What Peak Gold Supply Means For The Commodity

If you look at the gold market over the past few years, a grim picture starts to emerge. A precious metal that was once on the top of the world has been dealing with declines since late 2011. However, that's changing, and it's happening quickly. Recently, we've seen relatively bullish moves from gold, and in my opinion, the bullish activity is likely to continue. This has quite a bit to do with those words we've been hearing since the middle of January... “peak supply”. Today, we'll talk about what miners mean when they say peak supply, changes we've seen in demand for the precious metal, and what we can expect to see moving forward.

Peak Supply & What It Means For Gold

Since mid-January, we've been hearing more and more about peak supply in gold. On January 17^th, Thomson Reuters' own GFMS said that gold production is likely to start declining. This year alone, they are expecting to see a decline of 3%. With that said, peak supply is when the world's largest miners simply can't produce any more of the precious metal than they are producing at the moment. Over the last 7 years, production has been skyrocketing, and many believed that we wouldn't see a ceiling on the growth in our lifetime. However, it seems as though these experts missed the mark.

This is incredibly important for gold investors and the value of gold overall. As a commodity, the price of gold is dictated by supply and demand. When supplies are high and demand is low, as we've seen since 2011, the value of the commodity declines. However, when supplies are low and demand is high, the value of the commodity climbs. So naturally, given the fact that we have reached the “peak supply” mark, it only makes sense that we can expect to see the value of the commodity rise as a result. However, supply is only one piece of the equation. If demand doesn't falls, peak supply means absolutely nothing. Nonetheless, there's more good news on the demand front as well.

Demand For Gold Is Rising, And Likely To Continue On This Path

I've done quite a bit of research on gold recently, and the US Mint plays a large role in my bullish opinion of the precious metal. In an article I published about a week ago here on Gold Eagle News entitled Gold Bearishness Is Rooted In Sentiment Not Fundamentals I explained that the US Mint actually tells us quite a bit about the precious metal. That's because in 1985 an act was passed in the United States that required the Mint to produce gold bullion coins in amounts that were high enough to meet demand.

As a result of this act, the US Mint sells quite a few gold bullion coins, and more importantly, releases regular reports with regard to demand for the precious metal and the coins they produce. A recent report showed that in the year 2015, gold demand saw an increase of more than 50% year over year. Perhaps more importantly, this climb in demand is continuing through this year. On the first day that gold bullion coins were available, the Mint sold more than 60,000 ounces of the precious metal!

That's not the only good news on the demand side of the equation for gold. When it comes to this commodity, we're talking about a safe haven. This means that when market conditions are negative, we can expect to see gains in the demand for gold. Well, take a look at the Dow, S&P, NASDAQ, or any other stock market index around the world. When you do, you'll see that global markets have had a rough start to the new year, and in many opinions, the declines are likely to continue. As a result, demand for gold is likely to spike as investors look for ways to keep their money safe!

What We Can Expect To See Moving Forward

Moving forward, I'm expecting to see gold increase in price dramatically. As mentioned above, supply and demand play a major role in the value of the commodity. With supplies hitting a breaking point and demand climbing, there's no reason to expect to see negative activity!

What Do You Think?