Has Gold Production Peaked?

Mine output lags demand

According to data from the World Gold Council, mining supply over the last 10 years has been relatively steady. In 2016, mine production was 3,516.2 metric tons, and after hedging, total mine supply came in at 3,553.9 metric tons; however, by 2025, production rose to 3,671.6 metric tons, but after de-hedging, the total mining supply fell to 3,598 metric tons.

By contrast, Demand has increased more substantially, rising from 4,786.0 metric tons in 2016 to 5,002.3 metric tons in 2025.

The market balance was largely maintained through recycled gold, which increased from 1,232.1 metric tons in 2016 to 1,404.3 metric tons in 2025.

During that 10-year period, several factors affected gold supply; however, few events carried the same impact as the COVID-19 pandemic.

It had wide-reaching effects on the global supply chain for many goods, including gold, while its inflationary fallout raised producers' costs due to rising wages, inflation and temporary mine shutdowns.

Although COVID-19 was an important contributing factor to rising costs, it was far from the only one.

Many older mines are facing higher costs due to the need to process lower-grade ore or mine deposits at greater depth, while development projects are taking longer due to increasingly complex permitting processes.

During the 2016 to 2020 period, World Gold Council data shows that average all-in sustaining costs were relatively stable at just under US$1,000 per ounce.

In early 2021, as the effects of the pandemic rippled through the market, those costs crept over the US$ 1,000-per-ounce threshold and have steadily risen ever since, reaching over US$1,500 in 2025.

Meanwhile, while the price of gold rose to around US$2,000 per ounce in late 2020, it failed to sustain the momentum producers would need to increase capital expenditures on mergers and acquisitions, exploration or development activity.

In an email to the Investing News Network (INN), World Gold Council Market Strategist Joe Cavatoni explained that this isn’t unexpected.

“Mining supply is structurally slower to respond to price movements. New projects can take a decade or more to come online, so they aren’t necessarily gold price sensitive,” he said.

Does this mean mine output has plateaued?

Not necessarily.

Since the gold price began rising in 2025, margins have improved, and money spent in the gold sector has increased.

According to S&P Global, the number of deals decreased in 2024, while deal value reached a record high, including Coeur Mining's (NYSE:CDE) US$6.88 billion merger with New Gold (TSX:NGD,NYSEAMERICAN:NGD) and Gold Fields' (NYSE:GFI) US$3.69 billion takeover of Gold Road Resources. Overall, more than 162.1 million ounces of reserves and resources changed hands in 2025.

Likewise, financing within the sector experienced a significant resurgence in 2025.

According to a report by Keystone Financial, intermediate and junior companies had raised US12.8 billion by the end of October 2025, outpacing the 2024 full-year total of US$10.3 billion.

Even though this doesn’t indicate an immediate increase in annual gold production, it can signal an improvement in the industry's overall health.

With money flowing into the sector, it’s being spent somewhere.

According to S&P, drilling metrics logged the strongest January since 2023. The number of gold projects reporting results has risen to 179, a 15 percent increase over the same period in 2025.

“Mine supply has grown only modestly and hasn’t been a meaningful driver of recent price increases. Gold’s price strength over the past year has been driven far more by demand factors than by constraints or expansions in mining output,” Cavatoni noted.

Role of recycling

The biggest challenge facing the gold sector is declining grades and a lack of new projects entering the development pipeline.

The belief is that the easy deposits have already been found. In a report from the Oregon Group, the US Geological Survey noted that there are roughly 54,000 metric tons of identified reserves.

Their expectation is that no new significant reserves will be found, and that Earth’s gold could be depleted by 2050.

However, the gold is still out there. In 2024, geologists discovered a massive new deposit in China. The estimate is that the discovery could contain upward of 1,100 metric tons of gold, which at US$4,500 per ounce would be worth over US$150 billion.

The Caveat is that it's located at a depth of 9,800 feet below the surface, or about three kilometers. For context, the deepest mine in operation is Harmony Gold's (NYSE:HMY,JSE:HAR) Mponeng gold mine in South Africa. It operates at a depth of about four kilometers.

Underground operations at those depths face more significant challenges than open-pit or shallower mines. Workers need to deal with high temperatures and safety concerns. As a result, the mine's all-in sustaining costs are around US$1,800 per ounce, higher than the global average.

With high costs, it could take time before it becomes financially viable to develop. Even so, it could take the better part of a decade or more before a mine could begin production.

So with a few new mines coming online, the sector needs to rely on recycled gold to maintain market balance.

“Recycling is the most price-responsive part of gold supply, so it naturally increases when prices rise, helping the market stay balanced,” Cavatoni said.

However, he also noted that it’s far from perfect, noting that the majority of recycled material comes from jewelry or investors cashing out physical gold holdings, and that it doesn’t necessarily translate into unlimited or permanent increases in gold reaching the market.

“if demand remains structurally strong, recycling can help smooth short-term pressures, but it can’t fully replace the need for long-term investment in mine supply,” Cavatoni added.

What does this mean for investors?

As Cavatoni noted, the high prices aren’t due to a low supply environment. Recycling has helped close the gap between mining supply and demand. However, it may not be a sustainable solution as more investors seek to shield themselves from uncertainty in global financial markets.

While equities have been slow to react, major share prices have posted considerable gains over the past year. Barrick Mining (TSX:ABX,NYSE:B) and Newmont (NYSE:NEM,ASX:NEM) have seen their share prices double over the past year, while Agnico Eagle (TSX:AEM,NYSE:AEM) has gained nearly 70 percent.

Money flowing into the sector should also trickle down to juniors as majors look to fill their development pipelines with new projects, which, in turn, should spur new exploration activities.

This could present new opportunities for gold resource investors looking to capitalize on the high gold price without investing in physical gold.