The supply of gold is “sticky”, but flexible. The rising gold prices have pushed mining companies to expand exploration and mine production. The output can lag behind the exploration by about 10 years in order for the mine to get going, but we are seeing increases in mine production already.
About 2/3 of gold supply annually comes from mine production. The remaining supply comes from recycled gold and when prices are higher more people consider selling. The long term increases in supply that come with the higher prices obviously create downwards pressure on gold price.
Read the Final Blog Post in This Series: What’s Next?
Read the First Blog Post in This Series: Who is Charlie Pollock?
Read Blog Post #2: The History of High Gold Prices
Read Blog Post #3: Comparing Gold, Stocks and Commodities
Read Blog Post #4: Jewellery Demand for Physical Gold
Read Blog Post #5: Investment Demand for Gold
My colleague Gregory Neilson recently shared his thoughts on the inflationary pressure that is affecting gold prices, you can read his blog post on gold prices here.