The allure of gold has captivated human civilization for millennia, infusing cultures across the globe with its gleaming luster and inherent valueOften regarded as a symbol of wealth and stability, gold serves multiple roles in society, from jewelry to central bank reservesHowever, in recent years, an intriguing paradox has emerged: despite the perceived abundance of gold, can the world truly have enough of this precious metal? This question ushers us into a complex narrative about supply, demand, and the intrinsic nature of gold as an asset.

To grasp the essence of this inquiry, we must first address the common misconception surrounding the availability of goldParticularly, it is often assumed that gold is a rare commoditySome estimates suggest a staggering quantity of gold exists, with figures as high as 600 trillion tons circulated in popular discourseOthers cite a more conservative figure of 40 trillion tons

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Such estimates lead to a tantalizing thought: if spread out, this gold could form a continuous layer half a meter thick around the entire EarthNonetheless, the reality paints a starkly different picture.

While these massive figures may incite intrigue, the vast majority of gold lies dormant within the Earth’s core, seemingly non-existent to humanity with today’s technologyUnlike other metals where extensive reserves can be readily accessed and utilized, the quantity of gold available for mining is drastically lowerAccording to statistics from the World Gold Council, the current recoverable gold stock stands at approximately 209,000 tonsRemarkably, 46% of this total comprises jewelry, with the remainder divided between reserves, trading, and industrial applicationsIn contrast to other base metals, which often boast tens of millions of tons in reserves, gold remains scarce—translating to just several tens of grams per person worldwide.

Yet, this scarcity coexists with a rising trend in gold production

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The world has witnessed a significant upturn in gold yield, complicating the narrative around its availabilityAdvancements in mining technology have ensured a consistent increase in production rates, enabling the extraction of 60,000 tons of gold in the 21st century alone compared to a mere 11,500 tons in the previous centuryIn stark numerical terms, global gold output soared from just 386 tons in 1900 to an impressive 3,100 tons by 2022, prompting an urgent question: will we reach a point where gold becomes overproduced, leading to significant devaluation?

The conversation inevitably swings towards the economics of gold extractionPresently, the costs associated with gold mining are nearing $1,400 per ounceOver the past several decades, high-grade open-pit mines have gradually diminished, forcing companies to expend resources on increasingly difficult, deeper mines where the costs of extraction and purification grow exponentially

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Environmental considerations and regulations further inflate these costs, making mining a challenging enterpriseThe United States Geological Survey (USGS) reported a global reserve of approximately 52,000 tons of goldIf current extraction rates persist without identifying new deposits, these reserves could dwindle within the next 16 to 17 years.

A typical cycle of gold mining costs can be segmented into three phasesInitially, substantial capital investments lead to increased costs; however, as production stabilizes, costs tend to level offThis cycle becomes precarious once production reaches the 80-90% threshold, as costs begin to surge dramaticallyRecent reports from the World Gold Council indicate that over the past decade, costs associated with gold extraction have steadily intensifiedIn the first quarter of 2023, the all-in sustaining cost (AISC) climbed by 6% to $1,358 per ounce, the highest quarterly figure on record, reflecting a 10% increase compared to the previous year.

Looking at the current market landscape, gold prices hover around $2,000 per ounce, which ordinarily suggests lucrative opportunities for miners

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However, a report from Shandong Gold, China’s largest gold mining company, revealed that despite a principal income of 41.32 billion yuan, the net profit was merely 1.345 billion yuanSuch slim margins raise eyebrows regarding the sustainability of further investments in exploration and production

Amidst these financial intricacies lies the broader context of monetary systemsIn the age of fiat currencies—money without intrinsic value—it's perplexing to posit that gold could be in surplusThe United Nations projects the global population will reach 10 billion by 2050, with an annual growth rate of approximately 70 million peopleIf each person hypothetically needs 30 grams of gold, the increasing global demand equates to about 2,100 tons of gold annuallyGiven that current production is around 3,100 tons, it might appear that there is a surplusYet, this simplistic view does not encapsulate the complexities of gold’s value.

Demand for gold is determined not only by the number of people but also significantly hinged upon total wealth distribution

Gold serves as a store of value and a hedge against inflation, magnifying its appeal in times of economic uncertaintyRemarkably, in the investment sphere, two powerful maxims resonate: “Gold is scarce, but the market is perpetually in surplus,” and “Gold and silver are not inherently currency; currency is fundamentally derived from gold and silver.” Historically speaking, gold often performed poorly as an investment vehicle due to its lack of intrinsic value and high carrying costs.

However, the paradigm shifted noticeably after 1971 when the framework governing currencies detached from the gold standardConsequently, gold emerged as a viable investment option, rivaling benchmarks like the S&P 500, particularly as money printing took center stage in the global economic recovery narrativeHence, as long as currency systems remain unanchored, the relationship with gold insinuates a trajectory of perpetual price increases rather than stagnation.

Short-term observations indicate that after 2016, mass debt accumulation propelled the commodification of gold, instigating significant price appreciation