Martin Mittelstaedt

From Tuesday's Globe and MailPublished on Tuesday, Apr. 13, 2010 12:00AM EDTLast updated on Tuesday, Apr. 13, 2010 7:24AM EDT

The idea of peak oil has helped light a fire under the price of petroleum, but now, another peak theory has emerged, this time involving gold(GC-FT1,157.10-5.10-0.44%).

Many precious metals analysts and gold miners are taking a cue from the claims that global oil production will exhibit a peak, and then begin an inexorable decline accompanied by sharply higher prices. They're starting to say the same concept applies equally well to bullion and may lead to outsized investment returns from buying the yellow metal.

Believers in peak gold say that mining has a number of uncanny similarities to oil extraction.

Just like the slow output declines and dwindling reserves observed at aging oil fields, many of the best gold deposits are exhibiting the same sort of geriatric tendencies, with their highest grades extracted long ago.

Another resemblance is that in both industries, the pace of new elephant-sized discoveries has decreased, despite rapidly expanded exploration budgets and the spur of sharply higher prices, which in gold's case have risen about 350 per cent since the metal's bull run began in March, 2001, when prices were under $260 (U.S.) an ounce.

While the jury is still out on whether oil production has reached its ultimate high point, world gold output reached its record level in 2001, and has generally fallen since then.

The peak gold debate

"There are a lot of people that subscribe to [peak gold]," comments Jason Goulden, researcher at Metals Economics Group, a Halifax-based firm that tracks trends for the mining industry, but doesn't take a formal position on the debate over whether gold output will enter a long period of decline.

Others aren't so reticent about saying that peak oil has a close cousin in peak gold. "I think it's similar to oil," says Ronald-Peter Stöferle, international equities analyst at Erste Group Bank, an Austrian-based bank.

"Peak gold is only one part of my really positive scenario" for the metal, Mr. Stöferle notes, adding that he believes gold could ultimately double from current price levels, to $2,300 an ounce, the inflation-adjusted high it attained way back during the inflationary days of early 1980.