The price of gold has risen in recent years, rising from about US$1,300 an ounce in 2016 to more than US$5,200 in 2026.
The price increase is due to several factors, including central banks increasing their reserves due to gold’s status as a monetary asset and retail investors seeking its safe-haven status.
As an investment, gold is inflation-proof. It has been a monetary instrument and store of value for thousands of years. But a new cycle of geopolitical and economic instability has drawn renewed attention to the metal, along with a new generation of investors. Chasing the peaks and valleys Of meme stocks and bitcoin.
With huge interest from new investors and strong demand from traditional buyers of the yellow metal, what does this mean for the gold supply chain?
my production lags behind demand
According to data from the World Gold Council, mining supply has remained relatively stable over the past 10 years. In 2016, mine production was 3,516.2 metric tons, and after hedging, total mine supply stood at 3,553.9 metric tons; However, by 2025, production is expected to increase to 3,671.6 MT, but after de-hedging, the total mined supply has fallen to 3,598 MT.
In contrast, demand has increased significantly, from 4,786.0 MT in 2016 to 5,002.3 MT 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 the supply of gold; However, some events had a similar impact as the COVID-19 pandemic.
This had a widespread impact on the global supply chain of many commodities, including goldWhereas its inflationary effect increased the costs of producers due to rising wages, inflation etc. temporary mine closure.
Although COVID-19 was a significant contributing factor to rising costs, it was far from the only factor.
Many older mines are facing higher costs due to the need to process lower-grade ore or mine reserves at greater depth, while development projects are taking longer due to increasingly complex permitting processes.
Over the period 2016 to 2020, World Gold Council figures show that average total fixed cost were relatively stable at just under US$1,000 an ounce.
In early 2021, as the impact of the pandemic spread across the market, costs exceeded US$1,000 per ounce and have since risen steadily, reaching more than US$1,500 in 2025.
Meanwhile, while the price of gold rose to nearly US$2,000 an ounce at the end of 2020, it failed to maintain that pace, which would require producers to increase capital spending on mergers and acquisitions, exploration or development activity.
In an email to the Investing News Network (INN), World Gold Council market strategist Joe Cavattoni explained that this is not unexpected.
“Mining supply is structurally slow to respond to price fluctuations. New projects can take a decade or more to come online, so they are not necessarily as sensitive to the gold price,” he said.
Does this mean that my production has stagnated?
not necessarily.
Since gold prices started rising in 2025, margins have improved, and money has flowed into the gold sector.
according to S&P GlobalThe number of deals decreased in 2024, while deal values reached record highs, including Coeur Mining’s (NYSE:CDE) US$6.88 billion merger with New Gold (TSX:NGD,NYSEAMERICAN:NGD) and Gold Fields’s (NYSE:GFI) US$3.69 billion acquisition of Gold Road Resources. Overall, more than 162.1 million ounces of reserves and resources are exchanged in 2025.
Similarly, financing within the region experienced a significant resurgence in 2025.
According to a report by Keystone FinancialIntermediate and junior companies had raised US$12.8 billion by the end of October 2025, up from the full-year 2024 total of US$10.3 billion.
Even though this does not indicate an immediate increase in annual gold production, it may indicate an improvement in the overall health of the industry.
With money coming into the sector, it is being spent somewhere.
According to S&P, drilling metrics logged strongest january From 2023. The number of gold projects reporting results has increased to 179, an increase of 15 percent compared to the same period in 2025.
“Mined supply has increased only modestly and has not been a meaningful driver of recent price gains. Gold price strength over the past year has been driven far more by demand factors than by disruptions or expansions in mining production,” Cavattoni said.
role of recycling
The biggest challenge facing the gold sector is the decline in grades and lack of new projects in the development pipeline.
The belief is that the easy deposit has already been received. In a report of oregon groupThe US Geological Survey notes that there are approximately 54,000 metric tons of identified reserves.
Their expectation is that no new significant reserves will be found and that the Earth could run out of gold by 2050.
However, the gold is still there. In 2024, Geologist discovered A huge new stock in China. It is estimated that the discovery may contain more than 1,100 metric tons of gold, which would be worth more than US$150 billion at US$4,500 per ounce.
The caveat is that it is 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 approximately four kilometers.
Underground operations at those depths face more significant challenges than open pit or shallow mines. Workers need to deal with high temperatures and safety concerns. As a result, the mine total fixed cost Around US$1,800 per ounce, which is higher than the global average.
With high costs, it may take time for it to become financially viable to develop. Still, it may take a decade or more for a mine to begin production.
So with few new mines coming online, the sector needs to rely on recycled gold to balance the market.
“Recycling is the most price-responsive part of the gold supply, so when prices rise it naturally increases, helping to keep the market balanced,” Cavattoni said.
However, he also said this is not perfect, given that most of the recycled content comes from jewelers or investors redeeming physical gold holdings, and this does not necessarily translate into an unlimited or permanent increase in gold reaching the market.
“If demand remains structurally strong, recycling can help ease short-term pressure, but it cannot fully replace the need for long-term investment in mine supply,” Cavattoni said.
What does this mean for investors?
As Cavattoni said, the high prices are not due to a short supply environment. Recycling has helped bridge the gap between mining supply and demand. However, this may not be a permanent solution as more investors seek to protect themselves from uncertainty in the global financial markets.
Although equities have been slow to respond, major share prices have posted substantial 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 surged nearly 70 percent.
The money flowing into the sector should also reach the juniors as larger companies look to fill their development pipelines with new projects, which in turn should spur new exploration activity.
This could present new opportunities for gold resource investors who want to take advantage of the high price of gold without investing in physical gold.
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Securities Disclosure: I, Dean Belder, do not have any direct investment interest in any of the companies mentioned in this article.
