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Gold Production Has Peaked: CEO

The world's supply of new gold is shrinking as the major producers are finding less of the precious metal and the days of big open-pit mines are fading, Dave Paxton, CEO of Vatukoula Gold Mines, told CNBC Friday.

Peak Gold Has Been and Gone: CEO

"Gold production has peaked; I think the highest production I saw was in 1999 and it has declined since then," Paxton said.

Production is coming down in all of the key producing counties of South Africa, America and Australia, the former mining analyst added. 

- Watch the full interview with Dave Paxton above.

"The big open-pit mines, which were these massive units that produced lots of gold are coming to the end of their lives," Paxton said.

"We're not finding any more of the large open-pit gold mines. We're going back to more the underground mines, which are the long-term producers, but they are much higher costs," he added.

In the fourth quarter of 2009 gold demand in tonnage terms fell 24 percent, compared to the same quarter a year earlier, according to the World Gold Council. During the quarter, gold prices rose 38 percent, which is equivalent to a 5 percent rise in dollar terms, the council said.

The figures show that demand fell during a period of rising prices, but that inverse relationship is only true for consumer-led demand for gold products, or "fabrication," according to Paxton.

"On the fabrication side it is an elastic demand, prices go up and the demand goes down. But on the financial side, gold is an inelastic demand, the higher it goes up the more valuable it becomes," Paxton said.