A Lack of Production Growth Should Support Gold Prices

November 2017
By Joe Foster, Portfolio Manager and Strategist, VanEck

Most industry analysts have gold production peaking in the 2017–2020 period with no increase likely in the foreseeable future. This spells an end to the roughly 2.5% average annual production growth that has gone on for decades. The reason for the lack of growth is that most of the relatively easy to locate, near-surface gold deposits have been found and the industry has been unable to find any new prolific districts, akin to those of South Africa, Nevada, or Western Australia.

Gold Discoveries Declined as Exploration Spending Grew

Source: BofA Merrill Lynch Global Research; SNL Financial. Data as of December 31, 2015

The lack of discoveries has not been due to a lack of trying. The chart above shows the dramatic rise in exploration spending in the last decade, while discoveries trended lower.

About the Author:

Joe Foster has been Portfolio Manager for the VanEck International Investors Gold Fund since 1998 and the VanEck – Global Gold UCITS Fund since 2012. Mr. Foster, an acknowledged authority on gold, has over 10 years of dedicated experience in geology and mining including as a gold geologist in Nevada. He has appeared in The Wall Street Journal, Barron's, and on Reuters, CNBC and Bloomberg TV. Mr. Foster has also published articles in a number of mining journals, including Mining Engineering and Geological Society of Nevada.

The article above is an opinion of the author and does not necessarily reflect the opinion of MV Index Solutions or its affiliates.

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