The world has enough gold, university researchers say

The world has dug up plenty of gold and it may be time to stop mining it, researchers from the University of Oxford and the Colorado School of Mines said in a paper published in December in Environmental Research Letters.

There is enough gold in circulation already to handle global demand tied to technological and trading applications, the paper said. The researchers concluded that climate change, local environmental impacts and other harms outweigh the benefits of continuing to mine for the precious metal.

The gold industry criticized the paper, and has promised further progress in avoiding the environmental and social harm historically endemic to the gold mining process. Meanwhile, the researchers said rethinking the need for any extraction at all is worth considering.

Society must make some hard choices, and gold "doesn't quite pass the test in terms of cost of extraction versus the benefits," said Stephen Lezak. Lezak, program manager at the University of Oxford's Smith School of Enterprise and the Environment, envisions society moving away from using gold, similarly to how the world is transitioning from coal. However, the shift from gold could be much easier.

"For coal, we had to essentially invent an entirely new suite of renewable energy technologies, which has been remarkably successful," Lezak said. "For gold, all we have to do is say, 'We're going to stop putting the stuff in the bank vaults.'"

Recycled material is sufficient for the services and products that require gold, according to the paper. Only about 8% of gold mined each year goes to technological applications, while 92% is made into jewelry or stored in a bank vault as an investment vehicle.

With the energy transition demanding more mined materials such as copper or lithium, gold mining stands out as particularly unnecessary, Lezak said.

The researchers looked at two possible scenarios for gold in addition to another where nothing changes. In one scenario, global stocks of gold are fixed at present levels and mining is reduced by 60%. In the other scenario, mining stops completely and recycling alone is used to meet the technology sector's demand for gold, with the surplus going to jewelry production.

In the second scenario, the researchers found that recycled gold production in the first year would meet the demand for all technological applications and a third of jewelry demand. The paper acknowledges the importance of jewelry in cultural rites such as weddings but said jewelry could be made with other metals such as bronze or brass.

Miners skeptical

As predicted by the paper, miners have panned the proposal, saying it would be impractical to stop extracting gold ore.

"What is proposed seems so remarkably impractical and unrealistic it's hard to view this work as little more than academic clickbait," said Conor Bernstein, a spokesperson for the National Mining Association, a U.S. mining industry trade group.

The hypotheticals gloss over the immense value and importance of gold in the global economy in terms of its direct economic benefits and the role it plays as a store of value, Bernstein said.

A spokesperson for the World Gold Council, comprising most of the largest gold mining companies in the world, said the council's members contributed $57.5 billion to local economies and employed close to 250,000 people.

"When mined responsibly, gold mines create an uptick in infrastructure and utility investments, resulting in improvements to roads, water and electricity supplies benefiting the communities that outlive the production years of the mine," the spokesperson wrote in an email.

Companies have both ethical and commercial incentives to improve the health and education of communities where they operate, the spokesperson added. Gold companies have spearheaded the shift to renewable energy resources in many regions.

The gold trade group said it is committed to addressing key environmental, social and governance issues, including those discussed in the researchers' paper. The industry's 2019 Responsible Gold Mining Principles framework lays out what the members say constitutes responsible gold extraction.

Outside of the lab, the proposal is totally unrealistic and detached from "real world issues," said James Wellsted, executive vice president of investor relations and corporate affairs at South African gold miner Sibanye Stillwater Ltd.

Wellsted pointed to the study's acknowledgment that communities around mining should be a part of the conversation. "That is the nub of the problem," Wellsted said. "These mines are generally located in areas which are reliant on them economically, so it is a moot point."

Oxford University's Lezak argued that communities should transition to other ways of making a living, similar to efforts by governments and other stakeholders to replace the jobs being lost in coal mining regions around the world. Society could be at the beginning of what Lezak suggested may be a multigenerational shift away from traditional uses of the yellow metal.

"[Gold] is something that has been hand in glove with human history and empire and conquest and has caused an enormous amount of pain and suffering and bloodshed," Lezak said. "This paper is an invitation for us to imagine human history without that force driving us."

S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.