Gold is difficult to find in commercial quantities. It also takes time, typically 5 years, and plenty of money to bring mines into production. In this sense the supply side of the gold equation is relatively constant.

 

One of the features of this is that boom times encourage investment which takes a considerable time to work through to production and - eventually - to worked out mines. After a boom, when investment decisions may be made on over-inflated expectations of ultimately achievable prices, there is a tendency to subsequent overproduction and poor prices for a considerable period.

 

The gold price boom of 1979/80 resulted in steadily increasing production all over the world from a stable base of 1200 tons annually to a peak of above 2600 tons in 1999. All major producing countries except South Africa substantially increased production in this period.

 

Production then leveled out and started to dip slightly, as mines were exhausted and poorer mines shut.  Also the uninspiring gold market encouraged a decrease in exploration which now means there are a lower number of new mines coming into production than is expected to be required by the market.