I recently had an incredibly valuable conversation with Alain Gilbert of Gilbert Analytics. Although we theoretically sit on the complete opposite spectrum of gold and precious metals, there is great reason to align and understand both sides.
My world has largely centered around physical bullion, direct ownership, custody, wealth preservation, and helping advisors and investors understand why holding real metal matters. Alain’s work goes much deeper into the mining, exploration, capital flow, reserve depletion, and acquisition side of the industry. On the surface, these can seem like two completely different conversations. In reality, they are deeply connected.
For years, many of us in the physical bullion space have argued that gold is not simply another commodity trade. It is a monetary asset, a reserve asset, and increasingly a confidence hedge against debt expansion, currency debasement, geopolitical fragmentation, and systemic instability. That thesis has increasingly been validated by central bank accumulation, sovereign buying, and growing institutional interest in direct physical ownership.
But what Alain’s research highlights is that there may also be a growing structural supply problem underneath the entire gold market itself. And that matters enormously for the long-term physical price.
One of the most interesting concepts Alain outlined is what he calls “The Five Forces Driving the Gold Gap.”
The first force centers around margin expansion. At roughly $4,500 gold and industry all-in sustaining costs around $1,700 per ounce, the gross operating margin on gold production has exploded to nearly $2,800 per ounce today. At $5,000 gold, that margin moves closer to $3,300 per ounce. According to Alain’s work, that is more than five times the approximate $500 margin the industry operated under just a few years ago in 2022.
That kind of margin expansion changes the entire mining ecosystem. It impacts project economics, reserve calculations, M&A valuations, financing availability, acquisition urgency, and importantly, where capital begins flowing. One point Alain made that stood out was that the sector does not reprice evenly: bullion first, then senior producers, then mid-tier miners, and eventually smaller explorers and undeveloped ounces in the ground.
That sequencing matters because it says something important about how the market itself views scarcity. The physical metal is moving first because confidence in the monetary side of the system is already shifting, but underneath that move, the mining industry is quietly signaling that future supply growth may be far more constrained than most investors realize.
That becomes even clearer in Alain’s second force: the discovery drought.
According to S&P Global Market Intelligence (World Exploration Trends 2026), the global mining industry spent approximately $6.2 billion on gold exploration in 2025. Yet despite that spending, the industry has not produced a single super-giant gold discovery of 50+ million ounces since the year 2000. Not one discovery in the past decade ranks among the thirty largest ever found.
According to S&P Global data referenced by Alain, the average discovery size has fallen from roughly 7.7 million ounces in prior decades to approximately 4.4 million ounces today.
Even more interesting was Alain’s breakdown of where exploration money is actually going. Roughly 45% of gold exploration spending is now focused on near-mine drilling, a record high. In simple terms, producers are drilling around deposits they already know exist, trying to extend existing mine life. Meanwhile, true grassroots gold exploration, the kind that actually finds major new deposits, has collapsed to just 19% of spending, a record low.
The industry is spending more money than ever searching for gold while allocating less capital than ever toward truly finding new gold. That is not a bullish marketing narrative. It is a geological reality. The easy deposits were found decades ago, and what remains is deeper, more remote, more politically complicated, more expensive, and significantly harder to discover.
According to mining economist Richard Schodde of MinEx Consulting, the cost to discover an ounce of gold has risen from roughly $15 per ounce in the 1980s to approximately $61 per ounce in the 2010s, with recent estimates now approaching $70 per ounce today.
At the same time, average discovery size continues shrinking. The super-giant discovery era appears largely over.
This is where the mining side and the physical bullion side begin colliding into the same macro story. If sovereign buyers, central banks, institutions, RIAs, family offices, and retail investors all continue increasing physical allocation while the mining industry struggles to replace reserves, eventually price has to reconcile that imbalance.
And that brings us to Alain’s third force: depletion.
One example he used was Newmont. According to Newmont’s 2025 reserve report, the world’s largest gold producer saw reserves fall from 134.1 million ounces to 118.2 million ounces in a single year, a decline of nearly 16 million ounces.
That decline reflects mining depletion of 7.2 million ounces, asset divestments of 8.6 million ounces, and downward reserve revisions, partially offset by price-related additions and resource-to-reserve conversions. What makes that especially important is that, according to Alain’s analysis, Newmont added effectively zero ounces through new discovery.
Reserve additions came primarily through reclassifying already known material into reserve categories rather than discovering meaningful new ounces. In other words, the drill bit is not replacing depletion fast enough.
If major producers cannot organically replace reserves through discovery, they increasingly have only one practical solution: acquisition.
And acquisition eventually creates bidding wars for quality ounces in the ground.
That matters for mining equities. But it also matters for physical bullion holders because it reinforces the same core conclusion: gold supply is not infinitely expandable.
Physical production cannot simply be turned on overnight. A major discovery can take well over a decade before meaningful production ever reaches the market, with environmental approvals, infrastructure, political risk, permitting, labor, energy, and financing all sitting between discovery and production. Meanwhile, governments can create currency instantly, debt issuance can expand rapidly, and confidence can change overnight. Physical gold production cannot.
Alain’s fourth force centers around central bank accumulation. Central banks purchased more than 1,000 tonnes of gold annually for three consecutive years from 2022 through 2024, more than double the average pace seen during the prior decade. According to World Gold Council survey data referenced by Alain, 95% of responding central banks expect global gold reserves to continue rising.
That matters because central banks are not momentum traders. When they accumulate, they typically hold for strategic and monetary reasons, creating a structural layer of demand underneath the market.
The fifth force is accelerating M&A activity. According to FactSet data referenced in Alain’s work, the mining sector recorded approximately $89 billion in M&A transactions during 2025, the strongest environment since the 2010-2012 super-cycle. Precious metals alone accounted for roughly $31 billion across 84 deals.
The reason is simple: major producers are generating record cash flows from expanded operating margins while simultaneously struggling to replace reserves organically.
And that brings us back to the core of Alain’s Gold Gap thesis.
At roughly $5,000 gold and $3,300 operating margins, acquirers should theoretically be paying closer to $729 per ounce for pre-production gold ounces in the ground based on historical transaction math. Instead, recent transactions are averaging closer to $93 per ounce.
That disconnect, according to Alain, represents one of the largest valuation gaps in modern gold M&A history.
At Neptune, most of our conversations still revolve around direct ownership, allocated bullion, segregated storage, counterparty risk, and helping advisors retain metals exposure within their reporting ecosystem rather than losing those assets entirely to outside dealers or purely synthetic exposures. That remains the core conversation because unless an investor specifically wants trading exposure or operational mining risk, there is a strong argument for owning real physical metal directly.
But understanding the mining side of the equation adds another layer to the broader thesis. The current move in gold may not simply be a price cycle. It may be the market beginning to price in the future scarcity of gold itself.
That is a very different discussion.
And it is one reason why conversations between people approaching this market from opposite ends can be incredibly valuable. The physical bullion side understands monetary confidence, wealth preservation, custody, and sovereign risk, while the mining analytics side understands reserve depletion, discovery economics, project pipelines, and the realities of future supply. Together, those perspectives paint a much fuller picture of where this market may actually be heading.
