Gold Fields Minerals Services (GFMS) is considered my many gold followers to be “the” authority on gold, and GFMS currently believes that gold production will increase slightly this year. However, Graham Birch, head of Black Rock Investment Managers, which administers the Merrill Lynch Gold and General Fund, disagrees. Birch notes that gold production has fallen for the last five years and is likely to fall again in 2007.
Birch, speaking at a gold luncheon in Zurich, also noted that the four historic gold producing leaders, South Africa, the US, Canada, and Australia, all lost production in recent years. Between 2000 and 2006, South Africa’s production fell 36%; combined, Canada’s and the US’s production declined 30%; Australia’s by 18%.
Martin Murenbeeld, a seasoned gold market analyst, spoke a breakfast presentation at the same event. He pointed out that his financial model, which has been remarkably accurate in recent years, also showed a continuing decline in world gold output. For years, Murenbeeld has said that gold low prices in 1990s would result in low gold produciton in future years.
Note that this analysis is about the production of physical gold. Not talked about is the explosion in paper money, primarily dollars, by which the value of gold is measured. Decreased production and increased purchasing medium should result in much higher gold prices. The stage is set for a classic precious metals bull market.