Gold-to-Silver Ratio is around historic high; but gold price isn't. If GSR ever falls back below 40, and Silver still wanders below US$20; then you will see US$800 gold. Simple as that.
Another note: Gold-to-Crude Ratio is also around historic high. If GCR ever falls back to around 16, and Crude still wanders around US$50; then you will also see US$800 gold. Not a good sign for gold either.
This is the outside chance....the 100/1 horse that might just get up. If the $930 does not hold then it will be $800. A fall to such a level will wipe out many gold producers. My dilemma is buying stocks at the $930. A push to the $800 will smash the stock price.
Few years ago I might have agreed with you on the theory. But look what happened, when gold was above US$1900 peeps said the producer cost was US$1,400; then when gold fell to US$1,400, peeps said the cost was at least US$1,200. And when gold fell to US$1,200 peeps said the cost was around US$900. I start to doubt what is the real cost of gold mining; back to the days when gold was only US$600, how did the miners survived? Of course, there will be a minimum for the gold miner's cost; I am just afraid that we're still NOT there yet. Since the emergence of shale oil, the energy price has dropped significantly, this will help to reduce mining cost, too.
I suppose it will be a case of waiting and then we will find out which mining companies are swimming naked when the tide goes out. Truth is always in short supply with most corporations. ( But bullshit seems to always be readily available.)
Yeah I don't understand where people get this gold costs $1100 to mine price. They mined it before at much lower prices even adjusted for inflation. SOME gold mines cost that much sure and some even higher. But that's only because when the price went to ridiculous levels at like $1800 they started opening up mines or going back and mining the harder to extract gold that was abandoned in times past, because the cost of extraction was high. As the price comes down they close those fringe mines. But all the main ones will still be open. At the right price they can go back and extract it again later. Much like how there is massive amounts of oil that is out there that is capped but only extracted at certain prices. But there is still so many cheap producing oil wells that the price can keep going lower and they can still produce plenty of oil at insanely low prices. With that being said It does appear we are headed to $800. But I'm not sure there is enough time to get there before a massive economic crash again. Rising interest rates and rising oil prices are going to massively crush the economy. And it's coming fast and soon it seems. But maybe during the short deflationary stage it will hit it very fast before shooting up like crazy. I think banks and Governments will also be to interested in doing massive buy ups again right before it does that price though. $800 is a huge psychological barrier that pretty much everyone would see as a huge indicator to buy. One thing I've repeatedly noticed with about anything for sale, either a stock, or commodity or precious metal or whatever is the big players know that physiological price and they always swoop in above it before the crowd and masses can jump in with all the money they were saving and waiting for that price. In the end though the big players, Governments, Banks, Hedge funds and whoever will ultimately decide what price they want it at. One thing to keep in mind to though is remember the 1980 spike in silver. That was totally fake and manipulated yet it took an entire 12 years to deleverage and go back to a low that was over 10 times less than the peak. It didn't look like it would even ever go that low again to the $3 range. But it did and it took 12 years to go to were it was supposed to be. They worked and played the market the entire time until it got there. Looking at Gold now it still appears far to high, it's just so far up there on the history chart. But again it's going to matter on what the powers that be ultimately want it at. I'm hoping for $800 to though, I'll go all in. But I'll be buying all the way down as far as they let it go. At some point there will be a bottom, and it's only up from there. Let's hope we all got enough in by that point and as close to the bottom as possible.
Since I will never know the real cost of gold mining, I would rather wait until some miners go belly up. I wouldn't doubt that major miners can weather the storm; in fact, most of them survived over the last few decades. What I really want to see, is small and mid-size miners go bankrupted; that would release the BUY signal for me. Any other suggestion?
Regarding the cost of mining, remember that USD 400 gold was some 16 odd years ago. Back then the cost of production in dollar terms was less. Wages were less, cost of materials were less etc. So you would need to look at the real cost of mining production in the late 90's to the real cost of mining production today to get an idea to compare things. USD 800 for gold? You can pick any number out and suggest that's where golds going. But never buy all at 1 price, keep some powder dry for a lower price !
I don't know who wrote that piece but it is clear they know sweet f.a. about gold and what is driving the price of it. Geopolitical???????????.......as we have don't have enough problems already....and gold keeps falling. Perhaps we should ask the Bananas in Pyjamas if they have an opinion. I would be interested to hear it.
A big WOW with that call.................Now wouldn't that be interesting. .............Aussie dollar would be about 60 cent U.S. by this stage...so rounds would be back to about $4 each....sweeeeeeeeet.
Cost of mining comes down too. There was a shortage of skilled labour, now if we ask a miner what their next union lead bargaining will get them, when there are unemployed miners seeking their jobs, note these miners won't be "scabs" they will most likely be legit card carrying union members who have lost jobs in other mines. So I think many things will have come down. Ie shipping and fuel is defeintel as cheap or cheaper than it was ten years ago too. And you are
Gold mining is difficult business and 10 years is a long, long time. The difficulty they all face is to have proven resources to replace what they currently mine. How many small mining companies are still mining the same spot they were 10 or 15 years ago? It is no different to the small prospectors in W.A. As the years go by they have to travel further and further out of places like Leonora to get gold. Sure they find it but once they clear out an area, it is back to square one. The constant battle to stay in business.
This is a bit old, but look at the trend of total amount of ore processed and yield. Over time they need to process more ore for lower yield.
I wonder if it is policy to process lower grade ore when prices are high and save your good stuff for the lows.
i think there are much more gold to be had... Just like oil has gone deep water, I bet there are much much bigger mines in the water, technology just have to come around. Look at diamonds Mining/dredging in South Africa who would have thought we would be getting Desmond's 1km down. Gold unlike silver will just be there in the seabed just waiting for someone to mine it.
I'm sure there is in deep water. I bet there is insane gold reserves deep in the ocean. I mean all of the rivers flow into the ocean, and brings all the gold there from where it was in the mountains. For millions of years it's been flowing there. There has to be insane amounts of gold and reserves below the ocean floor. I don't know how it would ever be cost effective though to get it. Just getting a couple people down there is a crazy big expense and big ordeal, let alone mining it. And the mess it would make would be crazy. At the right spot price I'm sure it could happen though. There is still massive gold mines out there on land though, and I'm sure plenty yet to be found. Pebble mine is a giant mine in Alaska. They say there is probably 100 years of gold there (and silver and copper). But because of it's location near all the salmon runs they won't let them mine it. Imagine if that mine did get approved though, gold and silver would flood the market and lower prices. They already spent hundreds of millions of dollars in research on it. I'm betting even that will get approved when the spot price is high enough and it's time 'the powers that be' want it out of the ground, then it's coming out. For now the 500 billion dollars in gold, silver and copper is going to sit there in the ground. If that mine is out there I'm sure there are more to be found like it. http://www.pbs.org/wgbh/frontline/film/alaska-gold/
GSR (Gold-to-Silver-Ratio) has been at historic high; a profitable pair trade might be appropriate: long silver AND short gold (betting on a lower GSR) As long as Gold-to-Silver-Ratio is heading lower, you will win no matter which direction gold or silver prices go.
