MAY 17, 2018
There are two constant challenges investors should charge themselves with time and time again: 1) Check your premises – Are the reasons you invested in something still as valid today as the day you first invested? And 2) Check your timeline.
The when is the great unknown of great investments. If you need ‘x’ to happen by ‘y’ date, what you’re doing is much more akin to gambling than investing. You’re guessing.
But if your premises are sound and you truly understand you don’t get to decide when your thesis is validated, you can come to view price stagnation and, even better, price declines, as your ally. Buying the same asset for cheaper than you did previously, all else remaining equal, means greater gains for you in the end.
The World Gold Council estimates that remaining reserves worldwide amount to just 30% of what's been mined already -- 54,000 metric tons of gold in sufficient concentrations, and buried at sufficiently accessible depths, to be mined at reasonable cost.
At recent global production rates of roughly 3,100 metric tons per year, that means that in less than 20 years, all recoverable gold reserves worldwide (or at least those that can be recovered at a reasonable cost) should be depleted.
The sharp increase in production costs over just the last 15 years, combined with the inescapable math showing how quickly miners are churning through Earth's remaining recoverable gold reserves, suggests that in years to come, production costs could well begin rising again as the world runs out of unmined gold.
As long as gold producers are able to sell gold at prices above their cost of production (i.e., assuming the historical trend of gold pricing at a premium to production costs holds ), though, this should keep demand for gold high, and keep miners digging for it.