to the increasing difficulty large and small gold mining companies are having increasing their production. It is also signalled in the fact that most of the larger gold producing countries (such as Australia, the U.S., South Africa, Canada, Peru, Indonesia) have all seen production drops in recent years. China and Russia are the two only large producers to have seen production increases. Peak gold has yet to be considered and analysed by the international financial community but there is a risk that it has happened or will happen soon with a consequent impact on the gold mining industry and on gold prices in the 21st Century. More at http://www.businessinsider.com/peak-gold-gold-production-collapse-continues-in-south-africa-2012-7
same as "peak" silver; basically meaning it can't be mined economically. However, if tomorrow the cost of oil went to $0 and the cost of equipment maintenance is negated, and labour costs are reduced, then the "peak" goes away. If tomorrow we agreed that EVERY miner must be paid $10 million per year, then you'll find that every element on the periodic table has reached its "peak". Its the interdependency between energy and materials: you need energy (eg. oil) to dig out the materials (copper ore), and you need materials (eg. iron, copper) to harness the energy (via oil rigs).
There's physical peak, and economic peak - while ore grades are degrading in terms of grams per tonne, as long as extraction costs are below the market price, it's economical peak has not been reached. Peak supply however may have occurred.
Great comments by BS and GP above. To expand on sun's comment, it's the cost of input materials to the profit of output. Eg, if input costs 10 barrels of oil per oz of gold, then combined with other costs, that's your floor price of production. Energy itself is an interesting one, because if it takes close to, or more than one barrel of oil to produce an equivalent barrel of oil, then it is not cost effective. With energy, the input is effectively the same type as the output so you have to always get more out than you put in. That may seem elementary, but it's critical to understanding 'peak'.
Also Seems to me that if they are not able to produce ever increasing amounts , and people are buying more and holding more ,then supply will be less than demand increasingly.And price must rise. Different to there being an ever increasing amount available. obvious,but I hadn't thought of it.
Your point is valid for a commodity Peter, but it really depends on whether you think of gold in commodity or monetary terms. I think this post might illuminate things for you a bit (ignore the title): http://fofoa.blogspot.com.au/2010/10/its-flow-stupid.html
