Declining Discoveries Could Mean Much Higher Gold Prices
There could be a major shortage in the gold market in the coming years. This shortage could cause gold prices to surge. Mark these words; don’t ignore the yellow precious metal.
Investors have to understand one thing; gold is a precious metal because there’s a limited amount of it in the ground.
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It looks like we are starting to see gold discoveries hit a peak. That’s when not enough gold is being found in the ground.
Mind you, this is not based on a gut feeling. Even the leaders in the gold mining industry are saying there’s a problem.
Take Pierre Lassonde, co-founder and chairman at Franco Nevada Corp (NYSE: FNV).
In an interview recently to a German newspaper, Lassonde said, “Production is declining and this is going to put an enormous amount of pressure on prices down the road. If you look back to the 70s, 80s and 90s, in every of those decades the industry found at least one 50+ million ounce gold deposit, at least ten 30+ million ounce deposits and countless 5 to 10 million ounce deposits. But if you look at the last 15 years, we found no 50 million ounce deposit, no 30 million ounce deposit and only very few 15 million ounce deposits. So where are those great big deposits we found in the past? How are they going to be replaced? We don’t know. We do not have those ore bodies in sight.” (Source: “We Don’t Know How to Replace the Great Big Gold Deposits From the Past,” Finanz und Wirtschaft, October 3, 2017.)
Why pay attention to what Lassonde is saying? He is a pioneer when it comes to gold mining, and especially when it comes to precious metal streaming companies.
But he isn’t the only one who seems to be concerned about discoveries. Over the last two years, several mining companies have shown concern as well.
Exploration Spending Slashed
There’s one thing that could only make the shortage in the gold market much worse; due to low gold prices, mining companies have cut back significantly on exploration spending. Know that exploration is an investment in future production.
Now, bringing in everything together, because there haven’t been any major discoveries and because companies are cutting back on exploration spending, the odds of big discoveries just decline.
You really have to question what happens if much gold isn’t found and demand for the metal remains solid. We see a shortage and prices could soar.
Why Pay Attention to Gold Over Other Assets?
Dear reader, it can’t be stressed enough; the fundamentals of the gold markets are improving. In fact, as I see it, it’s one of the few assets where market conditions are getting better and suggest that the metal is undervalued.
To me, it will not be shocking to wake up one day and see the headlines read “Gold Prices Shot Up Over $100 in Overnight Trading.” When and if that happens, it will be a sign suggesting that investors are trying to catch up. But that may be too late.
