by Peter Schiff, Schiff Gold:
The most direct way to invest in gold is to buy gold and as SchiffGold advises the smart way to buy gold is to buy gold coins or billions. Sometimes investors bullish on the long-term prospects of gold take a look at the stocks of gold mining companies. Stocks of course lack some of the most attractive features of gold such as physical portability, and its finite amount (stocks always be diluted). Plus, mining companies can go bankrupt and are at greater risk from new regulations.
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But even people who eschew owning mining stocks can benefit from taking a look at corporate reports from gold mining companies which can give us a sense of where the gold market might be heading.
Looking at the disclosures of some of the biggest gold mining shows that gold might be getting even scarcer. This isn’t a new story. Even though in a technical sense gold can be found in lots of places (including seawater), experts have been pointing out that we may run out of gold deposits that can be feasibly mined in the next few decades, with some arguing that it will happen as soon as 2050
Newmont is one of the world’s biggest gold producers, but they aren’t producing as much gold as they used to. Newmont expected to end 2023 with 5.3 million ounces of gold produced. That would be greater than a ten percent decrease in gold produced relative to Newmont’s gold production in 2022.
It doesn’t look like Newmont is confident that it will always be able to make up for declining gold production either. In their 2022, annual report Newmont acknowledged that it might be unable to replenish its reserves of gold and other metals in the future, going so far as to list it as a risk factor to investors.
With uncertain gold reserves and declining gold production, perhaps it’s no surprise that Newmont also told its investors in that same report that it’s also facing financial risk and competition for gold from illegal and artisan miners in its mines in both Africa and South America. And this competition sometimes turns violent. Newmont told its investors that “in Ghana in 2019, illegal miners attacked a field team of security guards employed by a security contractor, tragically resulting in a fatality.”
Another of the world’s major gold mining companies, Barrick Gold also revealed that it was facing serious risks such as “resource nationalism” (countries with gold resources turning hostile to foreign or multinational firms that mine and extract gold) and uncertainty concerning the ability to maintain production of gold. Barrick Gold also revealed it had experienced multiple years of declining gold production, but was optimistically hoping that it might be able to increase gold production from 2022 to 2023, and was working to expand mining sites and even open new ones in the future.
