The idea of peak oil has helped light a fire under the price of petroleum, but now, another peak theory has emerged, this time involving gold GC-FT.
Many precious metals analysts and gold miners are taking a cue from the claims that global oil production will exhibit a peak, and then begin an inexorable decline accompanied by sharply higher prices. They're starting to say the same concept applies equally well to bullion and may lead to outsized investment returns from buying the yellow metal.
Believers in peak gold say that mining has a number of uncanny similarities to oil extraction.
Just like the slow output declines and dwindling reserves observed at aging oil fields, many of the best gold deposits are exhibiting the same sort of geriatric tendencies, with their highest grades extracted long ago.
Another resemblance is that in both industries, the pace of new elephant-sized discoveries has decreased, despite rapidly expanded exploration budgets and the spur of sharply higher prices, which in gold's case have risen about 350 per cent since the metal's bull run began in March, 2001, when prices were under $260 (U.S.) an ounce.
While the jury is still out on whether oil production has reached its ultimate high point, world gold output reached its record level in 2001, and has generally fallen since then.
The peak gold debate
"There are a lot of people that subscribe to [peak gold]," comments Jason Goulden, researcher at Metals Economics Group, a Halifax-based firm that tracks trends for the mining industry, but doesn't take a formal position on the debate over whether gold output will enter a long period of decline.
Others aren't so reticent about saying that peak oil has a close cousin in peak gold. "I think it's similar to oil," says Ronald-Peter Stöferle, international equities analyst at Erste Group Bank, an Austrian-based bank.
"Peak gold is only one part of my really positive scenario" for the metal, Mr. Stöferle notes, adding that he believes gold could ultimately double from current price levels, to $2,300 an ounce, the inflation-adjusted high it attained way back during the inflationary days of early 1980.
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Besides dwindling output, Mr. Stöferle is basing his bullish call on the traditional view among some investors that the yellow metal is a refuge in times of financial uncertainty over debt and paper currencies.
Some of the same people who've pioneered and popularized peak oil have also recently turned their sights on the precious metal, giving the idea further credence.
Jean Laherrère, an influential petroleum engineer who presciently predicted the end of cheap oil in the late 1990s, last year posted a 66-page report on the Oil Drum, a peak oil website, discussing whether global gold output will follow the same scenario being outlined for oil. He speculated gold reached its maximum output back in 2001. Mr. Laherrère could not be reached for comment.
A copycat move?
The notion that oil supplies would eventually peak and then fall was first advanced by U.S. geophysicist M. King Hubbert, who accurately predicted in the late 1950s that U.S. oil production would max out around 1970, and then go into permanent decline. The prediction was based on models that show the production at individual oil fields always traces a bell-shaped curve, with rapidly increasing output for a time, followed by a plateau, and then a gradual, permanent decline as reserves are exhausted.
Because oil is consumed and can never be recovered once burned, it's a scarier prospect than having dwindling gold output. Almost all the gold ever mined is around in bars, coins and wedding rings, and could be recycled, if need be, so the world will never really run out of the yellow metal.
The argument for peak gold has some peak oil advocates viewing it as a copycat move, a self serving justification for hopes of higher prices.
